By Brad Thomason, CPA
In the years after the Vietnam War, the US military spent a lot of time looking into what was necessary to assure victory in warfare. What they concluded, in simple terms, was that if it was important to win, you couldn’t really be thinking about minimum requirements or efficiency or things like that. The best way to win was to throw overwhelming force at the target, force of such magnitude that the target simply couldn’t hold up under the onslaught. Obliteration was the key to sure-victory.
Which, to their chagrin, they realized is something which they already knew, but apparently forgot. In World War II, our forces attacked by land, by sea and by air. In the major battles, all three at once. If you wanted to you could view the whole thing as being similar to a demonstration in high school physics class: you just keep piling on the force until the thing collapses. Ultimately it comes down to math. When the sum of the effects gets high enough, destruction becomes inevitable.
How would you like to do that to your chances of a successful retirement? Because if you would, I have the perfect three-prong attack that you can launch at your portfolio. Unless you have extraordinary resources (or a very short time to live), it is almost certain to blow it to smithereens. Ready?
1.It will reduce the total amount of principal that you feed into the system, which will inevitably, irrespective of any other factors, lead to the balance failing to reach the height that it could have achieved.
2.It will reduce the number of years that your (already-reduced) savings get to compound and grow.
3.It will make the job that your portfolio has to do, bigger. You will have a greater number of years to have to pay for than if you retired later.
Yes, folks, that’s a complete attack package. The financial version of land, sea and air. All the branches of the military converging on that poor, single target. The perfect concerted strike. It’s brilliant, I tell you. If you wanted to bring your portfolio to its knees, it is hard to imagine any single act which stands as good a chance of such effective damage-dealing. There may be more elaborate ways to do it, but if you are looking for a simple way to get the job done. In terms of having a big ole club to swing at it, this is the ticket.
I’ll presume my point is sufficiently made, and dismiss class early. Have a good one.
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