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The Money Guy Show | Investing, Tax, Estate, Retirement, Insurance, Spending, Saving, and Wealth Building Advice

Going beyond common sense and helping you make smart financial decisions.

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Happy New Year and A Happy Retirement

Money-Guy 01-12-2010

Well, I’ve missed you guys. We took a few weeks off for the holidays, and I can only hope that absence has made the heart grow fonder. I thought a great way to start out this new year of financial topics was to touch on an area that I think a lot of people are probably thinking about right now. I’m sure many individuals have made the resolution for 2010 to get their financial house in order and, as part of that, get serious about saving for retirement.

It comes as no surprise that, considering the economic downturn of 2008 coupled with the significant recovery of 2009, many individuals don’t really have a good grasp of how they are doing in saving for retirement or, if they are already retired or nearing retirement, don’t know if they have enough to last.

This is the exact topic that was discussed in the February 2010 edition of Consumer Reports. In an articled tilted A happy retirement: 6 steps that work, the author walks through a study and survey that Consumer Reports did on currently retired and nearly retired individuals. In addition to some really good stats, the article also shares 6 steps to a successful retirement. As you listen to the show, I will expand on each of these:

  1. Live Modestly – Spend less than you make and don’t live beyond your means.
  2. Maximize Your Savings – If your employer offers an incentive match on your retirement plan, make sure you are taking advantage of that. It is FREE money!
  3. Reduce Debt – Being debt free or near debt free is almost a must in retirement. There is a significant psychological change that happens when an individual enter into retirement and it sure is nice to not have that additional debt burden.
  4. Don’t Invest Too Conservatively – Because of diversification, taking even a moderate amounts of risk can pay off. You don’t have to go out on a limb to get the best return. Adding multiple “risky” asset classes can actually reduce the overall risk of your portfolio.
  5. Study Your Options – Always have a plan B. When determining your retirement goals be sure to come up with both a best case and worst case scenario.
  6. Take The Intangibles Seriously – Remember that money is only a tool to help you reach your goals.

As you listen to the show I also share some insights from Dr. Thomas Stanley, author of “The Millionaire Next Door” and the newly released “Stop Acting Rich…And Start Living Like A Real Millionaire“. His new book is incredible, and he shares some pretty incredible thoughts on what it really means to be wealthy and successful.

Reader Interactions

Comments

  1. Brian,

    I love the podcasts keep them coming! I would add one point for the younger listeners and would put it first because it is vitally important:

    0 Start saving for retirement as early as possible!

    Starting early is really a huge difference because of compound interest! Without a lot of time you don’t get much from compound interest. I wrote a post on this a while back, and was surprised at just how much it costs to start late. You not only need to contribute a higher % of your salary but you also end up living on less in retirement. Check out the graphs to see for yourself:

    http://ponderingmoney.com/2009/11/04/funding-retirment-is-painfulunless-you-start-early/

    -Rick Francis

  2. You mention an equation to calculate your Expected Net Worth based on your age and income level, but there were no thresholds provided. Do you have some simple ranges you can post?

    Thanks for a great show!

  3. Greg,

    I’m a little confused about your question. I noted in the show that a good ‘rule of thumb’ check-up is to take your age, multiply it by 10%, and then multiply that by your annual income. I’m not sure what you are asking for with ranges? The point I was making is that this won’t always work for young individuals just starting out in their career. For example: a new college graduate may start out making $25,000 a year at 22 years old. According to the equation, he would need to have a net worth of $55,000 dollars. This may be a little ambitious for someone just starting out. I think a good starting point to use this calculation would be someone who has been in the work force for at least 5 or 6 years.

  4. Longtime listener, great podcast.
    Came to the page looking for a paytrust link. I have noticed you have mentioned it more than one time. I too have new children and am learning I can’t spend as much time as I used too on smaller things. I think I’ll try them out. Thanks Y’all!

    Jetfxr
    Memphis

  6. Brian,
    You had mentioned a website about personal finance. I was wondering if you could post a link. Thank you

  7. I agree with your assessment Brian on the net worth calculation. Dr. Thomas Stanley has some really good information, but I think for a younger person it is very difficult. My wife and I (we are both 27) do not come close to Dr. Stanley’s calculations. However, we are debt free except our house (after paying off large student loan balances). We are not wealthy by Dr. Stanley’s calculations, but still in better financial shape than many of our friends and the “average” American. My wife is a teacher, I work for a State of Georgia law enforcement agency. Combined we make around $80,000. Then subtract daycare, insurance, bills, 401 (k) etc.. Using Dr. Stanley’s calculation we should be at $217,533 for net worth. No way that is possible. Keep the podcasts coming!