Most people are probably familiar with the well-known serenity prayer: “Grant me the serenity to accept the things I cannot change, courage to change the things I can, and the wisdom to know the difference.” First coined by American theologian Reinhold Niebuhr, he probably didn’t know how well this could be applied to retirement planning!
In retirement planning, you want to focus your time and effort toward the things you can control, and not waste too much energy fretting about things over which you have no control. In order to do that, it’s important to recognize the difference.
Source: The Importance of Being Earnest, J.P. Morgan Asset Management, 2013
To view a larger version, click on the image.
The graphic above delineates your areas of retirement planning control. You have total control over your saving, spending, and asset allocation (as well as the location of your funds). You have some control over your employment earnings and how long you work, as well as your health and thus longevity. You have no control at all over the markets and tax policy.
What does this mean for you as you plan for retirement? It means that when it comes to looking at market returns and future tax policies, you should make thoughtful assumptions based on your current knowledge and consider ways to diversify for different future possibilities, such as tax diversification strategies, inflation protection, and investment diversification. And then put most of your focus on the things you can control: how much to save, how to allocate your assets, and the development of an appropriate spending plan as you near retirement.
Keeping your focus on the things you can control can help you reach retirement planning serenity.