by Brian Bagnall
Did you know that a new study shows that 83% of Americans aren’t going to be able to retire on time?
And that number has only gotten worse.
This has lots of ramifications. It means that you might have to continue working well past your retirement date. Or you might have to pick up a 2nd job. Or you might have to decrease your cost of living. Or, worse yet, you might never be able to retire (this is becoming more common).
The days of counting on Social Security for your retirement are long gone. Now a days, many retired people, who failed to plan for their financial future and depend completely on Social Security, are struggling harshly and barely getting by.
And even retirees who have saved for retirement during their working years have had to make drastic changes on their lifestyles in order to adjust to their new incomes.
In fact, 56% of retirees are “not confident they will be able to live comfortably throughout their retirement years”, according to data from AARP (the American Association of Retired Persons).
Sadly, most Americans will just not be able to maintain their lifestyle in retirement and many will see their savings and investments come up short for even the most basic of expenses. But you’ll be one of the few who will be financially set if you follow the advice on this article.
Some of the advice is basic and some of it is advanced. Regardless, sometimes the most basic advice or smallest change can make the biggest impact.
So what can you do to make sure you don’t run out of money in retirement? Here are 5 of the major ones:
Most people invest the funds in their retirement account into a combination of these things:
There is, however, one major problem with this.
If you’re doing what the average person is doing, how can you possibly expect anything other than average results?
And the answer is: you can’t.
The average yearly return investing using a combination of stocks, bonds, mutual funds, and CDs is 3% to 6%.
And for heaven’s sake, never put money in a savings account as an investment technique. Only use a savings account for the portion of your money that you want to be able to access in case of emergency.
Now, a 3% to 6% return isn’t horrible… until you factor in inflation.
Inflation is when prices rise and your money decreases in purchasing power. This happens for a number of different reasons but stems from the fact that the government keeps printing money.
Every year, the government releases an estimated rate of inflation for the previous year. Usually, it’s about 1-2% per year. The problem with the rate that the government releases is that it’s never in their best interest to release a high inflation rate because it shows that they are printing too much money. Investment experts agree that the real rate of inflation is about 5% per year.
You can roughly figure out what inflation is by paying attention to how much the cost of the things you buy on a regular basis have risen. For example, According to USA Today, the prices on these common items went up:
But let’s take the 5% figure that most investment experts agree on. Let’s assume that you’re making 6% on your retirement funds, which is the high end of average. When you subtract 5% inflation from your 6% yearly return, that leaves you with earning 1% per year. You’re not going anywhere by making 1% on your money except to the poor house.
(To really be able to see your money grow, you have to invest in instruments that will yield at least a 10% ROI, or Return On Investment. But we’ll get to how you can achieve this later in this article.)
When working on your retirement plan, it’s very important to consider how long you’ll need your retirement savings to provide for you. While average life expectancies are published each year, there are more things that you need to take into consideration when defining your investment’s time horizon.
Your family’s history of health and longevity plays a major role, as does your current health and lifestyle choices. Remember that most people outlive their ancestors and the average life expectancy increases every year due to advances in health care and medicine. In a general sense, planning for a longer life is the smart way to go.
Sometimes, people who suffered a personal injury receive fixed payments for a specific period of time instead of a lump sum payment from their insurance companies or court cases.
This agreement is called a structured settlement. Many times, however, people prefer the lump sum instead. You can invest in such instruments and offer cash for their settlement, minus a percentage, and take over payments for them.
This way, they get a large sum of cash and you are able to get a decent and very safe return on your investment. Investing in structured settlements could be a great idea for you if you have a large enough sum of cash available.
This sounds obvious, but most people don’t realize the huge difference between a low return on investment and a high one. If you are able to obtain better returns on your investments, you can both drastically reduce the time it will take you to retire and considerably increase your monthly budget once you do so.
Let’s look at this graphically:
|Annual Contribution||Return on Investment||Total at age 65|
|*This numbers were calculated using Bloomberg’s retirement calculator at: http://www.bloomberg.com/personal-finance/calculators/retirement/|
Shocking isn’t it? Well, this is the impact that investing your money like a pro can have on your long term financial future.
You might think that getting a 15% yearly return is hard to do. It’s actually not.
For instance, most people don’t know that you can buy real estate IN your retirement portfolio and your money can grow tax free.
Most wealth has been created with real estate than almost any other method. Real estate tends to perform really well over long periods of time and the rewards can add a great deal to your chances of retiring on time.
So you’ve read this article and found some things you could be doing better. But what exactly should you do next? Well, you have 2 choices:
1. Be average
2. Be smart
An average person would click away from this page and go about doing whatever they were doing.
A smart person will say to themselves, “I really need to stop procrastinating on my retirement accounts and take an active interest… right now.”
It’s never too early (or too late) to start making changes to your retirement plan to make sure that you’re getting the best return possible so that you can enjoy retirement on your terms.
To help those that are smart, I wrote a guide called the “30 Minute Investing Plan” to help you get a better idea of what your next steps should be. In the guide, I detail what you can do in less than 30 minutes to avoid running out of money in retirement. And I want to give it to you for free.
While there is really good information contained in the guide, there’s nothing like a seasoned investment expert personally reviewing your portfolio and giving you customized advice. And I want to help you do just that… for free too!
So go here to request your free guide (and be sure to check the box at the bottom to request your Free Investment Boosting Session with me personally).
When we jump on the phone, you’ll walk away with a retirement plan with specific, measurable financial goals and a custom investment strategy to fit your needs that you can immediately implement to double or even triple your current ROI.
If you found this article helpful, don’t forget to share it and leave a comment below. I try and respond to every comment.
Brian Bagnall is an in-demand author, speaker, and real estate investor who has written several books and spoken at conferences throughout the United States. He's shared the stage with business greats like Daymond John from Shark Tank. Brian actually practices what he preaches. He began his investment empire with just $3,000 in start-up capital and has gone on to purchase over 100 properties (and counting) all over the country. Brian turned his small investment into a multi-million dollar success.