Everyone looks forward to the day you stay home when everyone else is working. A lifetime of work obligations has finally come to an end; your time now belongs to you! Unfortunately, a new set on concerns emerges: how will the bills get paid when you quit working? Will the Nest Egg last 30 years? How much is enough?
It is always a surprise to realize just how expensive Life can be. Retirement is not necessarily cheap. This is the time when dreams are realized and Cruises are booked, Flights are booked, Motor Homes bought and travel plans are made. You and your spouse have planned for years to enjoy a trouble free and worry free life. Grandchildren are visited and taken to Disneyland or Lego Land, memories are made to last forever. However, very few will enjoy their “Golden Years”.
The average baby Boomer turning 66 today has earned a Social Security payment of approximately $1404 a month. This is for someone who has forgone “Early” payments and has waited to receive the “Full Retirement” benefit. Unfortunately, most Retirees take early retirement as soon as they qualify at 62 and the monthly revenue drops to $1077 per month. Either way, most working couples can count on Social Security for well less than $2800/month; for Life! Hardly riches to fund Cruises or Motor Homes! In addition, the average “Nest Egg” is $109,000. Sorry, it needs to last a long time and annuitized, results in a monthly payment of less than $400 per month. The Government Accounting Office tracks these statistics and it is even worse than this scenario: the average Baby boomer receives less than $19,000 a year and has a net worth of less than $35,000. Further, many retirees are 100% out of money within 10-20 years of retirement. This has resulted in a record labor participation rate of 62% for workers aged 75+; retired and back to work! Saving and conserving is woefully lacking in preparing for an American Retirement. Everyone MUST invest.
There are basically 4 asset classes for the average American: Stocks, Bonds, Commodities, and Real Estate. Stocks and Bonds have done incredibly well since 2009. So well, many believe a bubble exists in both asset classes. Stocks have enjoyed a Market with virtually no corrections or downturns for years and may be extremely overdue and overvalued. Risk in the Stock Market may be much higher than many realize. An average recession results in a 39.6% loss in most portfolios; at 66, there is not time to re-build. Bonds have been calculated by Martin Armstrong to be close to a 5,000 year high with interest rates below the ancient Sumerians! Any rise in rates devastates a Bond portfolio and with rates this low, yields are likely to rise more than fall.
Commodities have been devastated and although prices seem to have stopped falling, it may be after the next recession before they recover. Real Estate is also subject to Market Declines that devastate other Asset Classes, but the Cycle length is much longer while the Cash Flow component mitigates any market turbulence. The Cash Flow is a great help during Recessions when business is struggling.
Rental homes continue to consistently provide monthly cash flow even in down turns and historically have appreciated gaining in value and monthly rental cash flow. Rental homes are perfect for Retirement planning and can be held inside retirement vehicles like Self-Directed IRA’s or can be held personally where they often offer Tax Shelter to qualified owners. Cyclically, Real Estate enjoys a long 18.5 year average duration and although corrections in an ongoing Bull Market can occur, accumulation for a cycle review in 2023/2024 could be appropriate.
It is never too late to start an Investment Program. Please review with your financial Adviser. If I or my staff can help, the first step is just to ask and the first consultation is always FREE!
Michael Douville michaeldouville.com firstname.lastname@example.org