I’d never tell anyone that a couple grand a month plus an SS check is to be celebrated. Yet my experience has taught me, in my opinion, that most current American retirees would run over Grandma for that much retirement income. No more is the old joke about “Hi, welcome to Wal.Mart” funny. Far too many have found themselves facing the painful truth of being compelled to continue workin’ when they simply wouldn’t if there was a choice. I speak almost daily with folks who’ve told me that all at once it dawned on them their plans to create a healthy retirement income seem doomed to failure, or at least fall terribly short. One caller described the feeling this way.
As a kid, my friends and I built ramps to jump over various objects with our bikes, including a nice landing ramp. It was great fun. As we continued, our confidence grew and grew. On my last jump one day, just as my front wheel went airborne, I knew I hadn’t been goin’ fast enough. I hit the landing ramp with the front wheel ‘fork’, flew into the air, and landed ugly. My left wrist was fractured, and my right one was broken in three places. My nose was broken. Not a happy day. I’m gettin’ that feeling about my retirement plan.
Regardless of what you’re doing to create the retirement you’ve envisioned, being brutally objective about how it’s working is — Captain Obvious Alert! — absolutely imperative. That is, if you don’t wanna find yourself in a panic a few years prior to the retirement you then realize might not ever happen. All plans have their ups and downs, as Murphy’s alive and knows where we all live. But, ups and downs aren’t nearly the same as having a fatally flawed retirement plan from Day 1. Thing is, most don’t know the flaw(s) exist ’til it rises up ‘n smacks ‘em in the face.
Some examples of fatal flaws
Flippers immediately come to mind. Though – it’s misleading to call flippin’ a retirement plan. What it is in reality is a new job with the potential for gobs of income and a killer cool lifestyle. Thing is, when flippers begin to feel the onset of the aging process, they soon realize they not only can’t keep doin’ flips forever, they seriously don’t want to. Piggybacking on that epiphany is the sudden recognition, for many, of a painful reality:
They’ve done nothing or very little about creating an income in retirement that doesn’t require them workin’ their butt off. Oops.
That doesn’t mean all flippers end up that way, cuz they don’t. Many figure out early on that keepin’ some long term income properties is wise. But, generally speaking, they seem to be in the minority. ‘Nuff said.
Employer retirement plans are also not coming close to doing the job. The reason why is a whole ‘nuther post, but suffice to say that my guess is you’ve never met anyone who’s retired well on their 401k or IRA. In the 30-some years of its existence, I’ve met less than a handful. It’s simply not happening, and a growing number of Boomers and their kids are beginning to see the writing on the wall. For some it’s literally too late, but for most it’s a matter of biting the bullet and changing horses in the middle of the stream — never a fun activity, I know. However, what’s their alternative, accepting a miserable non-retirement?
Many opt for the stock market approach, which is fine if you’re good at it. In fact, I DO know far more who’ve retired well on their stock market investments than on their 401Ks. However, knowing ‘far more’ than about four people isn’t what most would call impressive. Do yourself a favor and count how many folks you know for a fact have retired well, based upon their stock market investments. Go ahead, take your time. No rush. Now ask yourself how many folks you know or have heard about whose retirement was postponed, or worse, negatively modified after retirement when the 2008 crash hit. Not convinced? Then try this — if the stock market is such a great avenue to retirement, why do most folks’ employer 401Ks do so horribly? Why aren’t all your older friends, family, and neighbors retiring with envious incomes from their stock market investments?
Social Security X 2 Just Ain’t Gonna Make It
If you get anything from this line of thinking, let it be this: People back in the 1960s thought that retiring in the 90s with $35,000 a year in pre-tax income would be Nirvana. We all know some of those poor people. They’re not living out the retirement of which they dreamed. No, they’re living out what I’ve come to call a life sentence. Can’t visit family as much, or at all. Can’t go out. Have to sell their homes if they weren’t free ‘n clear at retirement, and sometimes even if they were.
How could they have been so wrong? Their thinking seemed impeccably reasonable and wise at the time. The national median household income in the 1960s was under $10,000. In fact, if memory serves, median income around 1965 was roughly $7,000, give or take. Now imagine yourself as a 30 year old man or woman back then. You’re makin’ around $5-10,000 a year. If you could create a retirement income of 3-5 times that amount, you’d be livin’ the high life for sure. In fact, the thought of retiring at 65 in 1995 with almost $3,000 monthly, pre-tax, made you giddy. Would you wanna be them about now as they enter their 80s? Didn’t think so.
Don’t be a part of the quickly growing OopsGeneration.