This is going to be an ugly “take your medicine” investment tip. Recently in the Wall Street Journal, there was an article titled “Boomers Struggle With Rising Debt, Dwindling Savings”. And frankly I’m seeing it all too much. People get to retirement and they feel like they worked their whole life, and now deserve to travel, buy a new car, do the kitchen remodel. And if they can afford it, great. But I am seeing situations where retirees are burning their savings at rates of 10% to 20% a year. That clearly is not sustainable. 4% to 5% is recognized as pretty much the sustainable rate for taking money out of retirement accounts. Beyond that, and you’re cruising for a bruising.
Now comes the ugly part. After we’ve burned through all our savings at 75, what does life look like? We’ll be living in a retirement home that will accept our social security check as payment in full. For that, we get a shared room, three very basic meals a day, and about $50 a month in spending money. Nothing else. And that can go on for years and years, as we have a good chance to make it to 90 or more.
So here is my advice. We need to make the changes ourselves, before our financial situation forces us into that little shared room. Yeah it’s no fun saying goodbye to that cruise that we’ve always dreamed about. But it’s a much better thing to make those decisions for ourselves, then to have it forced on us because all the money is just gone.
Ok, enough of the downer message. We now return you to our regularly scheduled investment tips, already in progress.