“The information you consume each day is the soil from which your future thoughts are grown.” – James Clear, Atomic Habits
“What have you been reading?”
I had just listened to a doozy of a conspiracy theory by one of my close friends who is approaching retirement. He was explaining in oddly specific detail how the U.S. banking system and dollar were going to collapse. This guy is a highly functional executive for a multi-national company. My friend was considering changing his retirement plans due to the coming demise of the U.S. financial system.
You can probably relate. It seems we all have a friend or family member that spends way too much time clicking buttons on the internet.
We’ve touched on the need for an information filter in the digital age, but what does that mean?
According to Datareportal, the average American spends 7 hours and 11 minutes looking at a screen every day. Americans are taking in five times as much information every day as they did in 1986. We were never meant to be fed reams of data to process. We are on information overload.
I’ve compiled a list of things I think retirees should pay attention to, but don’t. We can also identify things retirees pay attention to that’s a major distraction (or worse, can influence you to make emotional investment decisions).
What a pre-retiree/retiree should pay attention to…
- Savings Rate – approaching retirement and worried about running out of money? Maximize your savings rate and/or work a few extra years to give yourself a margin of safety.
- Expenses – in our experience, most retirees think they know how much they’re spending, but actual spending is completely different (and tends to be higher).
- Emotional Track Record – have you made knee-jerk investment decisions in the past? It’s important to be honest about past behavior. A successful investment plan requires patience and the ability to stomach losses without going crazy or making rash decisions.
- Risk Management – building a portfolio that reflects how you feel about risk, how much risk you’re taking, having a game plan for rebalancing and/or making trades (especially when markets get difficult) are paramount. Most investors think the time to make portfolio adjustments is after a market sell-off.
- Be Clear About the Game You’re Playing – be intentional about how you would like to spend your retirement days and build a plan around that. Everything else is noise.
- What’s your Enough? – someone is always going to have more money. Identify what your “enough” number is and stop the relentless pursuit of more. The skillset for building wealth and keeping wealth are entirely different.
- Where you get information – all of the focus you put toward things you can’t control comes out of the focus you could put toward the things you can (Shane Parrish, Clear Thinking).
The list of what you should pay attention to has nothing to do with predicting what happens next. It has everything to do with focusing on what you can control.
On the flip side, focusing on things in which you have zero control often lead to emotional decisions and unnecessary stress. Things like…
- Sensational Headlines
- Financial Media (TV & Print) – ”Our obsession with being informed makes it hard to think long-term. We spend hours consuming news because we want to be informed. The problem is, the news doesn’t keep us informed – quite the opposite. The more news we consume, the more misinformed we become.” – Farnamstreet
- Politics
- Forecasts – random stocks picks, market timing, talking heads on CNBC, grand prognostications of what disastrous event happens next
- Social Media
- Following every up & down tick of the stock market
In my opinion, separating the signal from the noise is the most underrated investment skill in the internet age.
Think of headlining topics within the last few years. These were the most important things until they weren’t…
- Death of the U.S. Dollar
- The Certain Recession
- Bank Failures
- Russian Invasion
- Middle East Conflict
- Fed Hikes are Going to Implode the Economy & Markets
It adds up to wasted time, anxiety, and worry over external factors outside of our control.
If it won’t matter in five years, why spend five minutes thinking about it?
For further reading on building an information filter, see…