DOMINATION REPORT
A Crash Course on Retirement Growth
When it comes to retirement, many of us suffer from bouts of insanity.
That's not to say we’re crazy (most of us anyway), but we have this common idea that if we do the same thing over and over again, we’ll find different results – a quote oftentimes attributed to Albert Einstein.
But when it comes to retirement, it’s rare that we discover what we’ve done wrong until we’re retired with no real retirement.
Putting away pennies a day, hoping that it’s enough for retirement is the worst thing you can do, for example.
Suppose, for example, you worked from age 18 to 70.
That’s 52 long years.
Now, assume you live until you’re 97. My great aunt did, and smoked like a chimney.
That’s 20 years in retirement. Think about that.
You need to have saved 20 years worth of funds (either through social security or retirement savings) to cover you in retirement. The math, the calculations are mind-boggling… and you don’t want to run out of money.
According to the Federal Reserve, the median balance of retirement savings at the moment is $60,000. The median retirement balance for those 35 to 44 is $42,700.
That’s not enough.
Worse, many people haven’t saved at all, pushing off the issue of saving.
Instead, they’ll spend $5 a day on coffee without realizing that they’re consuming – or in this case – drinking their retirement.
At $5 a cup per day, 20 times a month for 50 years comes to $60,000.
Starbucks is thrilled. Your retirement… eh, not so much.
Today’s 70 year olds and living well into their 80s and 90s.
That means there’s a very real possibility that you may need 20, even 30 more years of retirement income. With the average social security check coming in at a whopping $1,200 a month, you’ll need more.
We also fail to account for inflation.
Even low inflation can have a big impact on your bottom line.
For example, according to Fidelity Investments, using a 2% inflation rate, $50,000 would be worth only $30,477 in 25 years. Or, if you flip that around, in 25 years, you would need $82,000 to buy something worth $50,000 today.
The biggest error you can make is investing in the wrong things.
More than 25% of us have stashed our long-term saving in cash, instead of investing it.
At a time, when the average savings account earns 1%, that’s a lot of cash not earning a great deal of value. You’re actually losing money on your money every year with inflation.
If you’re earning 1% on your money in a savings account, you’re actually losing purchasing power with inflationary risk. Maybe it wasn't this way in "the old days" when you got a 3% or 4% return in savings, but it's certainly true today.
Stocks aren’t always safe either.
Over the last seven decades, the market has returned about 12%. Meanwhile the average return of the individual investor is less than 3%. That’s being generous.
The next 20 years may not be any better, especially young adults that are just starting to save now. Analysts find that US equities could only yield 4% to 5% inflation adjusted returns moving forward, compared to nearly 8% over the last 30 years.
What’s worse is future generations will have a shortfall.
Four in 10 millennials say they don’t any retirement income at all, according to Franklin Templeton. Instead, they’re paying down excessive college debt or attempting to stay out of credit card debt. Others are trying to make ends meet.
But we continue to repeat the same mistakes hoping next time will be different.
Unfortunately, it never is. And we slowly find ourselves with another bout of insanity.
You don’t have to repeat the same errors.
One of the best ways to retire, though, is with real estate ownership and real estate investment trusts (REITs). In fact, over the last 10 years the average REIT has returned just north of 9.5% growth, as compared to 6.4% growth on the S&P 500.
Let’s say you own rental property in a hot spot like Florida.
The biggest advantage to renting property is that tenants pay you rent.
That means you can collect predictable cash flow month over month, especially in an area with higher demand. Second, a commercial property may allow you to depreciate a property’s value and deduct it from your taxes.
It’s also a hedge against inflation, and offers security with intrinsic value.
Another way is to go beyond for your 401(k). You should be contributing to your 401(k) especially if your employer offers it, and if your employer matches it.
This can always be bolstered with a respectable real estate portfolio, too.
Diversification is also the key to success.
If you’re just holding stocks, or you’re just in cash, or you’re just in savings accounts or mutual funds, all of your eggs are in one basket. That’s a great way to lose money.
The last thing you want as you head into your retirement years is to find you really have no retirement years because of poor decisions.
Don’t keep making the same mistakes again and again hoping for a different outcome… or the insanity of it will get you.
Instead, let your money work hard for you so that you're never truly retired.
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An $80 billion cover up? Feds use obscure loophole to threaten retirees
Under the watchful eye of Congress, the government will soon be implementing a controversial plan that threatens the retirement of millions of Americans. And they’re using an obscure loophole buried in Title 29 of the U.S. Labor Code to do it. If you have a 401(k), IRA, or any type of retirement account, you need to see this before it's too late.
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