Military Financial Independence

The first part of this post discussed when to file your retirement request and the big-picture items to consider for your finances, departure date, and medical/dental checks.  It also discussed how to spread the news among co-workers, friends, & family.

Neither one of these posts is a detailed checklist– your command already has one of those.  Instead it’s a list of issues that will affect your choices not only as you separate from your command, but also during the first few years of retirement.  Let’s start with one of the hardest ones.

Choosing Where to Live

This is only one of your retirement decisions, but it’s probably the one that needs the most preparation. Start early– even a year may leave you wishing that you had more time for your research.

This is not your typical military relocation.  After 20 or more years of travel, many deployments, and a dozen moves (perhaps with a growing family), you’ve learned that you can set up housekeeping in record time. You may even be able to arrive in town on a Friday and by the following week have a place to live, put the kids in school, and report to your new duty station.

When you retire, it’s tempting to simply fall back on those skills one last time. It’s easy to find a new town and quickly set up a new life– although this time you’re in charge of all the decisions. The biggest difference, though, is that this new life may be for the rest of your lives!

The family discussions that led you to retirement will help you again when you decide where you’re going to live. (Yes, this time it should be a group decision, and you may end up with a minority vote.) This time it’s not even about you or your immediate family, but also your extended family and your preferences. Do you want to live near your siblings and cousins? Are your parents likely to need your support with medical issues or home maintenance or even full-time care?  Are your kids going to mutiny if you move before they graduate from high school with their friends?  Or would you rather choose your own lifestyle, climate, and location while accepting that you may have to travel to visit your extended family?

Take your time. After decades of making quick decisions, there’s no need to rush to make this one. Learn the latest rules on base housing and storing/moving your household goods, and use those benefits as much as possible. You may have to vacate your base housing after you retire, and you may only have a year to decide where to move your possessions, but you can take years to decide on your eventual retirement location. It’s only a matter of what issues you (and your family) are confronting– and how many times you want to move.

Once you decide on your rough location and timing there are many books, websites, and magazines to help you decide exactly where you want to live and whether you want to own your own home. Take advantage of those resources very early in your retirement planning– subscribe to the town’s newspaper or read it on their website. Ask the local Chamber of Commerce for more information or (if possible) look up old friends, shipmates, and relatives. Join an Internet discussion board in that area and ask for advice. Gather all the information you can, discuss it with your family, and make sure that you still want to move there. You may decide to change your mind more than once.

After you arrive at your chosen destination, don’t rush to set up your new life. There’s no need to buy a house that weekend or even to put the kids in school right away.  Take a short family vacation and get to know the area.  While you may already know the basics, now you can reacquaint yourself with the details. This is a great time to rent for a while and to learn the local real estate market.  Is the old neighborhood still a great place to raise a family, or is it looking a little run-down? How has traffic changed over the years? What new roads or neighborhoods will be built over the next decade? Are there any issues with electricity, water, sewage, schools, or zoning? What activities do you and your family enjoy, and how close do you want to be to them?

How Far Away from the Commissary, Medical, Dental?

Your new life also needs to consider your veteran’s benefits. Although the savings of exchanges and commissaries are always under pressure from multinational stores and big-box chains, you may still prefer their selection and pricing. Although you can choose many different levels of TRICARE health insurance, you may want to be near a major military medical facility. If you (or a loved one) have a chronic health condition then you may not want to spend hours driving hundreds of miles every month.

When you consider your new life, you’ll have to shop around for more than a home. Sample the selection and pricing in the local stores. If you’re in an area with several military bases then sample them all– the Army may actually have a better exchange than the Navy exchanges you’ve always patronized, or it may be closer to home.

Military-Friendly States

During your career you’ve probably been a resident of a state that doesn’t tax their active-duty military, or at least gives you a big tax break on your income. That’s going to change!

Taxes are one of the minor reasons for choosing your retirement location, but they will affect your retirement budget. While you’re discussing climate, family, and lifestyle you should also consider how much you’ll have to pay for the privilege of your chosen location.

Most states do not tax disability retired pay, and many states do not tax military pensions. The rules are always changing (Ohio stopped taxing military pensions just a few years ago) and the details may have more impact than you appreciate. You’ll also want to consider the cost of sales tax, property tax, asset taxes, taxes on investment income, and even county/city taxes. Registering your vehicles in your new state may require hefty fees and taxes.

If you’re planning to continue your education or if you have kids in high school, there’s another factor to consider in choosing your state residence: college tuition rates. Several state colleges offer reduced tuition to residents and may even offer veteran’s scholarships for you or your family. Other state schools may reduce their tuition for even minor veteran’s disability ratings.

If you’ve decided on a civil-service bridge career, you may choose to work for a state’s civil service instead of the federal government. The state may offer hiring preference to veterans (especially with a disability rating) and other benefits for you and your family.

While you shouldn’t choose your retirement residence solely for its tax advantages, it can make a difference in your retirement budget and your quality of life. If you’re unhappy about paying thousands of dollars a year in property taxes then you may want to cross a state line in search of a similar lifestyle. If your retirement plans take you near a state line, then consider the tax situation on both sides before making your decision.

Are You a Perpetual Traveler? What Does Your Family Think?

After decades of changing duty stations, maybe you don’t want to tie yourself down to one location!

One of the biggest interests of retirees is travel– seeing the world at your own pace and without a set of orders. Perpetual travelers (PTs) stay weeks or even months in a location, or travel with a motor home. Campgrounds are certainly a cheaper way to stay but options include discount vacation rental condominiums, trailer parks, or house sitting. Recreational vehicles are by far the most popular travel mode but others wait patiently for hops on military flights.

A surprisingly frugal retirement lifestyle is living aboard a boat. Particularly near the Intracoastal Waterway, large groups of boaters move north during summers (away from hurricane season) and south during winters. Others head for the open ocean on both coasts.

Even families can adopt a perpetual-traveler lifestyle. Although the recreational vehicle or boating life is easiest for adults, a few families make it work through homeschooling or only summer travel. If you’re the type of family who’s always enjoyed a boating or outdoor lifestyle, then this may work for you.  One family who’s been on the roads for months of military retirement is the “Wandering Wahls”.  Browse their blog and decide whether their lifestyle would work for you and your family.

Technology has dramatically improved the logistics of perpetual travel. With national cell phone roaming, mobile Internet access, and overnight shipping, the lifestyle has never been easier. Bills can be paid electronically or through automatic debit. Traditional mail-forwarding services will send your paper to your next port call. Other companies will actually open your mail, scan the contents, and post the images to a secure website for you to peruse at your leisure.

Banks, stock brokerages, and other regulated financial institutions may need a more permanent address than a post office box or a mail-forwarding service, but PTs also use the mailing address of friends or families and conduct their business online. If you’re planning to keep a current driver’s license and pay your taxes then you will also need to claim residency in a state. The amount of time you spend in other states during your travel may also render you susceptible to that state’s income taxes. However, these (and other challenges) have already been faced by thousands of PTs and many solutions have been worked out.  A great place to start your research is the RV forum.

The Expatriate Lifestyle– Intriguing but Not for Everyone

A significant minority of retirees have noted that their financial portfolios won’t support their lifestyles in Manhattan or Los Angeles, but their investments are more than adequate for expenses in Mexico or Bangkok.

The most famous overseas ERs are Paul & Vicki Terhorst and Billy & Akaisha Kaderli. They’ve been traveling the world since 1984 and 1989 respectively and show no signs of stopping. After two decades of travel through Europe, Asia, and South America the Terhorsts built a home in a rural area outside Buenos Aires but continue visiting their favorite places. The Kaderlis have spent most of their time in Southeast Asia and Mexico but have been to many other countries. They maintain a small home in a U.S. resort community but they spend the majority of their time abroad.

You may have seen some of the expat lifestyle on overseas duty or during port calls, but now you can live it full time. Both couples (and many other retirees) have learned that expat living offers a chance to get to see the “real” country and to know its people. Instead of staying in resorts and hotels they’ll rent city apartments, shop at local stores and eat at local restaurants, and blend into the community. “Going local” means learning to speak the language and to cook the cuisine, celebrating that culture’s holidays, understanding how to get around by public transportation, and knowing where to do your laundry.

Once again modern technology has made the lifestyle easier than ever before. Many overseas cell phones are actually more common, more fully-featured, yet less expensive than in America.  Cheap Internet access is widespread in metropolitan areas and most rural ones. Modern clothing fabrics and compact toiletries mean that luggage can be reduced to a roller bag and a backpack. Most finances can be handled through ATMs and websites. A dropping dollar may raise prices for every expatriate American, but plenty of bargains can still be found by staying for weeks or months in an area and really getting to know the local culture. If the dollar rises, then expat purchasing power just went up with it.

Expat retirees rarely become overseas citizens or residents. Instead of navigating the bureaucracy (and perhaps paying double taxes) they request long-term tourist visas or “restart the clock” by leaving the country for brief periods. Tricare is not easily accessible overseas (except when space is available at U.S. military medical facilities) but you may pay less out of pocket or even purchase your own catastrophic-care policy. It’s possible to find work (teaching English or providing services over the Internet or consulting) but earned income will subject you to taxation by both your host country and possibly the U.S. As a U.S. citizen you are still expected to pay U.S. taxes and maintain a state residence address.

Don’t despair if you have a family– just like perpetual travelers, many families have found a way to let the world be both their residence and their school system. If your kids have put up with your changing duty stations then they’ll easily adapt to the overseas lifestyle and be far worldlier than their domestic cousins.

The perpetual-traveler and expatriate lifestyles aren’t as difficult as they appear, and technology provides a wealth of solutions. You don’t have to be a trailblazer or even a rugged pioneer, and you can travel the world at your own pace.

As you and your family are sorting through these big-picture issues, you’ll still be working on your retirement checklist.  In the next post we’ll start discussing how to handle the final few months.  Until then, post your transition comments here!

I’d like to dedicate this post to Tomcat98 from Early-Retirement.org, a good friend who’s let his service know that they’ll only be enjoying his services for another 11+ months. He’s been planning this one for a long time, folks, and he has all sorts of ideas on what he’s going to do all day. Enjoy yourself, Tomcat– you’ve earned it!

This post is not a retirement checklist.  You all have those, and we all know that your command’s checklist is the best one that’s ever been used in the history of your branch of the military.  Let’s not get into the nitty-gritty of exactly when you should look for turn over your personal equipment or page-check inventory your classified material.  Instead, let’s focus on the squishy issues of reconciling your retirement with the rest of your life!

Let’s start with the simplest case.   This countdown post assumes that you’re going to retire from active duty with the financial independence to pursue different lifestyles through (at most) occasional part-time work.  Other posts will talk about Reserves & National Guard, bridge careers, and one-enlistment veterans.

Before we dig too deeply into this topic,  let’s also assume that you’ve chosen the retirement date that optimizes your pension finances. Your service dates are correct for your retirement system (“High Three” for the vast majority of us), you’re making the most of your rank’s longevity pay raises, and if necessary you’ve stayed long enough for the latest pay raise.  Add a comment below here or e-mail me if you have questions about these topics and I’ll expand on them in a separate post.

Let’s also assume that you’re not under long-term medical care. If you’re facing a medical review board then much of this post’s considerations will be on hold until the military decides whether you’re retiring from active duty or transferring to the temporary disabled retired list. Although a medical retirement is more complex, it’s probably in your best interests.  I’ve had shipmates spend years on the TDRL and they’re much happier for doing so.  I’ve also had shipmates try to punch out before the last medical/dental problems had been addressed, and it’s even more painful than addressing the root canal cause of the problems.

Filing Your Retirement Request

Each service changes their deadlines and restrictions, but you’ll want to file your retirement request up to a year ahead of your desired retirement date. This should allow ample time to meet all the notification requirements, to turn over to your relief, and to request an appropriate amount of terminal leave.  Try not to ambush or blind-side your chain of command.  Ideally you’ve already attended your transition assistance course, but if not this should be done as soon as you can get a date. Another advantage of such early notice is having ample time to complete any medical and dental care identified during the retirement physical.  You probably have no idea what you’re getting into until you’ve gone through the first part of your retirement physical.

Consider your terminal leave requirements very carefully. Depending on your duty station and your relocation plans, you could request up to 100 days of leave and permissive temporary duty (house hunting). This would allow you to not only continue to draw your base pay but also all special pay and allowances. At the other end of your range of options, you could also choose to sell back the maximum amount of leave and remain on duty until the last possible minute before leaving active duty. The difference is that selling back leave only earns base pay without any special pay or allowances. The difference may require you to trade several months’ additional labor (not leave!) for a cash boost to your retirement portfolio.

Once your chain of command has endorsed your retirement request then it’s time to make the announcement you’ve been waiting for!

What to Tell Your Shipmates, Friends, Kids, & Parents

At first it may feel a little awkward (even embarrassing!) to talk about it. Military retirement can actually be a bit threatening to a veteran’s identity. Your occupation may be a big part of “who you are” and it might make you feel like a valuable member of the team. You may have spent decades telling everyone: “I’m a Navy submariner.” This approach works very well in fields that you don’t actually have to “retire” from like law, medicine, or software. Even if you haven’t earned any money in decades from its practice, you’re still what you do. Identifying with your avocation may not always be good but it’s certainly a ready-made response in our career-oriented society.

Try adding the “retired” word to your introduction: “I’m a retired Air Force mechanic.” That may be all the explanation required. Most civilians have little trouble believing that military retirees have earned their retirement and are entitled to do whatever they want. (Next you’ll hear: “Congratulations, and thanks for your service!”) Other veterans, however, seem to be our own worst enemy– “Yeah, yeah, I know that, you slacker, but what are you doing NOW?” You have to justify your existence.

Others may react quite differently. Retirees have a saying: “Your retirement will separate your friends from your coworkers.” A true friend shares your hopes and dreams and will be happy for you when you achieve your goals. A coworker may not appreciate your ambitions and may even feel that you’re abandoning them to struggle with your old workload and to train your replacement. Even worse, some coworkers may seem jealous or frustrated that you’re able to retire (and they’re not).

Many military retirees avoided discussing their plans with their coworkers. They’d talk about their leave and vacation plans without mentioning work. If pressed, they’d talk about going back to school, spending time with family, or even volunteering with charities. They shared the details with their close friends but asked them not to spread the word until after they’d retired.

Caution: your true shipmates & friends should share your joy at your success, but that doesn’t mean they want to hear all the details ad nauseum. They may be humoring you while privately thinking that your plans aren’t realistic. They may even think that you’ll be looking for a job in a few months. (Refer back to the retirement myths.) You might end up telling them that you just want to spend time with your family or to explore life for a while.

Unfortunately you’ll have to play these situations from their comments and their facial expressions. Be cautious, be flexible, and don’t be surprised by their reactions.

What about family? If you’re married then you and your spouse have already discussed and coordinated your plans. You’ve already shared all your information and reached an agreement.

But how will your retirement affect your kids? Will they have to deal with yet another move? Will they worry that you don’t have enough money? Will they understand the plan, or will they feel embarrassed to discuss it with you?

Younger kids (up to school age) may not fully understand the idea of retirement. You’ve probably been working for their whole life and they may not know anyone who’s retired. At their age it’s best to stick to them and their big picture. They want to know that you’ll be spending time with them and they might care that you have enough money in the budget for some fun. Once they realize that you’re not deploying any more, they’ll happily skip the details!

Adolescents may be a bit more concerned. They know that people have jobs to pay the bills, and they want to know where their allowance is coming from. It’s a good idea to give them plenty of time to talk about it, to answer all their questions, and to let them know that you’re going to be able to spend more time with them. You may be earning less money than your working days, but you have a budget that includes everyone’s needs. You may have to have this conversation several times over weeks or even months– they’ll be skeptical and seek reassurance. (They’re also talking it over with their friends, who are reporting this news to the other parents.) Once your kids are assured that you can coach their team or chaperone their school field trips, they’ll be just as enthusiastic about retirement as you are.

Teenagers are a tough sell.  (Believe me, I know.  We just finished launching one from the nest.)  While they’re figuring out their own identity and taking their first steps to independence, they just want their parents to be normal, invisible, and available. Parental non-conformance is embarrassing enough, and they’re not necessarily going to be enthusiastic about all the time you’ll want to spend with them! At this age you may have to discuss the family budget in some detail and make sure everyone understands the changes. Your pension may even seem like a lot of money to them (especially if they want a car), and they may not appreciate that your investments have to last you for the rest of your life. If the family is going to be moving away from their school and their friends then you’d better have a good justification for this “disaster”. If you want your teens to support your retirement, then you’ll have to show them how it’s going to improve their life. Good luck with that– maybe you don’t want to move until after they’ve finished high school.

Your parents (and your parents in law!) might be even a tougher sell than your teens. In fact their reaction to your announcement might make you feel like a rebellious teen again. They know all your flaws and weaknesses, and although they might be proud of your accomplishments they won’t hesitate to question your judgment. (From their perspective, your spendthrift indolence might put their loved ones on the streets.) If your parents have already retired then you should be able to reassure them– especially if you ask for their advice.

If your parents are still working then you can expect to encounter resistance. If your parents have avocations of their own or feel that they’ll never save enough to retire, then you will have difficulty explaining yourself. You and your spouse will have many interesting discussions with them as they attempt to reconcile their standards with yours. The best approach is to emphasize the time you’ll be able to spend with family (including them and their grandchildren) and to talk about taking a few years off to explore life. Much later they may accept your decision, although privately they may despair that you’ll ever be able to hold down a real job.

Next post:  Choosing where to live, or even whether to live in just one place.

Listen to the early-retirement trailblazers: by far the most common comment of the new posters on Early-Retirement.org and other Internet retirement discussion boards is “I wish I’d started saving and planning sooner!” That’s not much consolation if you’re reading this during your 19^th year of military service, but the good news is that you still have time to let the magic of compound interest work in your favor. You can also make other lifestyle decisions that will accelerate your retirement date.

The next few sections will talk about financial-planning issues that are specific to the military and to early retirees. The discussion will assume that you have some experience with the basics of saving, investing, asset allocation, and budgeting. If this is your first hard look at these concepts then you have some “Recommended reading” to do from the back of the book. If you’re familiar with the basics then you’re going to learn about ways to optimize your investing and spending to take advantage of your new military and retirement assets.

“You’ll need xx% of your pre-retirement income for retirement spending.”

This canard comes from 1980s research that found the cost of commuting, childcare, and office attire was about 20% of employment-related expenses. The financial press picked it up and turned it into a thumbrule.  I’ve spent years looking for the original study that led to this sound-bite summary, and I’d appreciate hearing from you if you come across it.

The reality is that once again: “It depends”.  You may need as little as 25% or as much as 150% of your pre-retirement income, and you can control a great deal of that variance. This is especially complicated if you’re earning special pays, bonuses, or other allowances. Your retirement expenses will depend on the size of your family, your housing costs, your entertainment & travel spending, and your retirement area’s cost of living. Don’t even waste your time looking at the percentages. Your time will be much better spent figuring out where you’re going to retire, what activities you want to spend money on, and what your budget might look like. Then you can figure out how much you’ll have to save!

“Avoid risk by diversifying. You have to invest xx% of your retirement portfolio in stocks, another xx% in bonds, another xx% in commodities, and…”

“Risk tolerance drops with age. Your stock asset allocation should be ‘120 minus your age’ and should be adjusted every year.”

“Individual stocks are for losers. They’re too risky.”

“You can handle the risk of individual stocks and bonds. You have to steer your asset allocation around the yield curve, unless interest rates go down, but then…”

Whether or not you understand this vocabulary, once again: “It depends”. Asset allocation is one of the most important factors in the return of an investment portfolio, but that allocation depends on how hard you want to work at it and your tolerance for various types of risks.

Some investors are absolutely fascinated by the financial world and prefer to spend hours a day learning about asset classes, analyzing individual stocks, researching commodities futures, and even buying special data feeds for day-trading. Others would prefer to “set and forget” so that they can live their lives without having to keep an eye on the markets. You have to decide what level of effort you’re willing to exert and whether or not you want to keep it up for the rest of your retirement. You may not want to work so hard when you’re in your 80s, and your spouse may not want to take over a tricky stock portfolio if you’re no longer able to make the decisions.

One aspect of “risk” is volatility, which greatly affects your investor psychology. Some abnormally calm retirees may be able to watch their portfolio drop 25% in a month while others can’t sleep at night after a 2% drop. (No investor has ever complained about “upward volatility”.) Logical financial analysis is worthless if your portfolio scares you or if your spouse is uncomfortable with the type of assets you’re holding. See Appendix F for more discussion about asset allocation.

If you’re planning to work for a paycheck after you leave the military, then your asset allocation should reflect the “human capital” that you’re depositing on every payday. You can be much more aggressive with your investments when your spending money comes from paid employment. Pensions are the equivalent of another type of asset– the highest-quality Treasury bills or I bonds. If you’re receiving a pension (or if you’re going to receive one later as Reservists/National Guard do at age 60) then your other savings need to reflect that pension as a portion of the total assets. With a substantial portion of your assets in one of the world’s best inflation-protected annuities, especially if it pays your expenses, then you can afford to put more of the rest of your assets into more aggressive equities. If you’re ready to do this then be sure that you’re also able to sleep at night.

“You can’t retire, inflation is too high!”

This is why you should consider maintaining a high percentage of your savings in equities. In over a century of data, they’re the only asset class to beat inflation. Your pension has a COLA (and so does Social Security) but your personal rate of inflation may not match the official government CPI that determines the pension COLA. Keeping a significant portion of your assets in equities will give you both a hedge against inflation (your pension) and a weapon to beat it (your equities).

Part 2

Here’s the conclusion:

“Your savings need to be absolutely safe.”

A huge investing epiphany for most military early retirees is realizing that their personal savings might not have to last forever. They may only need to cover the time they retire from the military until their additional pensions kick in from bridge careers, civil-service employment, or Social Security. Instead of choosing assets that may be eroded by inflation (like most bonds or certificates of deposit), ERs may decide on a budget that includes consuming a portion of the portfolio before additional pensions (or Social Security) kick in. It may be worth the volatility risk to invest in higher-return assets (like small-cap value stocks, real estate trusts, or commodities) and liquidate a portion of the portfolio every year.

“Low-cost index funds are the way to go. Active investors can’t beat the market.”

“Warren Buffett beats the market every decade and we can too!”

“Why settle for average when you can pick a great active money manager?”

Few debates generate as much controversy as these statements. The vast majority of investment managers never beat their fund’s benchmark, but one or two of them have beaten it for at least 15 years. The vast majority of investors are also unable to beat the market, but investors like Warren Buffett continue to sublimely soar above the averages for decades. So who’s right?

They’re both right, and you have to decide which path you’re going to pursue. You may have the innate skills of a Buffett, but like him you also have to be willing to make it your life. You may need to read a half-dozen newspapers a day and devour hundreds of financial reports a year while keeping in touch with dozens of business executives and investment managers. Do you find it absolutely fascinating, even compelling? Are you willing to put in at least 40 hours a week or longer in the pursuit of one needle among those haystacks of reports? Do you have Buffett’s guts to “Be fearful when others are greedy and greedy when others are fearful?”

Maybe you’re not Buffett (very few are) but you’re confident that you can find the next Buffett. Or can you? Can you find the next hot fund manager for the next four or five decades? Can you sift through thousands of funds and make sure that they won’t change their management or objectives after you invest with them? Are you willing to keep up with the research, the monitoring, and the workload for the rest of your life– or would you rather have a life?

You can beat the market if you’re willing to work at it and if you can recover from your mistakes. For everyone else, there are low-cost passive index funds.

“I’m not touching the market right now. It’s too expensive.”

“I’m not touching the market right now. It’s going down again and it won’t recover for years.”

“You have to invest with every paycheck, no matter how the market is doing, or your savings won’t grow fast enough.”

“I’m waiting until the Federal Reserve lowers the discount rate, the commodities futures index has stabilized, and the dollar strengthens against the yen.”

Every one of these excuses may be a great reason not to invest for a retirement goal, but they’re all excuses.

Research has found that the stock market rises approximately two-thirds of the time, largely in a random and unpredictable fashion. The stock market is not always driven by fundamental financial values, either– greed and hysteria are the common emotions, amplified by the media and investor psychology. Sitting on the sidelines waiting for the “perfect” moment is one of the biggest risks of all: the risk that inflation will erode the waiting cash and miss months or even years of compounding. While it is possible to time the market, it’s nearly impossible to continue to time the market correctly through decades of retirement investing.

The vast majority of investors choose to add money to their retirement portfolio whenever they get it, which is usually with each paycheck. Some investors add the same amount every time (dollar-cost averaging or DCA) while others add more to their lagging investments and less to their strong performers (value-cost averaging). Every method has its advantages and drawbacks but they all instill a discipline of routine investing that can be put largely on autopilot.

Ironically, DCA does not perform as well as “lump-sum” investing. For the best historical returns, all money should be invested as a lump sum on the first day it’s available. The reality is that this approach takes a cast-iron constitution approaching blind faith, and very few have the courage (or the blissful ignorance) to even consider attempting it. The real value of DCA is that it’s a decision to make once and then automate with a checking-account deduction.

There are thousands of other investing myths, but by now the point has been made that there is no single best way to save for retirement. Each decision has both a financial and an emotional side, and each side has to agree before the decision will stand. Your supremely logical reasoning is also wasted if your partner can’t tolerate the volatility or the other risks.

The best way to build the confidence to continue to save and invest under all circumstances is to educate yourself.  As you become more educated and experienced, your temperament will evolve to handle other types of investment strategies. You’ll face the uncertainty with greater confidence and you’ll be able to ignore the market’s short-term volatility to stay focused on your long-term goals.