What if I told you to stop thinking about a retirement date when considering your personal financial plan? What if I told you that investing isn’t just about retiring and living happily ever after?
Here are three reasons why:
1. You’re healthy, but inflation is killing you.
Quit planning like you die at retirement.
Throw out the traditional wealth management approach where you invest in more stock funds than bond funds when you are young because stocks are more “risky,” bonds are more “safe.”
And as you get closer to retirement, you flip flop and own more bonds than stocks.
Let me call out the elephant in the room. You are still alive when you retire at 65, and you presumably still want to enjoy life. And life costs more than ever – thank you inflation. What costs $100 today will cost $103 next year, $106.09 the year after, 109.27 the year after, etc.
But you’re “safe” 10-year bond will pay you the EXACT same amount in interest every month for the next 10 years.
In other words, your income in retirement will stay flat, but your cost of living will increase by roughly 3% every year…which makes me wonder, how “safe” is running out of money because your conservative investments aren’t keeping up with the cost of living?
Wealth management is about your entire life’s mission, not your retirement date.
2. Work doesn’t look the same as it used to, so why should retirement?
Today, thanks to technology, we can work from anywhere in the world at any time.
People don’t need to drive to a factory, punch a clock, put in their time, and eventually enjoy life in retirement. To understand that concept more clearly, I recommend reading The Four Hour Workweek, by Tim Ferris.
Maybe you’ve heard it referred to as the “gig” economy, maybe you consider it a “flexible schedule,” or maybe you call it “entrepreneurship” – regardless of what you call today’s workplace, we can all agree it doesn’t look the same as it used to.
So it isn’t unrealistic to think that, because work isn’t the same as it was 30+ years ago, we can financially plan the way we did 30+ years ago.
Very few of us have a pension we can rely on. Social security, at MOST, will pay us $35k per year in retirement (as of 2019). That won’t cover life expenses.
And savings accounts don’t pay 10+% as they did in the 60’s and 70’s, so we can’t squirrel away money in a bank and depend on it the way my grandparents did.
Managing your money today looks differently than it did two or three decades ago. Back then you could have a mediocre investment strategy and lean on other avenues – social security, a pension, and a high savings rate – to make you whole in retirement.
Today, we don’t have that luxury. If your money isn’t working hard for you right now, you’re going to struggle in the future.
You can’t “save for retirement” anymore. You need to use your money as a tool to make more money today. Your savings account is a graveyard where good money goes to die.
Invest now, get it working now, and whatever retirement means to you, you’ll have enough money to pursue your passions then.
3. Your retirement isn’t about you, anyway.
Your goal of “saving money for retirement,” will be a long, slow, arduous one, if your focus is you. Not because saving money takes time but because putting money away for the “Future You” isn’t how we are wired.
Deep down inside, our “why” is never about us. It’s usually about someone else or our faith, or a combination of both. So saving for yourself doesn’t line up with your “why,” which means it doesn’t inspire you. And if it doesn’t inspire you, it will be tough to stay consistent with it.
If you take the position that building wealth is a gift, and gifts should be shared, then your wealth management strategy should be about more than just retirement. It should be about positively impacting as many people as you can in your lifetime.
I have a vision of helping clients one day with 100-year plans, helping generations long after they are gone.
Your ability to make and grow your money is a massive opportunity to leave this world better than you found it, to leave a legacy, and I know that speaks to the next generation of wealth in this country.
Head to Google and start typing in “millennials care about…” Watch how money suggestions auto-populate. Now try “generation x cares about…” not quite the same. As a guy whose content I follow, Cole Hatter, puts it, make your money matter.
Tie your wealth management goals to your why, not your retirement date, and you’ll create a proper investment discipline for a lifetime.