Your Financial Confidence
Good Morning Relaxing Retirement Member,
For nearly three decades, I have met and worked hands-on with hundreds of individuals and couples who have accumulated a lot of money by most people’s standards.
Yet, prior to joining our Relaxing Retirement Coaching Program™, many of them lived their lives with a considerable amount of anxiety.
Our most profound discovery while studying and working intimately with so many individuals and couples over all these years is that most are simply not financially confident enough at this stage in their lives.
Unlike the tiny percentage of the population who achieve complete financial independence and live exactly the way they want in their retirement years, the overwhelming majority of Americans are living in constant fear that they are going to run out of money. And, this severely limits their lifestyle.
Unfortunately, as we just experienced in again in 2016, maintaining your financial confidence in today’s ever-changing and fast-paced world is more challenging than ever. There are obstacles confronting you at every turn.
Lack of Successful Role Models
The first, and quite possibly most challenging obstacle you face is a lack of successful role models. There are two factors which give rise to this.
First, from a historical perspective, for anyone other than the super wealthy, i.e. the Carnegies and Rockefellers of the world, the whole concept of “retirement” (or financially supporting yourself without income from work) has only been in existence for approximately 75 years in human history. Before then, “retirement” didn’t exist.
Everyone either worked until they passed away, or they lived with and were supported by their families. So, there is no long history of how to independently retire successfully.
The second factor is extremely unfortunate, but true. Even with the explosion of information, education, and technology in the area of personal finance, statistics continue to reveal that only a tiny percentage of Americans reach financial independence by age 65, while the overwhelming majority do not.
A September 2014 study by the Center for Retirement Research at Boston College revealed that the total combined balances in IRAs and 401(k)s for households approaching retirement was only $111,000. Only about half of households had any IRA/401(k) balances, and the rest have no source of retirement income other than social security.
Given these two factors, it is statistically unlikely that many of your daily conversations and interactions are with those who have developed the mindset and financial habits necessary to achieve financial independence.
On the contrary, the majority of voices you routinely hear are of those who have little or no financial confidence.
Financial Media and The Crisis du Jour
The second obstacle you face is the financial media because their goals are in direct conflict with your financial confidence. In order to increase viewership so they can sell more expensive advertising space in their magazines, newspapers, radio programs, television shows, and websites, financial journalists have become more and more clever at writing “crisis du jour” headlines to generate as much confusion and unrest as they can muster so you will continuously “tune in.”
Next to a New England winter blizzard, the O.J. Simpson slow speed Bronco chase, or a real national catastrophe like the events of 9/11, the greatest tool ever invented to assist the mainstream press with capturing your attention is the daily volatility of stock market prices.
It’s a great tool for them to sound unnecessary, but extremely effective alarm bells, capture your attention, and strip away your confidence.
As you just experienced in droves over the last year right into the Fall election season, in order to create a demand for their existence, and capture your vote, politicians at all levels, and of every stripe, often perpetuate the well-received storyline that the world is unfair, and that markets are fragile and completely out of control.
They are very effective at facilitating envy toward productive and financially disciplined individuals (like our Relaxing Retirement members), somehow suggesting that you have had an unfair advantage. This, of course, does nothing but undercut the pride and confidence you deserve and have earned the right to enjoy.
Complexity and Lack of Pensions
Finally, a huge obstacle you face is the fact that everything is so much more complicated today when you reach The Employment Dependency Threshold™ (the point in your life when you are evaluating the move over to Phase II of your financial life where you are no longer dependent on the income from work to support your lifestyle).
40 years ago, many American worked for one company their entire career, and then retired with a guaranteed fixed monthly pension and social security that covered their spending needs. There weren’t many decisions to make, and consequently, not many mistakes to avoid.
Today, aside from social security, your income in retirement has to be generated from what you have accumulated in your Retirement Bucket™. Because of this, you now have the daunting task of calculating and strategizing:
- Do we have enough? (since there is no guaranteed monthly pension covering all of your expenses), and
- How do we make it happen? How do we position everything to produce the lifestyle sustaining income stream we need without running out of money during our lifetime?
Developing and Maintaining Your Financial Confidence
Overcoming all of these obstacles and maintaining your financial confidence over the course of your lifetime requires a system and a structure, and that is what The Relaxing Retirement Coaching Program™ was created to provide.
As we begin the New Year together, I believe it’s critically important for you to review and implement the fundamentals and principles of what a Relaxing Retirement entails.
That begins by taking a giant step back and accurately assessing what the fundamental challenges are that you’re dealing with.
The focus of many of the individuals who I meet with for the first time is often in many different directions.
My recommendation is always to have them clearly identify the lifestyle they want, and then the challenges and obstacles they face in getting there.
Let me give you a very simple, but critically important, example:
“Although I haven’t decided if I want to stop working or not, I don’t want to depend on the income from work anymore, so I need to generate income some other way.”
“My lifestyle costs a lot more than my pension and social security incomes bring in. (i.e. I need $135,000 per year to live after paying income taxes, and my pension and social security only bring in $50,000)”
“I need to generate cash flow from my Retirement Bucket™ to support my lifestyle.”
“I don’t have enough money saved to let it all sit in CDs at the bank and earn only 1 to 2% interest.”
“I need to earn better investment returns to keep pace with inflation so I don’t run out of money.”
“In order to achieve the better investment returns I need, I have to position my Retirement Bucket™ where it has an opportunity to earn better returns.”
“Positioning my retirement savings where it has an opportunity to earn better returns subjects me to greater amounts of investment volatility.”
“If my Retirement Bucket™ runs out too soon, I have to either make cutbacks in my lifestyle, or I have to go back to work!”
This may all seem obvious, but most people who I meet with for the first time have no idea why they’re even investing in the first place, nor why they’re allocated the way they are.
In most cases, the reason they’re allocated the way they are is because Fund X seemed like a good fund, or recently performed well!
This is extremely dangerous in its simplicity!
If you don’t begin 2017 by first identifying all the potential challenges in your way to enjoying a Relaxing Retirement, you risk joining the overwhelming majority of Americans who wander and focus on things that are potentially important, but completely out of context and inappropriate for their unique situation and circumstances.
Committed to Your Relaxing Retirement,
The Retirement Coach
P.S.: WHO do you know who could benefit from receiving my Retirement Coach “Strategy of the Week”? Please simply provide their name and email address to us at info@TheRetirementCoach.com. Or they can subscribe at www.TheRetirementCoach.com.
I appreciate the trust you place in me. Thank you! (The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advice on tax matters specific to your situation.)