It was a cold Friday at 10pm, and I was flying out of Chicago from advisor meetings back to Minneapolis. I was exhausted, in a bad mood, and all I wanted was to go home. It was one of those weeks. And in typical Chicago fashion, the “Windy City” was howling, gusts over 50mph.

I kept refreshing my Delta app to see if my flight was cancelled. This wasn’t the weather you want when taking off a runway. To my surprise, the flight didn’t cancel. I’m not a huge fan of turbulence, but I wanted to go home, “to hell with the wind” I thought.

I knew the turbulence was going to be bad. But it was worse than I thought. Turns out 50mph winds can throw an airplane around pretty good. It was the kind of flight where you get shot up a few hundred feet and then back down. It was a flight full of passengers gasping, babies screaming, and each time the plane got thrown by the wind your stomach was in your throat.

I remember being borderline terrified. I knew it was highly unlikely we would crash, but I couldn’t help think of the worst. It’s times like this you realize your own fragility. How tough I thought I was stepping onto that plane, was a lot tougher than I actually was. In fact, it was the feeling of pure vulnerability and zero control.

Luckily, I landed in Minneapolis, and I lived to see another day. But I’ll never forget that flight. That flight taught me some valuable lessons. I’m sure everyone reading this has their own version of this story. Moments of pure vulnerability, moments of fear.

Today I thought of that windy day after I saw a quote from financial writer, Morgan Housel. He said, “It’s impossible to know your risk tolerance until you’ve lived through a big decline.” In the same way for me on that plane, I wasn’t as tough as I thought I was.

For those who have known someone from the Depression era, there’s a high probability they didn’t have a large appetite for risk. And it’s probably why many seniors use low yield products, like CDs. The past is burned into their memory. It’s because they witnessed the mother of all declines.

Our industry worries so much about returns and metrics, yet it so often forgets to emphasize psychology. When in fact, psychology could be argued as the most important characteristic of a successful retirement. And when I say, “successful retirement”, what does that really mean? We all know a successful retirement means one that lasts. But also, you would think one that is happy. One that isn’t filled with worry.

The financial services business uses simple fact finders and risk questionnaires, questionnaires that can be filled out with little thought. When in fact, they should be looked upon as the most important part of the plan. Because if a plan cannot be stuck to, it’s not a plan at all. And those reading this most likely understand the comfort that annuities can provide during times like this.

Even the originator of the 4% rule, which states a retirement must have at least 50% allocation to equities, can’t stick to it. A recent article in the Wall Street Journal states, “Bill Bengen [the originator of the 4% rule], now retired, is invested in 20% equities, 10% bonds and 70% cash.” And is “uncomfortable with the markets in retirement”.

With all this volatility we have seen, it’s a reminder that times aren’t always good. In fact, sometimes they very, very turbulent.

And maybe, well…we aren’t as tough as we thought we were.  

Contact Us

We’re looking forward to working with you!

Confidentiality Notice

The information in this message, and any files transmitted with it, is confidential, may be legally privileged, and intended only for the use of the individual(s) named above. Be aware that the use of any confidential or personal information may be restricted by state and federal privacy laws. If you are not the intended recipient, please do not further disseminate this message. If this message was received in error, please notify the sender and delete the message.

Seek Independent Advice

Any information expressed above is intended to be general and non-specific information only; it is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Mach96, LLC, its affiliated companies, and its representatives do not provide tax, legal, or investment advice. Please consult an independent professional regarding each individual’s specific situation.

The information and opinions included in this article have been provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Mach96, LLC. It is being provided for information purposes only and is not a solicitation for the purchase of any product, nor should it be construed as advice designed to meet the particular needs of your clients. For Financial Professional use only. Not for public distribution.

A fixed annuity is intended for retirement or other long-term needs. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. A fixed annuity is not a registered security or stock market investment and does not directly participate in any stock or equity investments or index.

Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company, not an outside entity. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated.