99% of financial planners will tell you that retirement has changed for the US. People can no longer rely on social security. This comes at a number of different reasons that are incredibly complex and incredibly long, so I may get into it another time. What I want to focus is on what you really want out of retirement.
Not everyone wants to live the same life of retirement. So want to relax at home with nothing to do. Some want to pursue various creative hobbies and passions. Others want to live in some exotic resort. Maybe you want to travel and/or volunteer. Each scenario comes at a different price. Part of the reason retirement planning is such a difficult thing to do is that whatever, whether it be sipping down cocktails off the coast of the Bora Bora Islands or living in a cabin in the mountains with minimal materials, the amount of money that you have will directly affect your freedom to live that life.
It’s difficult to get the right information from the right people. Different financial advisors will advise different investment strategies. Each strategy can be catered to meet your retirement plan, but I don’t believe them. This is because most financial planners have a personal agenda. They need your money so they can accommodate for their lifestyle. Now, I’m not saying they will take advantage of you and your investment and put it down the drain intentionally, but their financial situation may alter the choices they push towards your investment. Also, not every financial advisor is an evil person.
There is one ultimate concept that everyone should know and it is common sense. Whatever you do in the future, you will need to make sure you have an annual income that can support it. If you are expending $200,000 a year while in retirement, your annual income needs to be more than $200,000 a year. Inflation can be calculated between 3 to 4 percent, but personally, I would calculate a safe 5% per year. I would also advise diversifying your investment into multiple markets, various currencies, and even stock markets outside of just the US.
A $100,000 high yield savings account with 5% APR would only generate $5000 per year. That’s only $415 per month. In fact, its even less due to taxes. Depending on how much you are making, state and federal taxes will sap a good portion of that income. Then when you calculate inflation, you’re actually losing money. My retirement planning is finding a way to produce a steady, stable source of income without minimal work.
Retirement is difficult and complex. It requires planning – a lot of it. Most people are either too lazy or too afraid to think about it. I suggest you take on the monster by the nose and begin now.