We’re in the business of planning and managing investments for retirement.
We speak with so many individuals as they approach retirement. A fair amount of these folks have made up their minds they want to be 100% out of the market.
That is not planning. Perhaps they attended “free dinner seminars” before the virus shutdown. Most of these “seminars” are a thinly-veiled pitch for annuities. The usual underlying message is “the stock market is no place for retired people!”
These seminars ought to address how folks can maintain their lifestyle in retirement. The salespeople would make better use of the dinner hour discussing the effects of inflation over the years their guests will be retired. And cover how ongoing financial planning can help.
Instead they take the easy road and show the “risk” of the stock market and the lousy returns at the bank. All done over lukewarm chicken and limp vegetables.
Is there a different approach worth considering? Perhaps.
At the end of August 2020, Warren Buffett will turn 90 years old. He’s one of the richest people in the world. Buffett and his company (Berkshire Hathaway) are planning their investments with a twenty-year time horizon. Some of their investments are designed to run even longer than twenty years.
Why aren’t you doing the same?
This past week, Buffett and Berkshire Hathaway announced a deal to buy natural gas assets from Dominion Energy. Dominion serves electric power to Virginia and the Carolinas. Dominion also supplies natural gas to the same areas, as well as Utah, Pennsylvania, West Virginia, Ohio and parts of Georgia.
Buffett (and his vice-chair Greg Abel) explained in May 2020, nearly half the company’s capital spending went into energy investments. On top of that, Berkshire Energy has been planning $40 billion of projects over the next nine years. These are long term, capital intensive projects. For example, the gas transmission projects they are bringing on line this year (2020) began in 2008. As they described, “we plant a lot of seeds.”
Shouldn’t your investments be doing the same?
Addressing the energy projects, Buffett continued, “…these are not super high-return things. They’re decent returns over time. They take a long time, they earn decent returns.”
Buffett then went on: “I’ve always said the energy business is not a way to GET real rich. But it’s a way to STAY real rich.” He also added, “it’s worked for twenty years. And it’s got a long runway ahead.”
In the 1980’s and 1990’s I spent a lot of time recommending twenty and thirty year bonds to retired individuals. These were folks who wanted an income higher than what was available at the bank, with a good degree of safety. Longer term bonds made sense (at the time) because they were safe and carried the highest current yields.
The usual response I’d get? “Twenty years? I’ll be dead in twenty years!”
Fast forward to today. We meet some people who want to completely “de-risk” when they hang up their work shoes. Those folks will never keep up with inflation taking that route. It doesn’t mean they need to own very aggressive investments. Nor does it mean they have to be 100% in the market. There IS a better approach than saying yes to the annuity sale, or dropping it all into the bank.
An investment advisor and financial planner can help you put together a sensible portfolio designed for you. Financial planning can help keep you on track. Give us a ring at 732-223-9000 to discuss!
You can watch the Warren Buffett and Greg Abel clip right here:
