The old saying 'money can't buy happiness' is not necessarily true. My contention is that money can absolutely contribute to a higher quality of life, which in turn can contribute to a higher level of happiness. And at no time in our lives is this more important than retirement, because it's unlikely most of us will be able to increase our income by going back to work in our 70's or 80's.
Whether you're approaching retirement, or have been retired for many years, income is crucial to your financial security, and even to your very health. Many studies have shown insufficient income during our working years, but particularly during retirement, can cause worry and insecurity in our day to day living, which can lead to ill health over time.
I hope the following will give you some ideas about how you can increase your retirement income, enhance your quality of life, and contribute to your happiness now, and in the future. So without further ado, here they are.
Just diversify across asset classes and you'll be protected from all potential harm. Or so the story goes from Wall Street, and the many Wall Street minions across the brokerage world.
Just buy a smattering of stocks and/or mutual funds, hold for the long term, and all will be right with the world, and your financial security.
Everywhere I turn it seems the same old story continues. Diversification, Buy and Hold, Modern Portfolio Theory, the beat goes on and on.
I recently returned from a business meeting in the heartland, Topeka Kansas. I went there expecting the usual, some creative financial planning and investment ideas, as well as the current thinking of people in the business of giving investment advice.
Was I ever wrong! I came away with a totally different perspective of how to provide the service I do, and a deeper understanding of what is truly important about what I do, what we all do, every day. You know the great philosophical question of the ages. The one that asks, "why am I here?" Or, put another way, "what is the meaning of life?"
Are we destined to go down that same road, the road traveled by Japan over the last 20 years. As you probably know the Japanese stock and real estate bubbles preceded ours by a few years, and they've been mired in a no growth/slow growth economy ever since.
Could it happen here? Is it already happening? Certainly questions no one can answer with certainty. The real question is are we ready for such a scenario? What steps can we take to handle and even prosper from such an outcome?
Be on guard, for the annuity salesman cometh, and he/she is poised to take advantage of you, your lack of knowledge, and yes, even your fears.
This breed of salesperson is most often seen at luncheon and dinner seminars, which are marketed heavily to retirees, for retirees have the money. As the infamous bank robber Willie Sutton, when caught robbing banks for the umpteenth time, was asked why he continued to ply his trade, Willie purportedly replied, "...because that's where the money is."
If you ask people who the most successful investors are, you'll probably get responses like Warren Buffett of Berkshire Hathaway, John Neff, formerly of Vanguard's Windsor Fund, or George Soros, the famous hedge fund manager.
However, some of the most successful investors from a risk/reward perspective are the large university endowment funds. This group includes universities with endowments larger than $1 Billion such as Yale, Harvard and Vanderbilt.
Source: 2007 NACUBO Endowment Study
People often ask me what I do and of course I explain. Another question, though rarely asked, is why I do what I do?
The answer to that question was driven home recently by a call I received from an elderly retiree. Her husband had died some years earlier, so in many ways she was on her own. Her knowledge of financial matters was limited and she had no relationships with anyone who could provide professional guidance. No one to turn to for answers to the many questions she had, or the many questions she did not know to ask.
1) Underestimating the effects of inflation: If you retire on $4,000 month today, in 15 years @ 3% inflation you will need $6,232 month just to stay even with the cost of living. Moral: Don not invest solely in fixed interest investments; build part of your portfolio with inflation hedges, i.e. mutual funds, exchange traded funds, real estate etc.
2) Not properly allocating your investments: Putting all your assets in fixed interest accounts runs the risk of falling behind the cost of living. (See above) Conversely, all your assets in inflation hedges puts your assets at risk of principal loss, at the time of your life you can least afford it. The Watchword here is Balance!
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