Want to help me write a book? Read on to find out how.
If eating healthy is important to you, you've probably heard of Michael Pollan. He has written several best-selling books on food and nutrition. I just finished reading his short, but interesting book “Food Rules: An Eater's Manual.” In it, he argues that eating has gotten overly complicated. Basically, there are too many diet books, food pyramids, health claims, so-called experts and weird ingredients that you can't pronounce.
He attempts to cut through the clutter and lay out some simple rules (some of which were submitted by readers or date to advice that grandma gave) that are easy to understand and follow for the majority of people.
As I read the book, I couldn't help but see parallels with the financial planning industry. It too has gotten extremely complex with endless products, research, regulation, advice, articles, experts, contradictory claims, credentials, DIY options and fee structures. All of that exists to help people prepare, and yet 57 percent of the population reports having less than $25,000 saved for retirement.
Obviously, the complexity does not seem to be helping. We need a Vince Lombardi “This is a football”-type moment to get us back to the basics.
So today, I'm inviting all of you to offer up your best retirement planning advice. Maybe it is something that your parents or grandparents taught you. Maybe it's something that has worked particularly well in your situation. Maybe it's something that you learned the hard way and you want to help others avoid the same mistake. Whatever it is, either email it to me at firstname.lastname@example.org or leave it in the comment section of this article.
Once I have enough entries, I'll compile them, choose the most helpful, combine duplicates, edit them for clarity and then lay them out into an ebook that I'll make available for free in a future article. I'll also choose some to highlight in a future column. If you'd like your idea attributed, be sure to include your name with your comment. I'll write a few random rules to get us started and then each of you can take it from there.
>> Start saving early. Those extra years can make a huge difference due to compounding. Imagine that your investments average about 7 percent per year, which means they double every 10 years or so. That's not very interesting at the front end of your career when $1 goes to $2, but very interesting toward the end of your career when that additional double takes your nest egg from $250,000 to $500,000 or from $500,000 to $1 million. Start early.
>> Make your saving automatic. Saving is like going to the gym or eating your vegetables. You know you should do it, but it takes discipline. Make it easy on yourself by having money automatically deducted from your checking account or paycheck each month. Then try to increase the amount deducted each year.
>> Beware of fees. A good adviser or mutual fund can add value, but pay close attention to the fees you are paying. It's not just the fees, but the compound interest those fees would have earned had they stayed in your account. Be conscious of fees and make sure that the people you pay are adding value.
>> Retire based on your bank account, not your birthday. Recent research by Aon Hewitt shows that a person will need Social Security plus savings worth about 11 times their annual income in order to replace 85 percent of their pre-retirement income (enough for many people to maintain their pre-retirement standard of living). Don't retire based on your age. Retire when you have the money you need to fund the retirement you want.
>> Retire to something, not from something. If all you do is subtract things — work, obligations, commitments — you simply create a void in your life. That void can open you to self-doubt, regret, lack of purpose and boredom if you don't fill it with something else. Don't just retire to escape your job. Use your new time wisely. Know what you really want out of life and then take those plans very seriously.
>> Curate your retirement. One of the most important jobs at any museum is the chief curator. He or she uses a discerning eye and a deep understanding of the museum's mission to select works that are appropriate for the collection. In a similar way, you are the chief curator of your life. Your retirement will largely be defined by what you let in and what you keep out. Choose everything — friends, hobbies, work, philanthropy, travel, education, etc. — with a discerning eye. Show me someone with a remarkable retirement and I'll show you someone who is a tough curator.
>> Focus on experiences instead of stuff. Given the choice between “more stuff” and “more experiences,” choose the latter. A life spent in dogged pursuit of rich experiences will usually have a much better payoff than one seeking the latest gadget or gizmo.
I'll write some additional rules for the final version, but for now I'll leave it at that so that there are plenty of topics for the rest of you. Feel free to add to one of the topics or categories above or you can start a new one. My only request is that you keep it simple and try to focus on rules that will work for the vast majority of people.
Joe Hearn is an Omaha financial planner. He can be reached at 402-331-8600 or by email at email@example.com.