Paul Ferraresi

Many Americans remind me of the great statue of 3 monkeys; you remember; see no evil, speak no evil and hear no evil when it comes to retirement planning. The “younger generation”, i.e., the “baby boomers” continue to live it up today with no concern for tomorrow. The sad fact is that in the 1950’s people worked 40 years, saved and lived 10 years in retirement. Today most people, statistics show, will live about 40 years in retirement. So, we work about 40 years to save enough money to live off our wealth for 40 years. Using a “0”% rate of return that means, in theory, one should save 100% of each years salary to fund each year of retirement…whew! That plan is not practical, attainable or realistic. Next, add in the poor financial position of Social Security and Medicare. What does that mean to you? Get on your horse and start making a plan for your “40 years of retirement.” Do not count on anyone but yourself. Did you know if you “saved” just $1 a day, from age 25 to 65(40 years), and got the average stock market return, you would have $370,000. In retirement, that bucket of money at a 5% government bond rate would produce $18,000 per year in income. That is about what Social Security is paying people now. (Keep in mind I have not accounted for inflation over the 40 years, but it is better than what most people are dong now). Look at the outcome of this $1/day plan:

• I have not made you change your lifestyle
• You can find $1 a day out of the change from purchases each day
• You will have a sense of pride in building your own plan
• You will NOT be dependent on anyone for part of your retirement
• You will have accumulated over 1/3 of a million dollars

Imagine if you “gave up” (ooh a bad word in America; Paul, you mean I have to sacrifice??-NO NOT ME! ) one cup of Starbucks coffee a day and saved it? Using $3 per day, for 40 years, at the markets average rate of return, would grow to $1.1 million. Gee at a 5% government bond rate that would generate $55,000 per year in retirement income. Is it worth it? You bet it is! (now do not assume if you have only 20 years until retirement that you double the numbers. No, it is an exponential function.) Get a professional advisor to help you find the right number.

Remember, anyone can save $1 a day.

End of Planning Your Retirement (Part 1 of 3)