Human shortcomings, ranging from fear to procrastinating, harm people’s retirement prospects. Stocks historically are the best way to build wealth over time, but investors too often find them scary.
Finally and belatedly, more Americans are coming back to stocks. They are voting with their dollars and putting money in the market via equity mutual funds. Millions of investors were scared away after the financial collapse in 2008 and the tech bubble of 2000. Market volatility has provided painful memories for many investors over the years.
The fluctuation in the emotions of investors reminds me of watching the Olympics when I was a child. The announcer said, “The thrill of victory and the agony of defeat,” as the poor skier wiped out. The market can be just as painful and just as exciting.
There are just a few realistic ways for us to have sufficient assets in retirement. At the end of day, regardless of how much you saved, you need an income that replaces the salary that you use to maintain your standard of living. That can come from inheritance, rental income, pension or your own investments.
A shocking Financial Planning Association study in 2006 found that 21% of those surveyed think winning the lottery is the most practical way to fund retirement. It is sad to think the lottery is even an option. According to New School professor Teresa Ghilarducci’s study, 75% of Americans approaching retirement have less than $30,000 saved.
You can retire when you have a source of income to provide for your needs. Retirement is a function of money far more than age. Most of us will have two sources of retirement income – and maybe three. We – at least for now – will get a mailbox check in the form of Social Security. The majority of us will need more and that will come from our personal savings, or working another job.
A potential piece of dynamite in retirement planning comes from procrastination. People tend to put off what they need to do – invest their money and get a good career. At an early age, it’s important to begin funding for your future with vehicles like Roth individual retirements accounts.
But it is just as important to be serious about your chosen career. Whether that’s starting a business or hoping to climb the corporate ladder, you need to focus on where you are headed. A solid career is key to earning the money you need to save for your life after work.
Asset appreciation is the best method of funding retirement. Your investments need time to build up, through steady additions and riding them bravely through market gyrations. Those that are successful create a plan and stick to it. Some do it with advisors and some on their own. I have witnessed success by both methods. The key is having a plan, following the plan and controlling your emotions along the journey.
Those that are successful create a plan and stick to it. Some do it with advisors and some on their own. I have witnessed success by both methods. The key is having a plan, following the plan and controlling your emotions along the journey.
Many attempted to master the stock market only to fall short. Isaac Newton, considered one of the most influential scientists of all time, lost a great deal of money investing. In the 1720s, he invested in the South Sea Company, a British enterprise chartered to trade with South America, then under Spanish rule. But Britain was at odds with Spain, and the company collapsed. “I can calculate the motions of heavenly bodies, but not the madness of people,” Newton said. If Sir Isaac failed then anyone can.
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Joseph “Big Joe” Clark, CFP, is the managing partner of the Financial Enhancement Group LLC, an SEC Registered Investment Advisory firm in Indiana. He teaches financial planning at Purdue University and is the host of Consider This with Big Joe Clark, found on WQME and iTunes. He is a Registered Principal offering Securities and Registered Investment Advisory Services through World Equity Group, Inc, member FINRA/SIPC. Big Joe can be reached at firstname.lastname@example.org, or (765) 640-1524. Follow him on Twitter at @Big Joe_Clark and on Facebook at http://www.facebook.com/FinancialEnhancementGroup.
Securities offered through and by World Equity Group Inc. Member FINRA/SIPC. Advisory services can be offered by the Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.
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