Retirement Plan

Reaching 55 years old has awakened me to the reality of retirement. It is so close. If you are like me, you may begin to feel a powerful need to “get conservative” on all fronts of life, especially your retirement plan.

In the past, your focus may have been focused on maximizing your returns on your investment portfolio and growing your little nest egg as large as you can. But the mid fifties for me have ignited a powerful disposition to be safe and avoid any costly mistakes in my investment strategies.

BEN STEIN TALKS RETIREMENT – YouTube Video

Is a “Be Safe First” strategy the right play?

The first danger occurs when you mistake your target retirement date with your investing time horizon. Your retirement date is the projected date you will begin to need funds from your investments but your investment time horizon is the total length of time you need your assets to provide for you. For me, my assets need to last my entire life and my wife’s life as well.

Don’t rely on your family history as a good measure of your life expectancy. Medical breakthroughs, healthier food trends along with a good gene pool have all combined to extend the average person’s life.

And be sure you don’t get confused when we use the term average person. Median life expectancies are the middle of the road. Half the people will live longer than the median and for a growing number of people, reaching 100 years of age is a real likelihood.

Developing a retirement plan without carefully considering these long life assumptions means running short of needed funds too soon and that is a game you don’t want to play. Some will simply shrug in total frustration because they feel absolutely sure they lack enough funds to pay the bills until the age of 100.

This may be so, but you improve the odds of running short if you turn to a conservative investment approach too early in life. Being absolutely clear about longevity is one of the most important retirement criteria that any senior will face.

So begin today and develop a retirement plan that presumes a longer versus a shorter horizon. For me at 55, I must begin to plan for another 30 to 45 years. Think of the implications of that. By simply assuming a minimal amount of inflation, if I wanted a conservative annual living of say $60,000, I will need well over $100,000 in 30 years to preserve the equivalent spending power.

The good folks that often peddle annuities that guarantee a fixed income for the rest of your life forget to inform you that inflation alone will erode the majority of your funds over time and since you give up ownership of the asset to the insurance company, there isn’t much you can do about it.

Stay aligned with a mindset of active investing. That is my conclusion. My money needs to work hard for me for a long, long time. At 55, I must surrender my fears to the reality of the life expectancy tables and plan accordingly.

With a long time horizon, stocks still remain the best bet, at least a strong portion of your overall investment portfolio. Sure, take some diversity with bonds or an alternative investment but equities must be the engine for growth.

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About The Author:

For more than 20 years, Karl Edmunds has been a noted author within the business and management consulting arena. As a senior, he now engages his curiosity and observations about life to write about key issues of importance to the growing community of seniors (Boomers), and the value of living life to the fullest every single day. Give me your comments and suggests at http://plan-retirement.org or http://For-Seniors.org