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January 15, 2007
Are you unhappy with your job?
According to the Hudson Employment Index, 28% of workers in the Dallas Fort Worth area, where I live, are unhappy with their job - more than one in four. And yet, what is our antidote for insufficient retirement savings? I'll just work longer.
The Retirement Confidence Survey done by EBRI in 2006 finds 67 of workers expect to work past age 65. Really? Even though one in four hate their job now and only 27 percent of people over 65 work today? Sounds like a classic case of putting off until tomorrow what I don't want to do today - save.
A comfortable retirement, at whatever age, requires you to do only three things:
1. Plan and budget carefully so you can save for tomorrow
2. Manage your retirement funds very wisely - don't be greedy, fearful or dumb
3. Turn those funds into a source of low-risk, reliable income
If you ask some people their financial objective, they'll say growth, or income. Some will say to be able to retire at 62. Others will say to have a million dollars by age 65.
My personal financial objective, for a very long time now, has been financial freedom. I define that as having enough portfolio income to sustain my lifestyle indefinitely out into the future. I want work to be a choice, not a necessity.
I don't express that goal in terms of a number. I express it in terms of an income. If it takes $10,000 a month for me to live the way I want to, then I need an after-tax portfolio income of at least $10,000 a month. I also need that $10,000 a month to grow by at least 3% a year to keep up with inflation. Whether my portfolio is worth $500,000 or $3 million is irrelevant. It is the portfolio it can generate that I care about.
I think the entire notion of a growth investor is outdated. The primary investment goal for almost every American under the age of 65 has become income replacement, whether they think of it in those terms or now. Given the Hudson Survey, I'd say it is full income replacement as soon as possible. Failure to meet that goal is a life sentence of work.
If you go to one of these retirement calculators on the web, they will tell you how much you need in order to retire. What is the magic number? But to say I need a portfolio of $X to retire, which is our old way of thinking about income replacement, is bassackwards. I don't intend to spend my entire portfolio on the day I retire. I intend to live off of it for 30 years.
If that is true, the goal of an investor has to be to maximize income, not to maximize the portfolio value. What do you think? Agree? Disagree? Leave your thoughts and comments below.
SOURCES:
1. "National Employment Index," Hudson, Dec 2006
http://www.hudson-index.com/node.asp?SID=4394
2. "2006 Retirement Confidence Survey," Employee Research Benefits Institute, Apr 2006
http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=3630>
Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.
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Kim Snider is an author, speaker and host of Financial Success Coaching, Saturdays at noon, on KRLD Newsradio 1080, Dallas - Fort Worth. This blog is primarily devoted to empowering individual investors with information to help them be good stewards of their money. Above all, it is about achieving true financial success. Kim's book, How To Be the Family CFO: Four Simple Steps to Put Your Financial House in Order is in bookstores now. Order yours from Amazon or other fine booksellers today.
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