What is the biggest mistake people make when planning for retirement?Another thought provoking article by Ernie McDaniel - as seen in Forum News. |
 |
Ben Franklin said it quite succinctly over 200 years ago and it still applies today: “A penny saved is a penny earned”. To make that message possibly more helpful by providing guiding steps, here is my own suggestion in just as few words:
Do not spend. Save. Invest well. NOW.
For twenty-five years-olds, the age-range of my two children, retirement investment success requires only that 10% of annual income be placed into long-term savings. Please understand that this long-term savings is to be distinguished from shorter term put-and-take savings. This long-term money you only “put”; there's no “take” for 30 or 40 years. It's rare for people age 25ish to get serious about retirement. When they count back 30 years, they are into another dimension. Never and forever are the same. When they look into the future thirty years, what do they see? Never.
You probably aren't age twenty-five, dear reader, because if you were you wouldn't be reading this. But let's suppose you love someone who is. Here's my suggestion. Find that someone, hijack him or her, and use whatever sort of torture necessary to extract a promise to abandon the 110% spending habit and permanently adopt a 10% savings strategy. Someday, he will thank God - and you - for the tough love.
For thirty-five years-olds - and some of this age group may actually be reading this - I suggest saving 20% of income. Yes, every year. Yes, even if you have to drive a 10 year-old car while your best friend brags about his new SUV. Get a new friend, not a new car. Whatever you do, don't reduce your retirement savings. On a day not too far down the road (of life) you may be sending money from your second home in the Caribbean to your old friend. He will need it to maintain his old, run-down car, the one parked on the street in front of his old, run-down house. About that day in the future: You will very kindly not mention the occasion back in 2004 when he rubbed your nose in his juvenile conspicuous consumption.
For forty-five year olds…. Are you serious? Don't answer that - it's a rhetorical question. Obviously you aren't serious, not about retirement. But you'd better get that way quickly. And the sad fact is that age forty-five is about the age that many people do finally get serious about saving for retirement. They've been waiting for the kids to get out of the house or out of college, or waiting for…it really doesn't matter, does it. The good news is that it's not too late. Here's my suggestion, and it will be about as welcome as a doctor's advice that both legs be amputated to save your life: cut your hifalutin spending habits in half and with the difference save…Save…SAVE! Isn't there any other choice, you wonder? Sure. You can continue to live the way you have in the past then cut your lifestyle to poverty level a few years from now. Yes, you too can live on Social Security and memories! Here's another possibility. Live an extremely unhealthy and meaningless lifestyle - beginning right now, because you can't afford to wait. Sex! Drugs! Rock-and-roll! Live fast and (hopefully) die young - well, middle-aged anyway. Sorry, but these are your hard choices. Deny the reality of these few and you default to one of the less pleasant.
For fifty-five year olds who are just beginning to invest for retirement, my suggestion is that you win the lottery or plan to live with your children…or find a job you really, really enjoy - because you'll be doing it awhile.
Here's a message for people of any age who care more about your personal contribution to the world around you now than your personal comfort in a future retirement. First of all, congratulations! Sounds as though your vocation is your true calling and you plan to work in it until you drop. If so, good for you, you are more blessed than many wealthy people. Whether age twenty-five or ninety-five, to be assured a happy and meaningful life I believe you must continually contribute in your own unique way to a world that needs you. (Yes, needs you - just look around.) But don't you agree that it's better in old age to be needed and financially independent than needed and needing? Someday what you've saved along the way may be your only source of power over the quality of your own life. Keep your options open - save for the future.
To all readers, no matter what your age, I repeat, here's the secret to eventual retirement: Do not spend. Save. Invest well. Now.
 |
 |
 |
|
| Get this file in PDF format by clicking on the icon below. You will need Adobe Acrobat Reader. Click here for more information. |
|
|
|
 |