Trips to the Well

By Brad Thomason, CPA
 
 
If I told you that there was a well with 100 gallons of water in it, and you knew that you used 5 gallons of water every day, it would be plain to all parties how many days the water would last.
 
If you had access to such a well, you would not be particularly concerned about water for the next few days.
 
But neither would it be lost on you that there was some significance to each trip to the well.
 
As a response you might consider whether or not there was something you could do to increase the amount of water in the well.  Though you’d need to find a method that didn’t put what was already there in great jeopardy.
 
Or, you might go looking for another source of water, so that you could delay going to the well at all for the time being. 
 
You might give some thought to trying to cut back on your water consumption.  But as soon as you started to think about it a little voice in your head would point out that even if you could cut back some, you likely couldn’t cut back a lot.  Certainly nowhere approaching zero.  Especially if you weren’t being wasteful with the water in the first place, then there might be very little if anything you could actually do to decrease your consumption by any quantity that would matter.
 
Finally, even if you couldn’t find a suitable replacement, maybe you could at least get a little from somewhere else so that you could take a smaller amount from the well each trip.  Even if you did that for only part of the time, it might make a difference.
 
How many annual trips to the retirement well do you have?  When you draw out a year’s worth of money, how much is left?  Are you sure you want to start going to that well, especially if you have the option to work a bit longer?  Even if you no longer want to work all of the time, have you looked at the potential impact of having an ongoing income that’s quite a bit smaller than what you were accustomed to during your career – not to try to live off of, but just to slow the rate of withdrawals?  It might surprise you how much difference a seemingly small amount could make.
 
Real wells fluctuate with rainfall and other factors, just as retirement finance is affected by investment returns, inflation and medical expenses.  So neither is exactly as static as I described above.  But loosely interpreted, it’s not a bad analogy.  I bet you get it.