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Transitions between different phases of life often reveal more questions than answers. For high income earners, these transitions can be periods of opportunity but also present significant dangers if smart decisions aren’t made.
What we call the “Run-Up” phase, 10 years or so before retirement, is the most critical stage of financial life and questions usually dwarf answers during this time.
Make Time your Friend
Chaucer’s words,“time and tide wait for no man,” provide an excellent frame for times of change. We often call financial planning “future making” because what you do today determines your future. From the point where earnings peak, for most in their mid 50’s, until full retirement, financial choices take on increasing importance.
Time can be both a friend and an enemy. If the peak earning years go by without progress towards your most important goals, your financial future will likely be less than ideal.
No One Has a Crystal Ball
Since no one knows how long they will live, it is impossible to precisely pinpoint the exact amount needed to fund your lifestyle throughout retirement. You don’t know if you will be here for “days or decades.” The questions keep piling up.
You also don’t know, and can’t know, your future health, future investment returns, or future inflation. These are questions without definitive answers. Human nature, however, craves precision and seeking this precision can lead successful individuals down errant paths.
Related: Don't Fall Prey to These Four Investing Misconceptions
Sift through the Questions
The sheer breadth of questions during life transitions can disorient you about the proper role of money. Money isn’t abstract, rather it’s a resource that can be used to create memories and experiences.
Of course, money can also be used to buy things, items you may need and stuff you don’t need. Money is ultimately about trade-offs; if you want to buy one thing, you may not be able to buy another. Coming to grips with trade-offs is among the most important ingredients to financial happiness.
Achieving desired outcomes is not just about the right answers. It really is about understanding the right questions and how these impact your future.