Your Retirement Is a Tree, not a Garden

Sensationalism is something the news media is known for. They take the most miniscule tidbdsits of information and make it into something that sounds like it is the greatest thing since sliced bread. One of the most recent things to be taken by the media and run to the ground has been the DOW breaking the 11,000 mark.  Personally I think it is nice to see my 401k go up but what does it really matter to me?

I like to think of my retirement accounts like a tree that has taken root. Trees grow slowly but steadily with little care or attention. Planting the tree is like getting started with your investing for retirement. You have to figure out where you want it go, plant the tree, and water it well that first year. As you nail down the allocation that you are most comfortable with you just keep feeding it regularly.

Just like a good tree you can’t just leave it alone forever and hope it comes out ok.  About once a year you step back and take a good look at it then prune it to make sure the tree is even growing the way you want it to. Similarly you should reassess your retirement accounts and redistribute it to get you to that magic allocation you are looking for.

The opposite of this approach is to treat your retirement like a vegetable garden. Vegetable gardens require fairly regular attention getting out there and pulling weeds, watering daily, and harvesting regularly. This kind of constant attention works great for a garden but isn’t so great for your retirement accounts. If you start worrying about every drop in the market like you do a wilted seedling then you are in for a rough ride.

When it comes to retirement savings it is about picking the right tree to grow in your area and then taking care of it but not obsessing over it. Make the environment for your tree the best you can then just clip off the dead branches each year and even things out. You have time before you retire, 100ft oak trees didn’t grow in a day and neither will your retirement.


1 Stephen April 13, 2010 at 10:19 am

Perfect advice. People must understand the differences between retirement accounts and individual brokerage accounts in order to maximize their efficiency. Along with the patients factor and long-term outlook that you mentioned, people should also understand the tax implications in which stocks would provide a higher return in which account.
.-= Stephen´s last blog ..Four Important Way to Build Your Network =-.

2 Kristine April 13, 2010 at 11:39 am

I’d also add to plant the tree that you like, and not just because everyone is doing it. If you happen to love stocks, then you will take care of it, monitor it, and prune it.

I have fallen into the trap of investing in something that looks great on paper, but did not have a passion for it. Incidentally, these kinds of investments don’t do as well as the ones I like.

It’s not about the investment. It’s about the investor.

3 Guy G. April 14, 2010 at 12:24 am

Hey Kyle,
Love the tree analogy. I think my favorite part was that a tree grows steadily with little care or attention.

I think the reason many people fail with their retirement savings is one, they don’t learn and practice sound tips on budgeting and never have enough money to invest. Two, they give their retirement ‘tree’ too much care and attention and prune the sucker to death. If they’d pick a strategy, set and forget and revisit annually, they’d be much better off.

Again, great post.
.-= Guy G.´s last blog ..How to Save Money – Tips on Budgeting =-.

4 Penny April 14, 2010 at 10:16 am

True, the medias obsession with static #’s in the market is silly at best. They miss the point on why the move is made and what it means. As far as my IRA we’re better when the market moves up but I do think we’ll head down from here. Technically we have some needs and fundamentally things are not sound.

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