If you’re over 50 without a retirement plan, you may be saying to yourself, “OMG! I’m all grown up with no retirement savings. Now what do I do?” They say that 90% of the solution to a problem is understanding how it happened. So let’s start by examining how most people got into this mess.
Over the last 30 years, most employer-provided pensions have disappeared, except, at least for now, in the government sector. At the same time this was unfolding, most baby boomers bought into the extremely successful but extremely destructive marketing programs of the financial services industry. These programs sold the idea that the stock market and/or the ever-increasing value of your home would provide enough money to fund a good retirement.
Times were good, perhaps too good, and people bought into this highly seductive spin quite willingly. Why can’t I live the good life—have a new car, a large home, nice vacations, and so on? Why should I have to save 15-20% of my income? After all, my financial advisor, the “expert,” assures me that the proper investments in the stock market should grow my limited savings very nicely, my high-value home will give me a nice extra nest egg, and all will be well.
Unfortunately, the truth is that the financial services industry never did learn how to invest, just how to take their cut, regardless of whether their clients made money or not. Following their advice was a formula for financial failure. Over 80% of those who invested in the stock market over the last 25+ years made nothing. Adjusted for inflation, they actually lost money.
But don’t take my word for it. A monumental study by Dalbar, the nation’s leading financial research firm analyzing how stock market investors fared over a 20-year period (1984-2004), found that most investors earned only 2.57% in total after 20 years, while the stock market (the S&P 500 index) went up by an amazing 1,000%+! Translation: From 1984 to 2004, the stock market went through one of the greatest growth explosions in history, yet most investors made nothing—only the financial services industry did. (As did the 10% or so who simply invested in no-commission, low-cost index funds, funds that directly track the performance of the overall market. They cleaned up, making over ten times on their money.)
Now you know why over 10 million baby boomers can’t retire and why over 11 million families and counting lost their homes.
Okay, So What Should You Do?
There’s how it all happened, but what’s done is done. The question now is what do you do about it? The answer is clear. Do not continue one minute longer with the very system of personal money management that failed you. It didn’t work, and it never will. Here are seven specific steps you need to take:
Step #1: Fire your financial advisor. Invest your money yourself, and likely far better than any expert will ever do for you. To learn how, go to my site, MoneySmartOnline.com, and start reading. It’s all free.
Step #2: Know how you really spend your money. Over 50% of Americans do not know how they spend their money. Don’t assume you’re in the group that does. Spend two minutes a day and write down every single expenditure. In less than 30 days, you’ll know the truth about where your money goes.
Step #3: Create a written plan for how you will proceed. The information, tools, and templates you need to get started are on MoneySmartOnline.com and in Money Smart. Do not underestimate the importance of this step as, without it, you are unlikely to succeed.
Step #4: Learn to spend smart and save more.Yeah, I know you know how to do that. Well I respectfully disagree, as few of us know how to do it all. In researching Money Smart, I discovered that I’d blown over $300,000 over the last 20 years buying my cars wrong, despite being a pretty savvy business dude. So, again, go to my website and start reading my three-minute blogs about how to spend smart. I truly believe that most individuals and families have the ability right now to save thousands a year that they’ve been giving away to others.
Step #5: Consider working longer. Before you let this thought upset you, ask yourself this: Will life really be better if you completely stopped working? For some, it is a better life, but for most people it is not. Having something productive to do is part of who we are and what life should be about. Hey, I’m 71, and no way am I gonna stop unless a truck hits me.
Step #6: Live a simpler life. Many people have learned that less truly is more. Personally, I’m one of them and love having a simple life. How complicated has your life become over the years? How many activities and obligations do you have every day, week, and month that you’d rather not do? How many things do you own that you don’t use? Do you really need such a big home? Do you live far from your job and commute hours each day, leaving you tired and with little time for your family or for yourself? Is everything you do and own really worth it? Do these things actually add to the quality of your life? Simplifying your life doesn’t necessarily mean doing without. It means living a less stressful, more balanced life, and having more time for the things that end up making you happier.
Step #7: Take good care of yourself. Good health is one of life’s great treasures. With it, you’re likely to do just fine. Without it, well, I don’t have to tell you what that means. So take good care of yourself, because nothing, including money, can insure your future quality of life like good health. You already know what to do to be healthy, so go do it.
Planning for your retirement encompasses a great deal more than figuring out where to put your money. Feathering your retirement nest, as you can see, has a lot more to do with changing your mindset. People who live their lives consciously, rather than carelessly, and take responsibility for their spending, investing, time-management, working, and health habits will find themselves in a serene state of security, financial and otherwise. No matter what retirement planning mistakes you made in the past, you’re never too old to get back on track.