Bonfire of the Sanities: Reset Your Retirement Portfolio for Today's Financial Lunacy

By David Wright

The year 2020 brought about dramatic changes that have impacted the U.S. and the entire world, affecting different areas of our lives from financial markets, freedoms, fuels, and the future. The retirement landscape in particular is continuously evolving, and retirement portfolios must be managed effectively to avoid losses and recognize opportunities.

Investors can no longer rely solely on computer-simulated allocations or robo-advisors that use algorithms to direct allocations. The current economic environment requires ongoing monitoring of changes to an investor's needs and the external environment.

In Bonfire of the Sanities, author and retirement advisor David Wright outlines the unfolding economic landscape and the increasing regulatory changes to teach you how to

• identify the various paths available for retirement investments,
• implement risk-limiting tools to protect yourself from sudden surprises,
• recognize new initiatives or regulations early and take advantage of them,
• control what you can and actively watch your finances, and
• find the correct professional to oversee retirement portfolios or implement risk-limiting tools to take advantage of high-potential investments while protecting your accounts.

Investors must be vigilant to recognize shifts, more so now than ever before, and actively manage their portfolios to avoid losses and recognize opportunities.

• Language: English
• Publisher: Advantage Media Group
• Release date: Dec 12, 2023
• ISBN: 9781642257267

David Wright

David Wright is a writer and teacher living on Canada’s majestic west coast. He has a lovely wife, two sparkling daughters and 50 published short stories in dozens of magazines including Neo-opsis, Martian Wave and Perihelion. David’s latest novels are available on Amazon and Smashwords. Visit his author website at davidwright812.wordpress.com.

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Introduction

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This is the captain. Brace for impact.

These words were the first announcement made by Captain Chesley Sullenberger (Sully) on US Airways Flight 1549 on January 15, 2009. Ninety seconds later, the plane was skillfully set down in the cold January waters of the Hudson River.

Planning

His landing has been dubbed Miracle on the Hudson. Just two minutes after takeoff, the plane ran into a large flock of geese; this immediately stalled both engines of the Airbus 320. Attempting to restart the engines proved to only waste precious seconds. At the time, the passenger jet’s altitude was a little over a half-mile high, and its momentum was much slower than cruising speed. The preferred plans of Sully and his first officer had changed dramatically that afternoon—so did the travel plans of all 150 passengers aboard the aircraft. But, by the time they had gone to bed that night, Captain Sully, his crew, and everyone onboard considered themselves very lucky. And here’s why they were lucky: Their pilot had planned for an easy two-hour and nine-minute flight to Charlotte, North Carolina, but he was also prepared if things didn’t go according to plan. Plans change on you. United Airlines’ pilots are in the air up to a thousand hours per year; during each pilot’s career, there will be a few surprises that they also plan for, just in case.

Sully wasn’t lucky; he was prepared; like most responsible experienced professionals, his plans also included various possible contingencies.

Preparing

Since you’re reading a book about preparing for everything retirement can throw at you, I assume you’re mature enough to realize you can’t plan for absolutely everything. But your experience tells you to prepare for what is likely to happen over several decades of time—to build a plan that provides a soft landing in some of the worst-case scenarios. You know this is important, because unexpected circumstances take many shapes and have varying amounts of impact. Some have greater costs than others. If Captain Sully and crew had not been prepared for the improbable, they could have all met their own demise shortly after the geese themselves were cooked. And since you’re old enough to have an interest in the guidance you’ll find in these pages, you are also wise enough to know that being prepared for retirement during the 2020s is more crucial than ever.

I learned the sting of being unprepared when I was about twelve. The lesson was an unintended gift from my father. It was Dad’s high level of confidence in his plan without being fully prepared that led to a shoddy execution. His plan fell flat for lack of preparation. I grew from the experience. Fortunately, the cost to everyone involved in this situation wasn’t physical harm or financial stress. Instead, the event that I’ll explain in a minute caused Dad’s temporary embarrassment and sorrow for having let others down, and a funny story that has been repeated at many family events and is still being told to this day. I believe Dad would understand that although I’m immortalizing his unprepared night in print, it is for the higher cause of making a point to help you better understand how a little extra prep can save a lot of heartache during the execution phase.

Execution

Growing up, the Wright household was a musical home. Not quite von Trapp family level, but I was literally and figuratively raised on The Sound of Music; we never missed the Andy Williams Christmas Specials and (don’t tell anyone) The Osmond’ Holiday Shows. My dad sang solo in various chorus groups, the Navy Bluejacket Choir, and even sang on Major Bowes Amateur Hour on NBC Radio in the 1940s. Mom was also musically inclined. In high school, I was offered lead parts in musicals—I would practice my lines until I was ordered to go to sleep.

There were two reasons for my work ethic. First, I get a high level of satisfaction from entertaining others. Second, when you’re in the audience watching a live show, whether it’s a play, choir, or solo performer, the person(s) in the spotlight makes what they’re doing seem natural and easy. From the performer’s perspective, they know the audience is counting on them. Not in the way an airline pilot’s passengers are, but the audience presumes the performer is as ready for putting on a show as they are to be entertained. This goes double for a play; there are even more parties who would be let down if one hasn’t prepared and fails to execute well. For example, in addition to the audience, the cast and those involved in the production are relying on everyone else to know their own part perfectly. Choral groups performing in front of a general audience are a bit more forgiving, less forgiving when performing for trained ears.

In my family, it was not unusual for my dad to share his vocal talents on the weekends for Church, civic events, as well as social organizations. He loved to entertain others and make people happy. I had not yet hit the awkward teenage years and was proud to occasionally tag along with my family to these events, and hearing the applause often heaped upon him as he executed perfectly. On this one particular night, I accompanied my dad to the local Women’s Club of Bowling Green in our small town, and without missing a beat, my dad began singing a spot-on rendition of George Gershwin’s Summertime, a popular tune of the 1940s and 1950s. He was feeling the emotion of the song that night, and his confidence showed throughout the first few praises of the song.

My father started:

"Summertime

And the living is easy."

Then something happened: my father, whose reputation for professionalism, preparation, and vocal abilities was known by everyone in town, didn’t know the next line of the song. He simply forgot the lyrics—and the embarrassment of the moment was palpable—and my Dad was humbled. As he collected himself, and had the dubious task of directing the piano player back to the point where he could restart the song, the damage was already done. I felt bad for him, and of course, with his self-deprecating style, my father quickly joked about it. It was not a big deal—this was a friendly crowd gathered around tables and chairs at the local community hall.

I don’t believe I had ever told him this directly, but I was impacted by his performance, or more accurately, slightly-off performance that night. I learned from him the importance of not leaving things to chance. Control what you can and be ready for those things you’re powerless over—there are many things you can control. Plan, prepare, execute; the reward will follow. Often the reward is just peace of mind.

Years later, I found myself in college studying to become a teacher. I spent my days preparing students for the future and expressing how important being ready for the unexpected is in life. Many of the kids welcomed the lesson; some did not. I took this teaching and advising skillset with me when I later changed careers and began helping people plan and prepare their finances for what lay ahead for them.

Back then, still as a young advisor, I worked for a larger firm that had many similarities to performing in a large choir in front of an audience of untrained ears. For example, there was a director who told you what to do and when. And while some advisors made mistakes, hardly any clients (with untrained ears) picked up on them. Further, since a large group of people were all singing the same song, including myself, there were flaws in the words but few in this big Wall Street choir noticed; some did, but getting paid, sadly, was the only concern for most.

Going Solo

I didn’t become a financial planner to outsource the planning part to a distant uncaring corporate headquarters. I wanted to be hands-on by planning and preparing clients for what’s coming, then help them execute that plan. Large financial institutions are there to serve the corporations’ owners. Like other big companies they organize for the purpose of maximizing company profits by streamlining and creating boilerplate one-size-fits-no-one solutions. It doesn’t matter which large financial firm; they will log your answers to their questionnaires, defer to corporate headquarters, and someone with no stake in the relationship will provide a product for you. In reality, the real solution is financial management and investment management in a way that is unique to fit your purpose. The big shops, bar none, are not prepared to offer you management to fit your specific situation. Even more, in recent years, we’ve experienced a dramatic shift in how the government manages its finances. Policies of holding rates down, picking which industries prosper, and printing money have not been de-escalated as expected. This has to be addressed. Large financial management firms aren’t much help to their clients with these changes.

It was important for me to write this book you’re holding to explain in great detail the important differences between boilerplate products and tailored management. It is also important for me to be among the first in the industry to say that many things have changed and present the new green flags and red flags for retirement portfolios. This is also why it is important for me to direct my own firm, so I can do what’s best, adjust when the need arises, and only affiliate our services with like-minded providers.

Hands-On

When United Airlines flight 1549 became disabled at low altitude and with slow ground speed, Captain Sully announced, My aircraft, in order to make clear who would be responsible for the important decisions. Your aircraft, said the first officer. Those on the ground tried to direct him by adamantly providing a few different options. But he was the person in the aircraft managing the situation for the benefit of those who entrusted their lives to him. The options presented by those removed from the situation struck him as filled with unwarranted risk. Perhaps those doing the directing did not want to calculate losing an expensive plane in order to lower the chance of crashing short of a runway in the densely populated Queens or Newark. After his successful landing, United Airlines did not treat Sully as a hero, despite zero loss of life. Flight modeling, in hindsight, later suggested any other path could have taken too long to put in place and would have led to a grim result.

Thankfully, the captain was a hands-on pilot.

Hitting the Right Notes

Expect a fun and informative ride in the coming pages. You’ll continue to discover that when the unexpected arises for retirees, a disconnected or unprepared advisor or being an unsuspecting self-directed retiree could be devastating. More importantly, you’ll understand how to be prepared for the expected, the unexpected, and everything in-between.

—D.W.

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Chapter One

WHAT RETIREES NEED MOST

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Abraham Maslow was a psychologist who created the widely taught theory of human motivational needs, appropriately known as Maslow’s Hierarchy of Needs. He dared to define and rank from the most basic level of human motivational drivers to the uppermost drivers once the lower ones were met. His theory makes so much sense that it’s hard to imagine that it wasn’t identified earlier. Maslow was not a philosopher from hundreds of years ago; he died as recently as 1970. If you’re unfamiliar with Maslow’s hierarchy or need a refresher, they are, starting at the most basic driver: physiological (food, shelter), safety, belonging (or love), self-esteem, and what he called self-actualization. The understanding he laid out proposes that one doesn’t concern themselves very much with belonging, friendships, or even self-esteem if they don’t have food.

These needs aren’t altered as one moves toward or into retirement. Retirees at the most basic level want to make sure they get to keep their home and put food on the table. Next, they want to provide for their safety, including healthcare costs. If that’s taken care of they can focus on belonging; examples I see include visiting with kids and grandchildren. These seem basic, but that’s because most retirees have planned through life, and we are blessed to live in a country where opportunities made it possible to accomplish their plans. As we move up the hierarchy, I’ve found that one is never too old to try to retain self-esteem and pride. I meet older clients who have had to let some of their pride slip and get help from others. Seeking help when needed should not lower one’s feelings of worth. Self-actualization is growth as an individual. I can attest, based on my clients, that retirees are experts at this. Once their other needs are covered, they invest their days doing things like volunteering to help the community. Or they satisfy their need for continued growth through travel and experiencing the world, learning a new skill, or even writing a book.

No place in this hierarchy, even at the very top, is there a need to be rich. Throughout Maslow’s need pyramid and my version described in the previous chapter, I ascribed to retirees that the most basic need is to not be poor. This is well worth noting, because when it comes to the investment side of financial planning, my personal observation is seven out of ten people near or in retirement keep their portfolio distributed in a way that 18–30 percent of it could disappear in a bad stock market month. Out of the remaining three, two have their money in the bank, where they are losing to inflation every day. The longer they live, the greater the erosion of their ability to provide for themselves