State of Mind

America is aging.  Of course this only natural, given the baby boomer generation is now full steam ahead toward hitting the retirement age of 65 (or 66 is you ask Social Security!).  Today, 13.5% of Americans are 65 or older.  Eight years from now in 2020, it is expected that over 16% will be 65 or older, while eight years ago in 2004 that number was 12%.  When we look at the unemployment numbers that are reported to us, it makes me wonder what the unemployment number would be if we didn’t have a workforce that was naturally retiring! 

But that’s not the entire story.  The unemployment rate of those under 25 is nearly double that of the group 25 and older.  It’s estimated that over 80% of recent college grads are moving back home to live with parents.  As a father of three, that’s a number that scares me.  If we want to know why that is, look no further than the baby boomers.  Today when asked, one in three people tell us that they plan on retiring AFTER 65.  That number is up significantly from one in nine of those asked in 1996.  With a generation this large purposely retiring beyond the expected age, we can understand why work is so scarce for those with no real life experience.

So why are people working longer?  I just finished a project for a national law firm where I was hired to provide financial plans to 40 of their employees reaching retirement age.  What I learned was astonishing and has forced me to reevaluate the way I see the current generation of retirement age people.  Of the 40, over 75% were mentally ready to retire, yet fewer than 20% actually could retire. I believe we’ve become a society that is frozen by too much information, without direction or useful guidance readily available.  Working Americans are left with a 401(k) brochure that promises to help them make choices, featuring information that is confusing at best. Couple that with a direct hit from the commission junkie sitting at a desk in a local bank, or a life-insurance-salesman-turned-investment-advisor, and it’s easy to understand their confusion.

Talented advisors are available, but typically only to those “million dollar minimum” prospects that have determined that they really do need guidance.  As more people with affluence understand they need that help, more professionals have started successfully fishing upstream, leaving the average American with these less than desirable choices, who are prone to “go at it alone”, armed solely  with information they’ve found on the web.  I too have successfully done this, growing my business to work with those “with more”, however I’m beginning to believe that an account size should not dictate the quality of advice that an individual receives.  The reason for this shift in perspective is due to the fact that our retiring population is less prepared to live the life they want to (or need to).  They have resorted to doing things on their own that were once left to professionals, and as a result, they need to work longer.

Here are a few things to keep in mind to help you Take Hold of Your Wealth™.  These are things that apply equally to a 20-year-old as they do a 60-year-old:

  • Expect to need more than $120,000 of investable assets to be able to create an inflation adjusted $500/month that will last through retirement
  • Recognize that you need help and that information alone will not solve your problems
  • Do not be afraid to ask questions or to demand help beyond the sale of a mutual fund.  Financial decisions go beyond an asset allocation, and that house or car you buy today could impact your ability to retire tomorrow.
  • Do not under any circumstances live beyond your means.  Not only does debt kill your ability to retire, but it also sets you up for an unsustainable lifestyle after you stop working.  How you spend today is how you will spend in retirement
  • Do not think you can work until you drop.  Even if that is true, when you get to retirement age, you are not going to want to keep going at the same pace as you have your entire life.  Even those rare birds who can’t stop working want to redefine how they will work in their “golden years”

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