Have you thought about retirement lately?
My wife and I did and it was eye opening. We usually talk about retirement, especially at the end of the year, but this was a little different. We spent time looking at what we have to spend when reaching retirement.
What I am finding is that people look at it in the wrong way. When asking friends about their plans I was surprised that many are not planning at all, let alone, really looking at what they will have to spend in retirement.
Since becoming a financial advisor this has become apparent more and more. Many people my age don’t even think about saving or what the future will hold and how they could control it.
One couple I met look to have about $25,000 a month in retirement. They have done everything right since entering the workforce in the 70s. How would you like to have that kind of income in retirement? I’d like to have it now! It is attainable.
In our culture we don’t emphasize retirement enough. The issue is brought up through a company plan or maybe a conversation with a friend but it is difficult to find people really prepared.
Kids today especially don’t understand the first thing about saving or being responsible with their money. It’s about where to buy the next Ipad or new technology even though you can barely pay rent.
This problem won’t take care of itself. The biggest mistake I see is looking to the government to take care of retirement. Social security won’t cover your expenses but a good plan will.
I personally know people in retirement who have never made more than $50,000 a year and are doing just fine in retirement because they planned correctly. It can be done. You wouldn’t know it from watching the news but it is possible.
Think about the numbers for a minute.
You’re 25 and want a million dollars 40 years later when you retire at 65 you need to start saving about $300 a month and have an 8% growth rate over the duration of your saving as your money compounds.
At 35 it would be about $700 a month to save. Age 40 about $1,050 a month and so on. You get the picture. It’s not easy to save this kind of money and not as many pensions anymore to meet the income requirements to live good in retirement.
$1 million at age 62 would only give you $37,000 a year in income to live on. Of course you would have social security (if it’s there) but it’s not as much as you thought to live on. Especially 20-30 years from now with inflation.
The point is that saving $1 million does not provide the income most people live on now so how can you get this number higher.
Don’t always think about the amount. It is important but not the end all for planning. Think about the types of income you could have.
To be successful in retirement you need at least 7 – 10 forms of income. This isn’t as hard as you may think.
Income ideas include rental income, stock dividends, social security, internet affiliate programs, part time job, 401k, IRA, Insurance, a small business, pension and/or consulting.
These are just a few but think where the money will come from in retirement and how you will get there.
Just some brainstorming ideas for you.
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