Return to Innocence
Do you remember what life was like when you were 18? You were fresh out of high school with your whole future in front of you and a world full of opportunity. Remember what it felt like to finally be free to make your own choices and blaze your own trail? You weren’t worried about taxes or retirement or mortgages or car payments or college tuition for your kids. You probably weren’t worried about much of anything back then. The world was your oyster and your dreams were going to become your reality.
Now that you’re older, have you ever wanted to go back and have a conversation with your 18 year-old self? What would you say? Would you share some of the worldly wisdom you have acquired over the years? Would you tell yourself to stay focused and never give up? Would you warn yourself about the perils and pitfalls that life can throw your way? Would you try to change the course of your life by telling your younger self what career to choose or what path to take? We’d probably all give ourselves stock tips, right?
Back to the Future
According to WikiPedia: “When people feel connected to their future self, they are more likely to save for retirement, make healthy decisions, and avoid ethical transgressions.”
What if you could speak to your future self? What do you think he/she would say to you? Do you think they would tell you that you made the right choices? Do you think they would pat you on the back and say thank you for thinking of them when you started saving for your retirement? Maybe they’d give you stock tips or tell you when the next market crash was going to happen? But what if your future self told you that they are struggling to make ends meet in retirement? What if they tell you that you’re making the wrong choices and they are suffering because of it? Would you listen? Would you do something about it?
Obviously none of us can go back and speak to our 18 year-old self, but we do have the opportunity to care for our future self. The point we’re trying to make is best summarized in an ancient Chinese proverb that states, “The best time to plant a tree is 20 years ago, the second best time is now.” Now is the time to start thinking about your retirement. Sure, it may seem a long way off, but so did 40 when you were 18! Life comes at you fast and a little planning can go a long way. For those of you nearing retirement already, you know exactly what we mean.
Failing to Plan
So what are you doing right now to take care of your future retired self? Are you saving? Are you investing? Both? Well, if you’re doing either of these, you’re doing better than a lot of Americans. According to researchers at the Stanford Center On Longevity, only one-third of adults in their 50’s have ever tried to devise a retirement plan and only 57% of retirees even have a retirement plan, and they’re already retired!
Having a plan is the first step, however, implementing that plan can seem tricky. As many of you know, there are a lot of options when it comes to saving for your retirement. Ultimately it boils down to your situation, your goals and your tolerance for risk. In addition, you need to determine how much you need to live off of in retirement so you can figure out how much you need to save. According to another study done by the SCL, of the Baby Boomers that have been saving, they have an average of $290,000 in their retirement accounts. That’s not very much considering financial experts say that you’ll need 70-80% of your pre-retirement income to maintain your current lifestyle in retirement.
What does that work out to be? Well, it’s different for everyone, but let’s run some numbers to give you an idea:
In our example we’ll be talking about a married couple reaching their Social Security full retirement age of 66 years in 2019. While they were working, they had a combined income of $150,000 and they have $290,000 in their retirement savings.
Applying the 4 percent rule, which is a rule of thumb used to determine how much a retiree should withdraw from a retirement account each year, their $290,000 in retirement savings will provide an annual retirement income of about $11,600.
Add in Social Security at a maxiumum of $33,456 per year for the primary wage earner and half of that again for the spouse, their total combined Social Security income is $50,184 annually.
4% of Retirement Savings = $11,600
Social Security Income = $50,184
Total Retirement Income = $61,748
So, in our example, this couple will be living off of about $62,000 a year. That’s about 41% of their pre-retirement income which is well below the 70-80% experts recommend. Of course that’s assuming Social Security continues to pay benefits at its current rate. Unfortunately, based on a new official government report, Social Security is expected to go broke by 2035. In any case, this couple will need to make some significant lifestyle adjustments in order to stretch their retirement dollars.
The Road Less Travelled
People often follow the path of least resistance, it’s just what we do. The road to retirement can often seem difficult and even a little uncertain. That’s why many people don’t want to think about it. Too many variables.
But what if you could eliminate the variables? What if you could take the guesswork out of it and get some actual guarantees that the efforts you put towards retirement today would turn out the way you planned? Wouldn’t that be the path of least resistance? It’s time you started asking yourself some important questions. Let’s sit down and have a conversation about what you want for your future-self and how you imagine your retirement. It’s never too late to take that first step. You owe it to your future-self.
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Focus Financial Group
Building wealth and providing security for your family are just a few of things we do here at Focus Financial Group. Our mission is to help you achieve your financial goals, whatever they may be. We have helped clients from all walks of life and circumstances safely and securely grow their money. Whether it’s retirement planning you’re focused on or saving money to put your kids through college, we have solutions for that. Let’s start with a conversation about where you want to go and then make a plan to get you there. Consultations are always free so contact one of our experienced financial professionals today and get started down the path to financial peace.