For many people thinking about retirement, their biggest fear is running out of money while they are still alive. We have been working with folks to overcome this fear for over 40 years and here is what we have learned in as simple of terms as I can give you.
First, the most important thing you can do is to learn to save. If you can’t save money, then you won’t have anything to invest for the future. Saving is the most important component of being able to afford your lifestyle for the rest of your life. If you don’t save enough, no amount of investing savvy is going to make up for your lack of saving.
Second, time is on your side. The second most important variable is the compounding of money over time. The money that money makes - makes more money. A 30-year-old investing $523 at the beginning of every month in a pre-tax account earning 8% annually would accumulate $1 million by age 60 assuming the monthly investment is increased 3% each year.
Third, you are going to live longer than you think. Go to livingto100.com and use the life expectancy calculator to determine how long you will need money to fund your lifestyle. Remember that inflation running at 4% per year will double the cost of your lifestyle every 18 years. Over the next 36 years of your retirement from age 60 to 96, everything could cost 4 times as much. How do you turn that $1 million that you accumulated into an ever-increasing lifetime income stream that you cannot outlive?
A well-diversified portfolio composed of the world’s greatest companies could help to provide an ever-increasing stream of income due to dividends and price appreciation. Having the appropriate mix of stocks and bonds will allow you to stay invested for the long haul and provide you with the income your lifestyle demands.If you and your life savings are being ignored or feeling taken advantage of, come join our family. We are a family-owned financial planning and investment firm who promise to treat you like family. No products. No hard sell. No gimmicks. Just honest advice based on four decades of experience.