Thanksgiving and Retirement: Planning and Diversifying

Posted on: November 10, 2021   |   Category: In The News
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After spending an October filled with Halloween costumes, apple picking, pumpkin carving, and leaves changing colors, it’s time to start preparing for Thanksgiving. Who are you going to share your table with this year? What types of foods will you be preparing? What time will you be serving dinner? These are just a few questions to start asking yourself as Thanksgiving swiftly approaches. 

Although they are not compared too often, retirement planning is a lot like preparing for Thanksgiving. Here are some commonalities:  

Thanksgiving and Retirement Both Require an Investment of Time, Money, and Effort to Prepare

There are a lot of decisions to be made when preparing a Thanksgiving dinner. For example, where will you be sourcing your ingredients from? Is anyone else going to bring over food? How long does each dish take to make? 

These questions are similar to those that you should be asking when planning for retirement. What types of investments are you going to make? Will you be contributing the funds to your retirement plan yourself? Are you inheriting an account? Does your company provide a company match? How much risk are you willing to take with your investments? When do you want to retire and how much will you have to save and invest every month in order to reach your goal?

Adjust Based on Your Specific Situation

Depending on your culture, you may enjoy unique dishes and use different ingredients on Thanksgiving. The climate and geographic location you live in can also affect the food you prepare. For example, if you are in the New England region you may enjoy oyster stuffing, while in the South you’ll be digging into a nice ham with macaroni and cheese as a side. Maybe your German aunt always serves sauerkraut alongside the turkey or your Italian grandmother serves cheesecake instead of pumpkin pie. 

Similarly, when planning for retirement you invest in what makes sense for your unique financial situation and goals. For example, as you approach retirement, you may choose to make less risky investments since you have less time to overcome possible market downturns. Also, after you turn 50 years old you can start making catch-up contributions to your IRA account, which is $1,000 more than the normal allotted amount. (Currently this comes out to a $7,000 maximum contribution). The way you plan for retirement may look different based on your unique financial situation, but it is critical to find a strategy that helps you achieve your goals.

Everyone Has Their Favorites

Uncle John loves his turkey with cranberry sauce on it, while mom prefers the green bean casserole. Cousin Jen’s favorite is the stuffing, while you’d rather have sweet potatoes. It does not matter which dish you prefer, as long as you are enjoying the meal together. 

Just like everyone has their favorite dish, everyone has different account types and investments that they prefer. Some choose to stick with a company 401(k) which helps them automatically save by taking money from their paycheck and putting it directly into an account. Others choose to go the Self-Directed route, as they prefer to have more control and freedom to invest in the assets of their choice. Some may also choose to invest in the stock market, making daily trades or investing in an index fund so that they have a sliver of all of the pies. Finally, you can find individuals who want to invest in something they understand well like real estate, private placements, or cryptocurrency. It does not matter which account type or investment you choose, as long as you are on track to reach your financial goals.

Enjoy a Little Bit of Everything

Although everyone has their personal favorites, it’s important to have a dish filled with a diverse group of foods. You may love apple pie, but first it’s important to fuel your body with a well-balanced meal including foods such as protein, carbs, and vegetables. 

Just like the necessity to maintain a well-balanced diet, it’s important to possess a diversified retirement portfolio. You can invest in a variety of assets, both in the stock market and alternatives, as well as assets that differ in their risk assessment. This way, if one market crashes (or if one food item is burnt), then you have a hedge against the market and – on average – will not experience as much loss.

If Done Right, There Should Be Plenty of Leftovers for your Loved Ones

The best part about Thanksgiving is sharing the meal with loved ones. Being around the table together and sharing what you are thankful for is something to look forward to every year. And if you plan correctly, you may even have leftovers to share.  

Similarly, your retirement account can be passed on to beneficiaries who will inherit your estate. If  planned correctly, your financial goals can be reached and you can share your wealth with those you care about. 

Thanksgiving and Retirement

There is a connection between everything, and Thanksgiving dinner and retirement plans are no different. In the same way that some people prefer ham over turkey, you may have your own unique take on which retirement account will work best for you. Are you more of a straight stock market investor or do you prefer to have total control and freedom in your investment choices? Preparing the best Thanksgiving meal and retirement plan may not be as easy as pie, but they’re both important and rewarding. Schedule a call today with one of our Self Directed IRA Specialists to explore your options.