by Dr. Rui Yao
Recently I’ve been thinking about the similarities between long-term retirement saving planning (for example using a 401(k)) and long-distance running planning (such as 5k runs or 10k runs (a marathon long thought as a 40km, is really a 40.195K, but I digress)). In both cases the goal is a long distance away, in time or length. For the purposes of this article I will refer to all types of long-term retirement saving plans, 401(k), 403(b), 457, 408 (IRAs) and such, as simply as (k)plans, and I will refer to all long-distance runs as (k)runs.
In order to be successful in (k)plan saving you should have long-term focus and discipline. In order to be successful in a (k)runs you should also have a long-term focus and discipline. Do you see how both work so well as a concept together? I suppose if you do well in either, you have done O(k), or you have an O(k) plan.
Whether you are talking running your (k)plan or (k)run it is best to be aware of the road in front of you, but you ought to keep most of your focus on the finish line.
Unlike running, it feels better to be investing when you are going uphill; but like running, the reality is that you might be making more progress along the trip when you are going downhill. Really? Really. When running, you can go faster and make bigger steps when you are going downhill. In dollar-cost-averaging, you anticipate accumulating quicker when you are going downhill. In both running and investing, many mistakes are made when you are going downhill. I have heard that more injuries occurred to runners going downhill than uphill and so it is with savers as well. Savers see markets going down and make all sorts of emotional changes that cause damages to accomplishing their long-range goals.
Financial and physical planning has a lot in common. Be careful going downhill because it can be a crisis, or an opportunity.
Rui Yao, Ph.D., CFP®
Associate Professor & Director of Graduate Studies
Personal Financial Planning
239 Stanley Hall
University of Missouri Columbia, MO 65211