What follows is one of my all-time favorite quotations, from Alice’s Adventures In Wonderland. The background is that Alice has come to a fork in the road and wonders out loud which way to turn. The Cheshire Cat materializes, and the following conversation ensures:
Alice asked the Cheshire Cat, who was sitting in a tree, “What road do I take?” The cat asked, “Where do you want to go?” “I don’t know,” Alice answered. “Then,” said the cat, “it really doesn’t matter, does it?”
This gets to the very heart of financial planning. How are your invested assets to be used? What is the purpose for these dollars? What do you want to accomplish?
Our point is that investment accounts don’t (or shouldn’t) exist in a vacuum. Purpose and time horizon inform the ultimate investment choices. For example, if the purpose of the account is providing retirement income, then perhaps we’d look to invest for you in a retirement account – i.e. Roth IRA. If you are 40, then we’d generally recommend a more aggressive allocation than a conservative one. But if you’re 60, then perhaps we’d recommend a non-qualified account, so that you can take advantage of favorable capital gain tax rates.
All of our advice depends upon your (the client's) particular set of facts and circumstances. But you, the client, have to decide which road to take before we can advise you properly. That means, like Alice in the story, working backward from the ultimate destination to today. Often that can be the tough part for the client. Why? Because people have had to focus all their lives on making a living. Lifting one’s eyes up to contemplate the possibilities and design a brilliant retirement can be a bit of a challenge. Mr. Client, is your vision for what’s arguably the last third of your life big enough?
Honestly, if you have no clear vision for your retirement years, then it doesn’t matter which road you take, because all roads will lead you somewhere! But is somewhere the right place for you? This is one for you to think through.