The other night, I had the privilege of talking to a group of people at the Livonia Public Library. My topic was about how to make your money last in retirement. I thought I would share with you some of the issues that I discussed.
The first thing I highlighted was the obvious, that we are living longer than ever and our cost of living continues to rise throughout our lifetime. In the old days, you didn’t have to worry about a rising income; a fixed income was sufficient. In addition, back then 10 years was considered a long retirement. Today, people need to plan for 20 or 30 years in retirement.
In making your money last through retirement, I highlighted the importance of protecting your money and not getting scammed. Seniors are very susceptible to scams and they must recognize that. I stressed how important it is to take time with decisions, ask questions and check things out independently. It doesn’t matter if the person approaching you is a member of your church or synagogue or if you know them from a club you belong to. Never let your guard down. Remember, scams come in many different forms and some of them are run by out and out crooks who just want to steal your money, while others are more of getting you to invest in something that is inappropriate for you.
Another issue is being extremely cautious before you help others financially through gifts of loans. I recognize it is difficult to say no to children and grandchildren. However, it won’t do anyone any good if you don’t have the resources to protect yourself. As selfish as it may seem, you have to protect yourself first.
Investing your money wisely is key. The only way you’re going to have a rising income throughout your lifetime is to have a portion of your portfolio invested long term. For the great majority of people, that means investing a portion of their portfolio in the stock market. My advice for people who are nervous about the market is to learn a little bit about investing and use the services of a true professional, not a salesman. There are many places where you can go to hire professional services to help you manage your investments. The belief that when you retire you should put the majority of your investment monies in vehicles such as CDs and U.S. treasuries is about as obsolete as 8-tracks. In today’s world, CDs and U.S. treasuries are not safe investments if you want to have a rising income throughout your lifetime. Unfortunately, the rates of return on these investments don’t keep up with your increased cost of living.
The last topic, and probably the most important, is spending. It is essential in retirement that you monitor your spending to make sure that you are living within your means. One of the best ways to monitor your spending is to do a cash-flow statement at least twice a year. A cash-flow statement is nothing more than looking at what comes in and what goes out. By regularly doing a cash-flow statement, you will be able to determine if your expenses have changed, allowing you to make adjustments before a crisis develops. Unfortunately, too many people don’t monitor their spending until it is out of control, making things much more difficult to resolve.
Retirement should be a period of relaxation and spending time doing the things you love. To achieve that type of retirement, you must take care of your money. Unless you win the lottery, there really is no other choice than to be smart with your money.