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Road to Retirement; To Work On The Golf Course or Be on the Golf Course.

Recently, Jill and I took our three girls to a water park out in Western Massachusetts. The anticipation was killing them. All we kept hearing was, “Are we there yet?” Doesn’t it always seem kids focus more on the destination and miss the journey. I started thinking, I am 45, and it seems like just yesterday I was graduating from Massachusetts Maritime Academy. A blink of my eyes, 24 years has passed.
 
I find that many folks preparing for retirement feel like my kids and ask, “Are we there yet?” I guess no matter how old we are, inherently we focus on the destination and miss the journey. Unfortunately, for many future retirees, they feel like Wiley the coyote chasing the Road Runner, they keep running but never get close enough to actually capture it.
 
A study performed last year by the Center for Retirement Research at Boston College brings both good news and bad news for all of you Wiley Coyotes. Good news is you don’t have to work forever; bad news is age 70 is the new 65. 70 is now the new age when most Americans will be prepared to retire.
 
You do not have to be a financial advisor to realize that the longer you work, the more financially fit you will find yourself in retirement. While the study shows that 85% of Americans will be financially sound by the age of 70, it further breaks out Americans into numerous groups based on age and when they will be ready to retire. The study says that 23% of us will be ready to retire between the ages of 66 to 68, 17% will be ready by age 69-71, and 9% will remain working until at least 72.
 
While many independent advisors are now using age 70 for their clients, if you have your mind set on retiring before 70, then we need to focus on the journey. The study says that about half of Americans will be fiscally fit to enter Retirement By Age 65 (RBA 65). If you want to be a part of the RBA 65 group, there are a few techniques you may want to implement on your journey.
 
Up Your Savings – It is the little things in life that make the big differences. If you are currently saving 10% of your income, try 13%. For someone earning 75K/year that is just an additional $2,250/year, or $43/week. For a 40 year old with 25 years to go with a return of 8%, you could add $175K to your retirement.
 
Decrease Your Expenses – The study’s findings are based on maintaining your current lifestyle. A good way to get included into the RBA 65 Club is to reduce expenditures. Don’t eat out as much, move to a smaller house, buy use cars instead of new. Most retirees find that with increased time on their hands, they find more activities, such as more golf, increasing overall expenditures. By reducing expenses you increase your odds of joining the RBA 65 Club.
 
Portfolio Management – Be sensitive to changing markets. Recently the Dow has been at an all time high. Since 1900, the US has had about 22 recessions, about one every 5-6 years*. We all remember the last Great Recession in 2008. What is your portfolio and market risk? What happened to your investments in the last recession? How did you feel during that part of your journey? If you are nearing retirement or even in retirement, the fastest way not to retire or come out of retirement is to lose principal.
 
Part Time Work – Recently, I had a new client who did not know what to do with himself in his transition from full time employment to total retirement. I advised him to work half time for a year and then see about full retirement. Many retirees experience a shock going from working full time for 40 years to nothing at all. Try part time work, it can be good both financially, socially, and may even help to keep a healthy marriage.
 
We are in changing economic times for both retirees and pre-retirees. Change creates opportunity, only if you are prepared to accept the change. Americans are living longer than ever and experiencing much healthier adult lives. Yes, we need to focus on the destination. However, we must enjoy the journey. The easiest way to enjoy your journey is to have a plan, and to plan you must take action. Remember, there is light at the end of your tunnel. Small changes can create massive results. Implementing some or all of these techniques will give you confidence to enjoy the ride so eventually when you ask yourself, “Are we there yet?” sooner rather than later you will say, “Yes!”.
 
* http://www.boston.com/business/globe/globe100/globe_100_2008/recessionspast/