Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Forex Trading Management: The Importance of Being Prepared - 19th Feb 19
Gold Stocks are Following This Historical Template - 19th Feb 19
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Tortoises Win the Retirement Race

Personal_Finance / Pensions & Retirement Sep 19, 2013 - 05:06 PM GMT

By: Don_Miller

Personal_Finance

The race to the finish line—the time between an empty nest and retirement—is tightening. A major generational shift has taken place, and it's having a huge impact on when and how we save and plan.

Most older baby boomers like myself had children in their 20s and empty nests by age 50. They used that time to accumulate enough money to retire. When my children were in high school, their friends' parents were in their late 30s or early 40s. It was unusual to run across 50-somethings at a PTA meeting or high school basketball game.


I don't need a bunch of expensive research to confirm what I see with my own eyes: Couples are marrying later in life, having children later, and even spacing them out more. My own unscientific survey confirmed this. My oldest son just turned 50, and his two children are 14 and 12. My stepdaughter is 36, and she has a nine-year-old and four-year-old. They're right in line with their peer group.

So, assuming our grandchildren go to college, my children could easily be in their early 60s before their kids are off their payroll. Even if they push retirement back to 68, the time allotted for their race to the finish line has been cut by about 50%. If they had followed in their parents' footsteps and waited until the nest was empty to get serious about retirement, they'd damn sure have to be world-class sprinters.

On top of that, two-income households have become a virtual necessity just to make ends meet. Among folks my age, many mothers reentered the work force as their children went off to high school. The second income was a luxury, and the extra money could be used to jump-start capital accumulation for retirement. Today, a second income seems to be necessary just to meet current expenses.

Then there's that pesky issue of debt. For many of us, there's some lag time between both spouses committing to a debt-free life and wealth accumulation. It can easily take 3-5 years to pay off debt, and only then can one actually start socking away money. I remember wishing I had money to invest when I was younger. However, while I could have had $10,000 in my brokerage account, I would have also had a $10,000 credit-card balance with 18% annual interest. Simple math told me I was better off getting out of debt and staying that way.

So, let's imagine a couple whose nest is finally empty at age 62. At that point, they get serious about paying off debt and accumulating wealth. If it takes three years to become debt-free, that leaves just three years to stockpile money for retirement, if they retire at 68. This couple could save 100% of their salary for those three years, and they still would not have nearly enough to retire.

The Long Jog to the Finish Line

You might be thinking something like, "Well, Dennis, I'm 50. There's not much I can do about marrying and having had kids at 35 now." And you'd be right. Frankly, there are many advantages to marrying and having children at a later age, and I certainly don't want to harp on folks who made that decision. It does, however, mean you have to plan differently than the generation immediately before you.

So what can younger baby boomers do?

Get on with the job. I know I've said it before, and I'll say it again: the time to start planning for retirement is today. Younger boomers have to run a different race than I did, but they still need to start, regardless of other drains on their resources.

Reprioritize wealth accumulation. It's easy to give yourself a nice reward every time you get a raise, but it's much tougher to save a portion of that raise or use it to pay off debt. For me, that meant acknowledging that I had survived before I got a raise, so I didn't really need the extra money. I don't recommend being a scrooge; go ahead and reward yourself with a small portion of any raise, but you know where the rest goes: your 401(k), IRA, or other retirement savings account. If you're not contributing the maximum amount to tax-deferred retirement accounts, start now.

Don't buy the biggest house on the block. I have noticed that younger boomers are becoming more attuned to needs versus wants. Up until 2008, folks were buying the biggest house they could afford because real estate was an "investment." Houses weren't just homes, they were moneymakers—or so we thought. If you've opened a newspaper in the last five years, you know that's no longer true.

My son and his wife just bought a new house—a nice home that meets their needs well. They really liked another model that cost $25,000 more because it had one more bedroom. A spare bedroom would have been convenient when grandparents visited, but then again the house would have been too big in ten years or so.

They made the right decision. They saved the $25,000 as well as the interest on a higher mortgage, as they had already made the maximum down payment they could afford. They'll be just fine without the spare bedroom; that's what air mattresses and hotels are for.

Use some common sense. I've made this same mistake more than once: I'd decide to get serious about diet and exercise and go way overboard. On day one, I'd exercise to the point of exhaustion and cut my caloric intake in half. By the second day, I could hardly move, and I was starving to death (at least it felt that way). By the third day, my commitment would vanish. Had I paced myself, I would have been a lot more successful.

The same principle holds true for paying off debt and saving. For most folks, the best way to start is by withholding incremental amounts from their paychecks. Many employers will do this automatically and put the money in your 401(k) or IRA. Tackle debt the same way: cut up your credit cards and start paying a little extra on your regular payments. It is amazing how quickly you can make progress.

Become an educated investor now. It is easy to think, "Why do I need to learn about investing when I don't have any money to invest?" There are two responses to that question. First, you don't want to wait, because from day one you want to take what little capital you can start with and invest it wisely. And second, I found that the more I read about investing, the more motivated I became to have money to invest. The thought of my money working for me instead of the other way around sounded quite appealing. After all, isn't the goal to accumulate enough money and invest it wisely so we don't need to work at all?

One of the fun parts about being a grandparent is reading bedtime stories to the little ones. It is wonderful one-on-one time, and the little guy always gets to pick the book from the stack. Darned if one of my grandkids didn't pick The Tortoise and the Hare for me to read during a recent visit. As I read him the book, I realized how much the fable applies to us. Both the Tortoise and Hare want to get to their goal, but their approaches are quite different. It looks like a lot of baby boomers who became parents later in life will have to start slowly and steadily plod along. We all know who wins the race in the end.

Some of my regular readers are already retired, and some are a few years out. The retirees look to us to help them make their money outlast their lives. One of the quickest ways to learn how is by watching our timely video event—America's Broken Promise: Strategies for a Retirement Worth Living.

Some of today's top minds discuss how to make sense of the challenges facing savers and seniors alike. They also give you actionable recommendations on how to make your retirement about thriving, and not just surviving… no matter how old you—or your kids—are.

The presentation is hosted by my colleague, David Galland of Casey Research, and features John Stossel, formerly on ABC's 20/20 and now with Fox Business Network, David Walker, former Comptroller General of the United States, Jeff White, President of American Financial Group, and me of course.

This is the one event you must see to ensure you retire on your own terms. Use this link to find out more and to sign-up.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules