If you asked older Americans in the 50-75 age group if they had a retirement plan; unfortunately, four out of five of these older Americans would not be able to raise their hands.
What’s the old adage?
If you fail to plan, then you plan to fail.
As with every other aspect in our lives, if we fail to plan we plan to fail. Failing to prepare for a test, practicing for a game, or developing a company’s business plan will all fail.
So why is it that so many Americans are unprepared for retirement? Are they not motivated to plan for retirement when they see seniors working at the drive-thru window? Do they want to be in the same predicament?
Yet, the numbers don’t lie. Not only do a large percentage of older Americans not have a retirement plan, but most also are not even financially literate about how to prepare for retirement.
According to a recent study released by The American College of Financial Services, four in five older Americans not only do not have a retirement plan but fail to understand the basics of how to successfully plan for a financially secure retirement altogether.
Anybody relying on their meager social security payments as their sole source of retirement can expect to continue to work well into their retirement years just to make ends meet.
And, forget about your children taking care of you, since a large number of these children are a big reason for your current state of financial strain. These “boomerang” children, unable to make it on their own, move back in with mom and dad to have someone else help with their expenses.
One troubling trend that should be a wake-up call to all imminent retirees is the accelerated pace of companies forcing early retirement because of a struggling economy or decreased profits. The point is: retirement may come sooner than expected with no time to prepare.
This reminds me of a story involving former NBA star Shawn Kemp. In the summer of 1998, while Kemp was on the Cleveland Cavaliers, the NBA threatened a lockout over an impasse in negotiations over the collective bargaining agreement. Things eventually worked out and there was no lockout. The season would go on.
Funny thing is, at the beginning of the 1998-1999 season, Kemp showed up completely out of shape and overweight – nearly 70 lbs. more than the weight he carried at the end of the last season according to his coach.
When asked by Coach Mike Fratello why he had gained so much weight, Kemp responded, “Coach, I didn’t think we were coming back.” Kemp didn’t think there was going to be a 1998-1999 season because of the threatened lockout. Wouldn’t it have been a better idea for Kemp to stay in shape in the likelihood that the season would go on?
Don’t get caught off guard when it comes to your retirement. This is the one thing you can’t afford to fail to plan for.
Steve Parrish, adjunct professor of advanced planning and co-director of the College’s New York Life Center for Retirement Income, recently made the following statement about retirement financial literacy:
“With a troubled economy and an acceleration of early or forced retirements, consumer understanding of retirement principles is particularly important.”
Don’t let your retirement be depressing.
Here are some steps to take to avoid the fates of so many Americans who struggle financially through retirement:
No matter your age, start now but avoid speculative investments that can jeopardize not only future savings but your current financial situation as well.
Look to passive income opportunities with intangible assets. Passive income will make you money in your sleep and will allow you to keep your day job to continually reinvest in passive income investments. Tangible assets like real estate are less speculative and demonstrate reliable growth over time allowing your portfolio to grow along with your assets as you get closer to retirement.
Reduce expenses and seek to increase wage income to increase your investable capital. Start with smaller investments with lower entry costs and expand to bigger investments as your war chest grows.
Invest in private markets.
Opportunities in the private markets are non-correlated to Wall Street – shielding your portfolio from volatility. These exclusive opportunities tend to have longer lockup periods – allowing the underlying investment to mature and cash flow and preventing investors from acting impulsively and liquidating their positions.
Stop trying to keep up with the Joneses.
Don’t keep up with the Joneses, set the pace. Don’t pursue their love of toys and the debt incurred to acquire those toys. Instead, dominate the Joneses by winning in the criteria that matter: productive assets – assets that add more streams of income and build wealth behind the scenes. When the Joneses start asking why you’ve been taking so many vacations lately, you know you’ve done your job.
Look to alternative assets.
It’s well-known that elite individual and institutional investors are heavily allocated to alternative assets like private equity and commercial real estate.
Passive income generating tangible assets will ensure ongoing income and growth insulated from Wall Street volatility.
Your retirement is the one thing you can not afford to fail to plan for.
The key is to get educated and to get started now. You’ll be glad you did.