If you’re in your forties, my guess is you’re thinking hard about the economy lately—and specifically, your own financial future.
You see the volatility in the markets. You read the reports about trade wars, inflation, and signs of a possible recession. You hear the “experts” questioning the viability of Social Security.
All this has you thinking seriously about retirement planning. In fact, if you’re like most 40-somethings, you’re feeling increasing pressure to get your financial ducks in the row. Like most, you’re wondering, “I’ve got 20 years—what should I be doing now?”
Obviously, when you frame it that way—giving yourself a 20-year time horizon—you’re talking about the time you have left until you plan to retire.
Perhaps you feel like you’re at the base of your own personal financial Mount Everest. It’s daunting, but you think “At least I’ve got 20 years to climb to the top.”
But is that where the journey ends?
Any mountain climber knows that reaching the summit isn’t the end of the expedition. That’s only the halfway point.
Have you checked life expectancy tables lately? The average American now lives 79.4 years (this figure is a bit lower for men, slightly higher for women).
In other words, your time horizon is longer than you think.
And since you’re likely above average (wink, wink), you might have an additional 20 years (or more) on the other side of your last day of work. If that’s true, you should be thinking about a 40-year time horizon (or more) instead of a mere 20-year time horizon.
With that recalibration of your journey’s length in mind, here are four wise things you can do to prepare yourself for whatever the future holds:
- Make protection a priority. Life happens. Whether a sickness, accident, natural disaster, disability, or premature death, unforeseen calamities can wipe out your best financial efforts in a moment. So, make sure you work with licensed, experienced insurance professionals to address the areas in your life that need protection.
- Save first, and then spend the leftovers. If you spend first, then try to save what you can, you’ll never save enough. I have yet to meet the retiree who said, “I saved too much money!” If you are not sure where to start, shoot for 15% of annual income.
- Understand the “rules change” in retirement. Think you hate volatile markets now? Wait till you you’ve stopped earning and you have to withdraw money from your retirement assets at a time when the markets are plunging. You can’t recover those losses.
But now, while you’re still earning and accumulating money, volatile markets can work in your favor. By investing monthly, even during volatile markets, (a practice known as dollar-cost-averaging), you’re able to get more for your money when stock prices drop, and the markets are “on sale.”
- Understand that YOU will change in retirement. Most retirees tend to be more financially fearful and fiscally conservative. They’re more comfortable with a base of guaranteed income (from a pension or an immediate annuity), with more conservative investments and savings set aside to fill in the gaps.
The old Chinese proverb says the journey of a thousand miles begins with the first step. With much less profundity, I will offer that the journey towards a successful retirement (pre and post) begins with a good plan.
Let me close with this…
If you’re mid-forties (or even in your 50s or 60s) and wondering about retirement planning, I’ve got a helpful, free tool. It’s called the RISA (i.e., Retirement Income Strategy Assessment). In less than 10 minutes, it can show you what kind of retirement income plan best aligns with your personality, goals, and lifestyle. There’s no obligation, and you can access it by emailing me (bmoore@argentadvisors.com).
Afterwards, if you want to discuss your RISA results further, reach out.
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