If the economic woes in the U.S. over the past decade have taught the Baby Boomer Generation anything, it’s that no matter how much you plan you cannot predict every economic trend. There is no guarantee your 401K will earn as much as you will need or that your estimated expenses for retirement will be accurate. Between economic changes and unexpected life events, planning for financial security is a constant task. So if you have waited until your 50th birthday to start setting aside funds or if you have been saving since you starting mowing “old man Johnson’s” yard at age 12, here are a few tips to remember as you prepare.
#1 Expect the unexpected: You cannot predict a heart attack or how long you may live. Seemingly healthy people go into the hospital for a checkup and leave with a diagnoses every day. Don’t assume that just because you’ve been spending a certain amount per month for the past 5 years that you can determine what your expenses will be during retirement. If you experience a costly emergency, or outlive your family’s average life expectancy, what would you do to pay the bills once your savings run out?
#2 Be cheap: Yes, most of us have dreams and a lot of them involve retirement and travel. So many Americans hit retirement hard with expensive trips they could never take because of their busy pre-retirement schedules and then end up biting off more than they can chew. I’m not suggesting spending your retirement in the corner eating beans out of a can by candle light, I’m suggesting you opt for cost efficient options. If you want to see the 7 Wonders of the World there is no need to fork over half your savings by going to all of them your first month of retirement. Instead, split the trips up, maybe only see 2 “7 Wonders” a year. Look for group rates and travel with other retirees. Remember: while you have money in the bank you probably don’t have an income to replenish what you have used.
# 3 Another thing retirees should be concerned about is “handouts”. Your oldest granddaughter just graduated high school and is going out of state for college. Certainly, you may feel safer if she had a car in this new city but it doesn’t mean you should fund it. By the time most people get to retirement they have spent decades supporting others, this is the opposite of retirement. Yes you worked all those years to support your family but you also worked all those years and saved to support yourself when retirement came. Taking on the CEO and Head of Finance role for the Bank of Mom and Dad or for the Bank of Grandma and Grandpa may be what lands you back into the work force in your 70s.
#4 And finally: diversify. We hear it our entire adult lives how important it is to have diversity in your investments and the same goes for retirement because at the end of the day your retirement fund is an investment in yourself. I recommend always having some money in the bank; while the interest doesn’t have the potential for return that more risky investments like stock and bonds FDIC banks guarantee at least your initial input. Look into different ways to split up your savings; other methods include land investment, gold bars, stocks, savings certificates, business, etc.
IRC is a full service commercial real estate investment firm. We will be glad to discuss the possibilities of property investments with you.