I enjoy reading military history and often think of how wisdom and principals of the past can be applied to modern life. On a recent reread of The Art of War, I  reflected on how Sun Tzu’s teachings could be applied to modern day retirement planning. Here are three lessons you can learn from Sun Tzu:

About The Art of War

Sun Tzu wrote The Art of War over 2,500 years ago during one of the most turbulent times in Chinese history, the Warring State period. It is one of the worlds most widely-read works on military strategy and has evolved into a rite of passage for military officers, politicians and business people alike. The book lays out the preparations and strategy a good general should take in the management of his army in the preparation for warfare.

There are certain works which transcend time and space to share the wisdom of accumulated generations.  The Art of War is certainly one of them.  The great thing about wisdom is it’s often universal and can be applied to all areas of life.  That’s what I’ve found to be true about this book.  If its lessons were good enough to prepare ancient and modern generals leading thousands of soldiers in life-and- death battles, then I think we can certainly apply some of the knowledge to our preparation for retirement.    

Lesson 1:  Laying Plans

“Now the general who wins a battle makes many calculations in his temple before the battle is fought.  The general who loses a battle makes but few calculations beforehand.  Thus, do many calculations lead to victory, and few calculations to defeat, how much more no calculation at all! (Verse 28) 

Like the general who’s completed many calculations, I believe those who prepare for retirement with a clear strategy and thoughtful plan experience a much greater probability of living a life they would deem financially successful thereafter, as well as a greater sense of confidence and security than those who do little or no planning beforehand.

Lesson 2:  Stratagem

“If you know the enemy and know yourself, you need not fear the result of a hundred battles.  If you know yourself but not the enemy, for every victory gained you will also suffer defeat.  If you know neither the enemy nor yourself, you will succumb in every battle. 

If you know what you’re up against and if you know yourself, I think you’re more likely to be financially successful in retirement. Your “enemy” in retirement can be summed up in what I call the Five Retirement Risks.  These risk are: outliving your money, inflation, stock market risk, spending too much and healthcare costs. You need to understand them and to have a plan that can address all of those “enemies.”

Knowing yourself is understanding your own tendencies, biases and likely emotional responses to shocks to your plan.  How will you respond if the stock market has a major correction?  Will you sell all of your investments at the bottom of the market because it’s emotionally easy?  You need a plan that prepares you emotionally and logically to be a good investor.  Do you know the risk levels which you are comfortable or need to take and have you planned accordingly? 

Lesson 3:  Energy

“Simulated disorder postulates perfect discipline, simulated fear postulates courage, simulated weakness postulates strength.” 

I hope your retirement lasts a long time. If it does, you’re going to live through many different events, recessions, stock market corrections and maybe even crashes.  You need to test your approach against hypothetical scenarios to see how it holds up.  Know the likely events which you will experience to make sure that you are emotionally and financially prepared.  The very act of thinking about what’s likely will make you more disciplined to your plan and will give you the courage and strength to stay the course.

How will your financial plan respond to a major stock market crash? 

How will you respond? 

As I write this we’re at the top of an almost 10-year bull market cycle. Don’t get tricked into thinking this will last forever.  Corrections are normal and will occur many times during your retirement.  Think about the likely and unlikely things that could happen which may affect your money and prepare accordingly.

Knowing if you have enough money to retire and then planning to make that pool of money last as long as you need is the focus of our Sovereign Series™ Retirement Plan. This time-segmented, inflation-adjusted strategy can help you answer the key question: “Do I have enough retirement assets to last my lifetime?”

Written by Chris Merchant, CFP® 2019