I will be the first to admit that I have issues with being in control. I am naturally a planner and love to organize and structure the future as best as I can. However, as we all know, we are in less control of our lives than we probably would like to accept. With billions of individuals making decisions independently of each other, there is only so much we are in control of. For me at least, it is a helpful exercise to consider what we can control and what we cannot. When applied to retirement, it can show where our time and energies should be focused on.
Out of Your Control
Market returns – An easy one but one worth always repeating. Outside of those capable of buying a controlling portion of a company, most investors have little ability to influence the outcome of a stock much less the overall economy. Our buying and selling have little impact on the eventual outcome of a company.
Policy regarding taxation, savings, and benefits – While we have the ability to vote who represents us, in the end, we have little to no control on what our elected officials end up actually doing. And as we have seen recently, regardless of where we stand, everybody has been disappointed by at least one of the outcomes that have come about. I always enjoy a good political debate but in the end, the best we can do is to react to policy as we learn more about it.
Employment earnings and duration – We have limited control of our employment and ultimately how long we end up working. It might not always be the job we want or the amount we want to make but there is usually some kind of job available that can extend our working career.
Longevity – Another area that we can positively impact with some of our decisions but ultimately the length of our lives too lies outside of our control.
Saving vs. spending – One thing that does fall under our control is how we spend our money. There will be constraints and surprises but ultimately how we spend and save is up to us. The most important factor in retirement planning is how much we spend and is something that we are actually in control of.
Asset allocation and location – Ultimately one of the most important decisions we can make for retirement. While we cannot control how the markets move, we can choose our balance of the various asset classes in our portfolios. This important step will help us control the amount of volatility we see and what we can expect to return over time.