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How Much Is Enough?
With the recent volatility we have seen the stock market, more and more people are refocusing their attention on their investments. As they watch their accounts fluctuate, there is an increasing concern with regard to their future plans and retirement. Let's face it, with inflation and the continued increase in the cost of living, what once was enough to retire on might not be enough in the future.
One of the biggest problems people face when they plan for retirement is underestimating their financial needs. If you went grocery shopping today, and your bill came to $100, how much would your bill be 20 years from now? Well, if you assume a 4% annual rate of inflation, that same grocery bill, in 20 years, would be more than $219. Not to buy anything more, just to replace that same basket of goods.
Well, you say, 'I won't need as much money to live on when I retire.' Oh really?? I have some things for you to consider when you retire; first of all, you're going to have a lot more time on your hands. What are you going to do with it? 'Go fishing,' you say, 'start gardening more often, day trade stocks on the Internet.' Trust me those all have costs associated with them-- some more than others. What about traveling? Do you think you might want to do that? According to the American Association of Retired Persons, Americans over the age of 50 spend an annual $30 billion on vacations. Anything more lavish than going to visit your grandkids is going to be expensive. And what about those precious darlings? Comedian Bill Cosby once said when watching his once penny-pinching parents spoil their grandchildren with gifts and money, 'These are not the same people I grew up with.These are old people trying to get into heaven.' Oh yes, they too will cost you money.
So how much is enough to retire with? According to an Omnibus Survey of 1,002 adults by Wirthlin Worldwide, only 52% of the people surveyed said that $1 million was enough to retire on. 47% of the people surveyed said it wasn't enough. When asked how much is enough, 51% of the people said that $4 million or more was needed to retire. (Scratch Regis Philbin off your list of retirement solutions.)
What are you doing to try to reach your financial goals? Mutual Funds Magazine surveyed Americans and asked them some of the same questions. They asked, "What are you doing as far as investing?" 58% of the people said that they were contributing to a sponsored retirement plan, such as a 401(k) or 403(b). 43% said they were saving for retirement some other way. 14% said they were doing NO SAVING! NOTHING! ZIP! (Percentages totaled more than 100% because some people responded to more than one option.) If you think the welfare system is how you want to plan for retirement, you need more help than a full service financial professional.
When hit with the follow-up question, which investment vehicles do you currently hold? 54% said mutual funds, 48 % said individual stocks, 24% said annuities, and 21% said other, none, OR DON"T KNOW! A fundamental phrase from the New York Stock Exchange is "investigate before you invest". Your investment professional should speak in simple, plain terms. If he or she cannot explain to you what or why you are investing the way you are.don't do it! Those who invest blindly deserve whatever rate of return they get.
Continuing on, 61% of those surveyed felt that their financial lives are more complicated now than 5 years ago, with more than half saying that they spend between 3 and 15 hours a month working on their "financial life." Just think what you could do with an extra 3-15 hours a month. They felt that long-term planning for retirement or college, and investing were their "biggest financial headaches," with a combined 35% responding to those choices. So what are they doing to get any help? Well, only 31% said they use a financial advisor.
As we have said in our seminars and in this column before, invest an hour in yourself. Seek out a full service financial consultant and get help with your retirement and investment needs. Your retirement or your children's education is far too valuable to be left as a part-time, do-it-yourself project.
(Garrett A. Butenhoff is a financial consultant with J. E. Liss and
Company, Inc. in Milwaukee. The views are his, and not necessarily those of
Liss Financial Services or the Job Connection/Hiring
Network.)