Ray’s Take: What are your thoughts about contributions to a 401(k), an IRA or any other tax-qualified investment vehicle? Are you thinking about the “right now” advantage of a tax break or are you thinking long term about what kind of life you would like to live in retirement?
Have you really put a pencil to what your vision of financial independence will cost? Do you picture yourself traveling the world? Relaxing on a beach? Assisting your children or grandchildren financially?
Per an analysis done by the Employee Benefit Research Institute (EBRI) in 2012 roughly 44 percent of Baby Boomer and Gen X households are projected to be at-risk of running short of money in retirement, assuming they retire at age 65 and retain any net housing equity in retirement until other financial resources are depleted.
The biggest risk most people will face is not stock market volatility or interest rates, it’s living longer than their financial plan. It’s a wonderful thing to live longer and enjoy life. With that longer life expectancy comes the possibility of outliving the resources we allocated to the future. If we don’t put careful thought into our actions and investments and get out of the habit of short-term thinking, we’ll inevitably face the harsh reality of being old and broke one day.
Everyone should have an emergency fund, usually at least six months living expenses as a basic. After that, consider putting away additional funds toward the future to make sure you have the one you would truly like to be living. Lots of additional funds. And don’t guess – have a plan.
It’s far better to plan ahead and to talk to a professional. Ask your accountant or financial planner for advice on how to put your plans for the future in place.
Dana’s Take: Today I read that the number of people who have reached their 100th birthday is growing at twice the rate of the general population. Gulp. With medical breakthroughs in genetics in the next few decades, that rate may continue to climb in my lifetime. So now I have to save enough money to last me past 100 years old? Overwhelming, isn’t it?
Will your plan support you through 100? Ray ran into a Memphis man recently who moved to Mexico for the lower cost of living in his retirement years. That’s thinking outside the box. If Mexico’s not your cup of tea, meet with your accountant or financial planner and crunch the numbers. Better to do it now, while you are still earning and can do something about your financial choices.
As living past 100 becomes more likely, creating a modest and sustainable lifestyle makes more sense than ever.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at firstname.lastname@example.org.