Today numerous issues complicate and endanger the retirement plans of millions of working Americans. Many find it increasingly difficult to save and invest due to the high cost of living, while others throw their investable dollars out the window on high rents every month due to a lack of affordable homes. The present inflation rate reduces the purchasing power of bank savings by 53% every nine years! The stock market appears to be approaching an inflection point, which may subject recent and near-term retirees to the devastating “early retirement bear market”. Taxes are going up, and traditional retirement accounts are a focus of legislators. Social Security is likely to be “means-tested”, meaning delayed and reduced for many. Medicare benefits are being cut, increasing the cost of Medigap outlays, and longer life expectancies compound the problem. I could go on, but suffice to say future American retirees have it far more difficult than previous generations.
Challenges create opportunity for solutions, and only a carefully constructed, personal financial roadmap will identify the specific solutions, or principles, sufficiently powerful when consistently applied, to overcome such formidable obstacles. Most people put a retirement plan together months before retiring, astutely utilizing about 1% of the time they had to plan the portion of their financial life that will lack earned income. I suggest a consideration of the following facts, followed by a resolute commitment to build and follow your roadmap this year:
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Net positive monthly cash flow, or a take-home income exceeding gross spending, is THE indispensable condition for achieving your retirement goal. Many workers invest for retirement while accumulating more debt than assets, thinking progress is being made.
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A detailed household budget enables us to distinguish between fixed and voluntary spending, a figure wealth producers are eager to exploit, but which wealth consumers never address.
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An accurate assessment of your present financial position, the resources required to fund your well-defined retirement life, the difference between the two, the means and principles to be applied to close the gap, and a vigilant application of your plan, is the only solution to the dilemma. We call it, “Assess, Address, Apply”.
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General figures alone fall short of effective planning: “Aim small, miss small”! Important detailed considerations include: the percentage of income to designate towards retirement, the most beneficial tax-advantaged plans to employ, the age at which Social Security benefits should begin, and the income solutions to harness (which most benefit those who use time to their advantage).
Financial stewardship, and its rewards, is almost never about how much money you make, and almost always about what you do with the money you make. Think about it, Shaun.
“Live today like no one else, so that later you can live like no one else.” ~David Ramsay
“A good man leaves an inheritance to his children’s children.” ~Proverbs 13:22
The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.
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