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. 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).
So what are people doing wrong to cause this shift? Here are 4 of the major ones:
Most people invest the funds in their retirement account into a combination of these things: stocks, bonds, mutual funds, or cd’s.
There is 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%.
Now, a 3% to 6% return ins’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, last year the price of eggs went up 5.7%, tomatoes went up 6.9%, sausage went up 8.7%, potatoes up 6.9%, oranges up 12.2%.
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.
The Employee Benefits Research Institute recently performed a Retirement Confidence Survey which revealed that 60% of workers have not calculated how much money they need to save for their retirement income needs.
This isn’t something you can leave up to your investment broker. Most investment brokers are paid their fee whether you make money or not. You have to take an active interest in your own financial future.
Sadly, most people spend more time planning their next vacation than planning their financial future. And as you know, failing to plan is planning to fail.
When working on your retirement plan, it is 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 (like inflation, cost of living increases, and your specific retirement goals).
If you haven’t taken the time to set measurable and specific financial objectives in writing and designed and implemented an action plan to achieve them, there’s a very high chance you won’t be able to enjoy freedom and independence in your golden years.
Assuming you have a typical pension from your 9 to 5 and are managing to put a few bucks away each month on top of that, it would be wise to look for opportunities to invest your savings into something that will give you the best returns.
It really depends on the economic climate at the time but there are many ways that you can increase your savings and future retirement income if you are smart about how you invest.
For instance, most people don’t know that you can put real estate into your retirement portfolio and your money can grow tax free. 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.
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.
You’ve read this article and found some things you could be doing better. But what exactly should you do next? That’s a complicated question that depends on a variety of factors. Unfortunately, there is no one-size-fits-all investing advice. If there was, everyone would be doing it.
So 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 4 things you can do right now 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.
If you found this article helpful, don’t forget to 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.