"We see two camps," Burns says. "There are the people who figured they would have to work forever, who were really frugal, they saved and live a moderate lifestyle. It turns out they can go ahead and retire. They can go ahead and accelerate things.
"Then there are the ones who just never really did any planning and they end up in scramble mode. There are a number of people out there who have been making a lot of money, but living a lifestyle (that reflects it)," Burns continues. "For the folks that haven't been squirreling away, there's not a lot we can do. It's a shame, and I hate to see it, but from an investment standpoint, there's not much we can do."
Controlled spending is only part of the picture. Just as important is ensuring a suitable income stream. Social Security and drawing down on 401k's or IRAs will be a baseline. But especially as people live longer and more productively, establishing a suitable lifetime income stream is crucial. That necessity has been among the selling points, for instance, in the current wave of annuity products promoted by firms such as Fidelity, MetLife, John Hancock, Prudential, Genworth, New York Life and Allianz.
For people escalating their retirement date, their portfolios need to protect them from running out of money.
Burns is a proponent of using individual bonds as a safe "paycheck portfolio," with careful use of equities to ensure long-term appreciation.
"Most people aren't so frugal that they can spend whatever the yield curve is," he says. "They need some exposure to equities."
Burns advocates bond laddering, dividing investment dollars evenly among bonds that mature at regular intervals. He stresses the value of individual bonds over bond funds.
"By using individual bonds to build an income portfolio, you can build a time buffer," he says. "The person who wants to retire now, they have to keep their spending in check. And they need to give themselves time to let equity markets do what they do, which is occasionally go down -- sometimes a lot -- but go up more than they go down if you are able to hold them for a long time and not make dumb decisions at the wrong time. If you are just pulling money out of your portfolio and there's no real structure to the income piece, it gets really scary, and that's when people make the wrong decision at the wrong time."
"A big advantage for an individual bond is that when interest rates start to rise you already know your worst-case scenario," he adds. "Your worst-case scenario is the yield to maturity and then you get your principal back. Whereas with a bond fund you can lose money."
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My best advice is to start as early as possible. I started at age 23 and have never put in less than 10%. When the market started tanking in October 2008, I put in the max of 30% until around December of 2009. When I get a raise, I increase my contributions by that percentage.
I'm 32, I've never made over 45k, and I've got just over 120k in my retirement account. The power of compounding cannot be overstated. Start early and be aggressive when you're young.
Well folks it like this. I retired in 2002 at age 54. I had retired from the military (CWO) and the Fed Gov't (GS-12) and a disable vet.
Do I make a ton of money no, but I live very comfortable and even can afford a new car if I choose, in which I don't (Use to when I was young, ash tray get dirty and tires wore out or the 12 month warranty they gave back then was up, trade'em in, start all over again, what a mess I was)
I have my house with a pool and 2 cars one is a 2000 blazer the other a 2009 Impala LT (The cars are paid for, the house no) I have only one (1) bill, the house plus the things that come along with it. Have 2 HD TV's 46 and 52", Paid cash for them both.
Manage your money, don't over spend and try to pay cash and not credit, but you do need some credit or you will come up short on things like Car Ins, etc...
And save! What ever you can make it a point to do it. When i make up my mind to retire I crunch the numbers a least a dozen times and said I can do this, a little belt tighten for a yr or two they off to the races...I don't regret one minute of my decision, I even went back to college and finish my degree in a less stressful situation with work and all. 3.7 GPA. Not bad for an old man...
Just link before you leap.
Well if you retire be sure you have something to occupy your time with besides taking naps. There is no way to know how to keep up with inflation thou. You can be in great shape financially but medical problems can still wipe you out.
I have been retired for a while but still think working part time would be a good thing. If you have a passion for something before you retire be sure to get ready to do it. Also if you have a mortgage in this market it probably would be better to walk away and rent a place. That way you don't have to worry about maintaining it. Being a landlord is no bargain no matter what anybody says. Real estate just isn't keeping it's value for years to come I believe. Realtors and agents really aren't your friends anymore than bankers. So walking away may be the easiest solution but get a place rented while your credit is good.
Being old in this day and age is no bargain and 60 plus is not the new 40 plus it is just bs. Yes retiring gives you lots of time after a while the work world is just a past life. We all end up no matter how healthy you are with problems eyes and hearing I think is the most common. Also this connected world is leaving everybody unconnected peoplewise and nobody young has time for the old because they are caught up in the work cycle of life.
The best thing is your life has given you many good memories and you have a long term partner in your life to enjoy your retirement with hopefully. Also definitely try to stay out of debt once you are retired. The less stress the better enjoyment of retirement.
For me, the secret was knowing "how much is enough!". I determined what I wanted to be able to do in retirement and then determined how much it would cost to do it. I allowed for an inflation rate of 3.5 to 5% annually and for a life span of 25 years beyond my retirement date. Finally, I allowed myself a margin or error of 15% on all of the above including accumulate investments and based on this formula, my wife and I retired in 1982. Obviously, my life span has exceeded the 25 years I allowed and 4 stock market crashes since 1982 have damaged my income projections but we have still been able to live a very comfortable life style including a new luxury auto every 5 years, 30 day cruises twice a year, and other upper middle class living advantages. What we did can be done but it is not easy and involves reasonable expectations for the future and saving and investing to achieve those expectations.
Duh! Save as much as you can the first 10 years after college, if you went to college.
Buy quality and avoid trendy expenses.
Spend as little on cars as possible since car payments are like setting money on fire. It's gone.
If you marry, make sure both of you understand the family finances and agree on how to spend. This is the most important.
Barring market collapses, you'll retire earlier.
Additionally, belt tightening, and a large enough nest egg to cover a few hundred a month in the red until Social Security kicks in allowed me to retire early. But because I've honed my skills over the years at getting the most for my money, it hasn't meant living like a hermit.
For example I treated seven of us to the International Auto Show on Sunday. Sunday was family day so the two kids got in free and I got the five other $10 tickets on Groupon for $5 each. What would normally cost $70 on Saturday cost $25 on Sunday. Restaurant.com has coupons for $100 off per table for $40, so we can try out a decent restaurant or two each month for $10 or so per person (you base the tip on the full cost). And store brands and warehouse/discount/dollar stores mean I save 1/3-1/2 on food and clothing.
It was Not my choice to retire early, but being laid off by a large company just before I could
receive my full penison and benefits..
Think they were on a out sourcing and greed kick..But with No Jobs to be had, whala,! I was
New dress code, No Gray Hair..
Will be glad to see Barrys laser beam effort on jobs for Americans to happen, but not
holding my breath till it comes about..?
Diversify and get paid. Counting SS, Pensions and dividends the whole thing generates 260 paydays a year. Not bulletproof but real close to it.
I caution against listening too much to the advice of many people on here who just want to brag and don't offer any real insight. I deal with the terminally ill, and I can tell you this: You will never meet a more bitter person than the one who scrimped and saved all their life only to find out they have a terminal disease shortly after they retire and thought they would now enjoy the "good life."
Life is about balance. Each individual's circumstances are different, and what works for a "corporate type" who likely made in excess of six figures his whole life may be pure foolishness to someone who makes considerably less.
What I can say is that you should strive to spend money on that which matters most to you. Sit down with yourself and figure out what honestly makes you happy in the here and now. And then decide how much you can spend on those things while still being a responsible, self-sufficient citizen. Too many people let their decisions (financial or otherwise) be determined by impulsive emotions when they would have been better served by honest self reflection. Some buy buy buy in an attempt to fill an emptiness whereas others deny deny deny themselves joy in the here and now in an attempt to assuage anxiety and reach some future utopia that may never come.
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