How planning for retirement is like packing for a hike
Earlier this week, my husband and I celebrated our second wedding anniversary. Sadly, we have wildly different ideas of what wedding-related celebrations should entail.
Case in point: The day after our wedding, he took me on a surprise mini honeymoon; a "mini-moon", if you will. After six months of grueling wedding planning, all I wanted to do was relax, order room service, and get a couple’s massage. Naturally, I was thrilled when we pulled into a B&B in Virginia wine country. That is, until the alarm went off at 6am the next morning. “We’re going on a nature walk,” he said. “It’ll be fun,” he said.
Five hours, a lot of sweat, tired legs, and one nearly lost temper later, we reached the summit of Old Rag Mountain. I'm not going to lie, a large part of me wanted to toss my new husband right off the side of that damn mountain. He clearly had NOT thought it through; half a bagel and a granola bar, lacrosse cleats and tennis shoes didn't exactly make for an enjoyable hike.
So when he suggested we celebrate our second anniversary by climbing Mt. Fuji in Japan, I was a hard sell to say the least. Fuji is three and a half times taller than Old Rag, and I don't know the first thing about climbing a "real" mountain. What should I wear? What kind of equipment should we bring? Which trail will we take? How long does it take to get to the summit? How cold will it be up there? What if we get lost? All of these questions and unknowns nearly made me say no, but the man has his heart set on it. “We’re going to the top, toots! So you better research, figure stuff out, and pack accordingly.” Aye aye, buddy.
While packing, it dawned on me that many people approach investing and planning for retirement in much the same way as I'm approaching this hike. I know it's coming and it’s going to take a lot of time and effort, and because of that, I’m procrastinating like crazy preparing for it.
But let's face it, time’s a-ticking; this mountain is our working years, the summit is retirement. And there are two questions we all need to ask ourselves:
- How smooth of a hike do I want?
- How will I feel when I reach the top?
- Ecstatic? Accomplished? Relieved? Frustrated? Unprepared? Defeated? Exhausted?
Both outcomes depend on one thing: how well we prepare ahead of time. The first step in preparing for anything is understanding what you're preparing for.
what is my goal?
As with any challenge, you've got to identify your goal and make it specific. In this case, I'm trying to get to the top of Mt. Fuji in time to see the sunrise. In the money mountain scenario, you're trying to get to the top (retirement) without too many bumps in the road. You hope to have enough money saved once you get there so you can stop working and enjoy the hike back down (your retirement years).
Now that the “what” is out of the way, it’s time to tackle the “how”.
how and what should I pack?
Better make sure you've got the right gear and equipment to help you on your hike!
I’m packing lots of food and water, a flashlight, hat, first aid kit, etc. The food and water will fuel my hike, just like consistent contributions to your retirement account will propel you to the top.
The flashlight, hat, etc are equivalent to the tools you'll need, like knowledge of basic investing principles, for your money mountain climb.
I'm also taking lots of dry layers so I’m prepared for any weather conditions that may arise. Similarly, you should know which investment options are available to you, that way you're able to change your allocation (investment selection) if the market “weather” shifts.
which path should i take?
Now that you know where you want to go and what you're bringing with you, you need to decide how you'll get to the top.
Will you take the shortest, steepest path that involves some sheer face climbing? It's riskier, but you may get to the top faster that way. Or will you take the scenic route that zig zags to and fro up the mountain? It’ll definitely take you longer to reach the top, but it’ll be less dangerous and likely more enjoyable.
Obviously, which path you take depends on two factors:
- How long you have to reach the summit (retirement)
- At what elevation you're starting
If you're in your 20s or already have a lot of money saved, you can afford to take the slow and steady approach. However, if you're in your 30s or 40s, or haven't started investing yet, the short, steep route may be your only option.
If you want to reach the summit by sunrise (a certain age), your time frame is limited. Taking the slow and steady path after getting a late start could mean missing the sunrise altogether (ie. arriving at the top far later than you'd like and working into your 70s or 80s).
reaching the peak
Just like working and investing for retirement, hiking Fuji will be a long, arduous process. Especially at the head of the trail, each step will seem tiny and insignificant. My bag will feel heavy and I'll wonder whether I've packed too much.
But once we successfully reach the summit, I'll know that every step I took, every layer and snack I packed, every bit of research I did was worth it and necessary for me to accomplish my goal. Just like every contribution you make to your retirement account and every lesson you learn about investing will help you reach the top of your money mountain.
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So, where are you heading?
What does the summit of your money mountain look like?
What have you packed to take with you on your journey? (If you need some basic investing knowledge to throw in, you can get that here!)
Where are you starting on your climb, and which path are you taking to the top?
Do you have the tools and knowledge necessary to handle any bumps in the road along the way?
What will you do once you reach the peak?
Remember, we’re all on this journey together, and we can reach the top successfully by helping each other along the way.
We’re going to the top, my friends! Happy climbing!