Two years ago, just before the market hit its last peak, we met with a couple who were ready to retire.

At age 52.

Ah, the dream! Hey, if you can do it, then do it. They thought they could do it. All they needed was $300,000 per year from their investment portfolio. So what do you think they had saved to fund this withdrawal rate? 6 mil? 7 mil?

$3,000,000, plus or minus. Much of it taxable. Even for you arithmophobes, that’s easy math. They needed 10% percent per year. That rate would generate the $300,000 they needed each year, while keeping their three million intact.

The market averages 10% per year. Oh, the serendipity! And the dream was born. They wanted us to invest their money, earn 10% every year, and cut them a check for those earnings. Retirement solved! Of course, we said no. That’s just not how it works. Failure was inevitable. They couldn’t grasp why – or more likely didn’t want to. So we all parted ways.

While the market averages 10%, in the last 100 years it has come within 2% of that average only six times. Typically it’s up much more or down much more. Or it just meanders sideways for a while. Just look at the market since we met this couple. It’s still about 10% off the high it made in January of 2022. And then there was 2018, 2008, 2002. Don’t forget all the drops that occurred intra-year, that don’t show up as negatives on the “yearly performance” list. 2020 was up, but not before suffering a 35% drop in the spring due to the onset of covid.

That’s why we said no. They couldn’t accept that the market is a long-term tool. Subsequently, so is investing. Anything less than long-term is just a gamble. And that’s where the hope lies. As our client, you are an investor, not a gambler (John’s mom’s Foxwoods Casino trips aside). You have the capacity to allow the markets to work, to absorb all those bad years, the 35% covid drop, the last two years, and still come out a winner. It’s easy to forget that when you’re still well below the high as we are today. So here’s a reminder: investing works, but only the patient and the disciplined succeed.

Cheers,

Your Team at Great Oak