As I was watching the World Series, similarities between baseball and retirement kept coming to mind. Well, not really, although my mind did start to wander after the second inning. Still, the World Series has a lot to teach us about successful retirement planning. Here are seven lessons the great American pastime can teach us about our golden years:
1. Little by little. The World Series isn't won in a single game. It's not won in four or even seven games, either. The baseball season is a grueling 162 regular season games, followed by post-season play. Winning the Series is the culmination of a long, tough season.
Retirement is the same way. A successful retirement is the result of careful planning and consistent investing over a lifetime. During that time, mistakes will be made. Winning the Series or having a successful retirement doesn't require perfection. But it does require consistency. Remember, retirement is a marathon, not a sprint.
2. Statistics only get us so far. Guess which team had 93 losses in the 2012 season and was dead last in the American League Eastern Division. Hint: They are in the World Series this year. That's right, the Boston Red Sox went from zero to hero in one season. Statistically, such a turn around is not very likely. But as the great Yogi Berra once said, "In theory there is no difference between theory and practice. In practice there is."
We can theorize about retirement all day long. Typically this takes the form of making all kinds of assumptions. How much will the market return? What will inflation be in 30 years? What percentage of our income will we need in retirement? While these are important considerations, what actually happens in the market or our financial lives may vary significantly from theory. Be ready.
3. It takes a team. While some players get more attention than others, winning the Series is a team effort. Planning for retirement takes a team, too, even if you are a do-it-yourself investor. A successful retirement "team" is comprised of some surprising players.
To start, there is the IRS. The tax code gives investors some advantages through various retirement accounts such as 401(k)s, 401(b)s and IRAs. Add to that low-cost mutual fund companies, retirement calculators and free investment tracking tools, and one can assemble an excellent team for very little cost.
4. Some things are out of our control. There are a lot of things in baseball that a team can't control. Umpires will make bad calls.
Retirement planning is no different. We can't control the stock market, inflation or the tax code. The key is to make sure we do control those things we can. For example, we can control our investing costs, asset allocation, how much we save and how long we work (in most cases). In short, we should seek to accept the things we cannot change, and do our best to change the things we can.
5. It's simple, but not easy. Baseball is not complicated. Hit, throw and catch about sums it up. Just because something is simple, however, doesn't make it easy. Retirement is simple. Save 15 percent of your income, invest in low-cost index funds and retire at 65. Simple, but as we all know, it's not so easy. As odd as it may sound, planning for retirement takes practice. It's takes practice to consistently spend less than we make, invest the difference and ride out market declines. But as the saying goes, practice makes perfect.
6. Consistency wins. We remember the big plays. The walk-off home runs, ninth inning rallies and no-hitters are stuff legends are made of. But it's the consistent, day-to-day routine plays that build a championship team. Successful retirement planning is also born out of consistency. Consistency in modest spending and regular contributions to retirement accounts are the keys to comfort in our golden years.
7. It ain't over until it's over. As any Yankee's fan will tell you, being up three games to zip doesn't guarantee a win in a 7-game series. I hear from a lot of people in their 40s and 50s who are behind in retirement savings. Some haven't even started. While those late to the game have some hard work ahead, I firmly believe that it's never too late to start investing for retirement. The key is to start today, even if you start investing a small amount of money.
Rob Berger is an attorney and founder of the popular personal finance and investing blog, doughroller.net. He is also the editor of the Dough Roller Weekly Newsletter, a free newsletter covering all aspects of personal finance and investing.