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I recently spoke to a prominent physician about the impact the 2008 market meltdown had on his retirement plans.  Although he’s only in his mid-50s, he said that he, and many of his colleagues, saw no alternative but to keep on working for as long as they can. The new definition of retirement for them is to phase out doing surgeries and working three days per week in order to keep some cash flow coming in.

While it is understandable that many of today’s professionals no longer see their retirement as one endless round of golf, it’s quite another to keep on working and endure the daily stress for financial reasons.

Let’s take a look at a few primary reasons for this profound change in attitude over the last couple of years among successful professionals. While it might be tempting to just blame the 2008 market crash for foiling our retirement plans, accepting the victim’s role is not productive for planning our family’s future.

Not withstanding the ever-present, short-term market volatility, do you realize that in April 2010 the Dow was within a couple of percentage points of where it was in August 2008, i.e., just before the crash? Do you also realize that in April the Dow was at about 80 percent of its all-time high reached in October 2007?

With these facts in mind, we need to ask, and answer, one crucial question. If one’s retirement plan was well intact in August 2008, then why are these professionals resigned to working past their desired retirement age when the market is again within a couple of percentage points of that mark?

I would suggest that understanding the answer to that question could have a profound impact on how we shape our financial future. In a nutshell, market performance as measured by an index almost always beats the individual investor's performance over time. In other words, while the Dow/S&P500/Nasdaq has recovered quite well over the last 20 months, most investors’ portfolios have not. We can easily validate this observation by comparing our portfolio’s value as of the end of April 2010 with the August 2008 value (adjusted for additions or withdrawals).

It should be obvious that the primary explanation for this discrepancy between investment and investor performance is found in the latter’s behavior. By definition, the stock market, in the aggregate, always acts rationally; the individual investor does not. To illustrate this point, just take a look at how most investors responded to the 2008 market decline. The most common reactions by individual investors were to put trillions of dollars into cash or Treasury bonds where it still sits today. Obviously, this fear-driven behavior made them miss out on the market’s recovery in 2009.

Even the more courageous investors, who did nothing with their holdings, could not escape the consequences of their behavior. For most of them, the pain of seeing their portfolio decline became so great that they refused to open their brokerage statements for several months on end. Compared to the previous behavioral choices, at least this approach recovered some of the portfolio’s losses. Nevertheless, doing nothing to one’s assets out of fear is not a rational portfolio management strategy. While a rising tide raises all boats, some of them will float and continue on their journey sooner than others.

In summary, whether or not our professionals have enough assets to retire depends primarily on the financial decisions they make and not on the market's performance. If now they don’t like the outcomes of their past decisions, then they should change them for the future. To use today’s market volatility or tomorrow’s economic/political uncertainties as an excuse for not making a rational investment decision is unlikely to move anyone closer to achieving an important financial objective.

If one is in his 50s, there are so many things that can be done to change a financial outcome 10 years down the road. It can be, and is, done by astute professionals every day.

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Dieter Thurow is president of Thurow Wealth Management Inc. TWM provides comprehensive and personalized retirement solutions to professionals and business owners in the North Bay. He is located in Healdsburg and welcomes your comments at dieter@dthurow.com.