Experts like Fidelity Investments recommend you save at least 10 times your salary by your 67th birthday if you want to have a comfortable retirement. Supplemented with Social Security, this may be enough to cover your expenses through an average life expectancy.
Those numbers account for increasing income and compound interest as you age. An on-time retirement savings looks like this:
1x your salary saved by age 30
3x your salary saved by age 40
6x your salary saved by age 60
10x your salary saved by age 67
If you’re on track, fantastic. If you’re late, you have some catching up to do. If you haven’t set up a personal budget, make that the first thing you do. Once that’s in order, you’ll be able to implement the strategies below to get ready for your golden years…
There’s one big problem with the Report, which reveals that the net worth of U.S.families has been reduced to a level not seen since 1992 – it’s one of the biggest lies ever perpetrated on the American public!
Here’s why: You can’t eat a number on paper!
Those statistics about how much Americans’ wealth had ballooned prior to the financial crash were pure fiction. Unless and until you sell your assets and (hopefully) lock in your gains, you have nothing more than a bunch of eye-popping numbers on paper that have lured most Americans into believing they have real wealth and financial security, when they do not.
You can win one of six valuable prizes by participating in our “Test Your Money and Investing IQ” blog contest – just enter your answer in the comments box below by midnight Monday, November 14.
At a dinner party recently, I sat next to a retired business owner and we got into a conversation about money and finances.
In response to one of his questions, I mentioned an important principle of finance, at which point he turned to me and said, “I’m a CPA and an MBA and I’ve never heard of that!”
Actually, it’s fairly common that I meet highly educated people who are unaware of some of the really critical basics of how money and finances work.
Funny thing is that I think many of our subscribers know these principles, even if they don’t have alphabet soup after their names.
Applying a little logic and common sense (which is admittedly in short supply in our society today) is usually all that’s needed.
And to prove my point, I’m holding a contest to see how many of our subscribers can answer the questions below correctly.
If you answer even one of these questions correctly and/or insightfully, you can win a prize.
I know that people deepen their understanding more when they participate and articulate their thoughts, so I decided to “ethically bribe” you to take a shot at it by holding a contest.
Here’s all you have to do to enter the contest…
Just type in your answer to any one or more of the five questions below, no later than Monday, November 14, at midnight. If you want, you can comment on someone else’s answer to qualify to win.
After the contest ends, our team will pick the best entry (best because it’s correct, insightful, entertaining or a combination of those). That person will win a $100 Amazon Gift Certificate. And two runners-up will be chosen to receive their choice of a $25 Dining Gift Certificate, or a personally autographed copy of my best-selling book.
Three more winners will be chosen at random – all entries containing at least one correct answer will be entered into a random drawing for another $100 Amazon Gift Certificate and two prizes of your choice of a $25 Dining Gift Certificate or autographed book. (Sorry – U.S. residents only.)
Although there are five questions, you don’t have to answer all of them to qualify.
So test your money IQ now by answering as many of these five questions as you want:
If you finance a $30,000 car through a finance company, your actual cost for the car is the money you spend on it, plus the interest you pay, less the value of your trade-in at the end of your loan repayment period.
Question: If you pay cash for a car, what’s your actual cost for the car?
If you have a $20 stock and it goes up by 40%, how much money did you make on that stock? (Hint: This is about a key financial principle, not a math question.)
According to Morningstar, Inc., the top-performing mutual fund for the last decade (ending December 31, 2009) enjoyed an 18% annual return.
However, the typical investor in that fund wasn’t so fortunate.
Question: What was the annual return of the typical investor in that top-performing fund? And why was their return so different from the return reported by the fund?
Here are short summaries of three of the most interesting and thought-provoking items that have crossed my desk this week. Enjoy… and tell us what you think!
Would you be prepared if you suffered a 30% pay cut?
A shocking new report reveals that the average person’s pay levels off when they’re in their 40’s. After that, about all you’ll be likely to count on will be cost-of-living adjustments to keep pace with inflation.
That will come as a real surprise to many people who assume their pay will continue to rise as they get older.
And if you lose your job while in your 50’s, you’re likely to remain jobless longer than when you were younger, according to the report.
Read this sobering and well documented article from the Wall Street Journal.1
What’s your best self-defense? When planning for retirement, assume the only salary increases you’ll get will be cost-of-living adjustments. And identify a worse-case scenario – such as a 20% pay cut during your final ten years in the workforce – and try living on that income and putting the rest into savings.
Ignore All The Financial Experts Who Advise You to Scale Back Your Expectations and Lifestyle
The chorus of gloomy financial experts is singing a ballad of restraint. They warn that we all must adjust ourselves to a “new normal,” in which we lower our expectations and scale back our lifestyles.
The supposed villains are many and include: persistent high unemployment; the devastated real estate market; rising energy and food prices; record budget deficits; the possibility of a double-dip recession; international turmoil; and, well… you name it.
You have no choice, caution the pessimistic gurus, but to swallow:
Earning less on your investments and savings for the foreseeable future
Downgrading your current lifestyle to make up for the loss of investment returns
Having less income at your disposal due to rising prices and the threat of inflation
Getting socked with higher tax rates as the U.S. Government struggles to close its budget gap, and cash-strapped states and cities do likewise
Pushing your retirement out – perhaps indefinitely
Living on less if you do eventually get to retire (that is not only less than you live on now – which these downbeat financial representatives have always claimed is a retirement must – but less even than “the less” they were already advising you get by on just a few years ago)
Sticking with the financial counselors who have been at your side all along because they remain your best source for guiding your future financial planning
To all of these bitter pills, we can only respond… B.S.
A couple months ago, I interviewed Dan Proskauer. Dan lives below his means and has significant savings discipline. But after decades of saving and investing and “doing all the right things” we’ve been taught to do, he realized he had nothing to show for it.
Dan is a vice president of technology engineering, very analytical, and he has spent hundreds of hours investigating .
His conclusion? “The more I look into Bank On Yourself, the better it looks,” says Dan. And he has implemented it for his family in a big way.
Dan shared the findings and conclusions of his research in a fast-paced interview. I encourage you to check it out now, if you haven’t already done so.
But what if you’re in debt?
Dan told me he was talking to a friend who was complaining that he and his wife were always in debt and confessed, “There are things we want to do – we don’t want to deprive ourselves of life. We can’t really afford them, but we do them anyway.”
Maybe you can relate to Dan’s friend’s situation. It’s a seemingly endless cycle of living beyond your means, using high-cost borrowing, which means you have interest to pay – leaving that much less for everything else.
Perhaps surprisingly, it has little to do with how much you make – people of all income levels suffer from this. After all, as the late British economist, C. Northcote Parkinson noted…
Expenses rise to equal income”
It’s part of “Parkinson’s Law.” He also said that, “a luxury, once enjoyed, becomes a necessity.” I can definitely relate to that, can’t you?
When Dan described to his friend how Bank On Yourself could be used to become his own source of financing and help free him from the endless cycle of debt, his friend’s first reaction was, “Yeah, it sounds great, but we could never do it – we have to get ourselves out of debt first.”
But as Dan explained more about it, his friend realized he didn’t have to wait. He could start now and reduce or eliminate debt while at the same time increasing savings. He realized Bank On Yourself could help his family “move to the right side of the line.”
What side of the “line” are you on now?
If you’re on the “wrong” side of the line, you know it. You’ve probably tried to get to the other side of the line, but it’s not an easy journey to make.
The good news is that if you’re truly fed up with your situation and ready to make a change, Bank On Yourself can help you get there. My New York Times best-selling book, is filled with stories of folks of all ages and incomes who have done just that.
One woman who shared her story in the book is Rose Hillbrand (Chapter 8). Rose knew the feeling of hopelessness that came with the crushing debt she had incurred. The video below updates her inspiring story of how Bank On Yourself helped her move to the other side of the line. It was filmed when I was in Ohio speaking to a standing-room-only crowd of over 250 people…
And, if you’d like to get a no-obligation Analysis and a referral to a knowledgeable Bank On Yourself Professional like the one Rose got referred to, who can show you how much your financial picture could improve if you added Bank On Yourself to your financial plan, simply request a free Analysis here.
Better than debt free?
Most financial experts say that the way to avoid getting into debt is to save up and pay cash for things.
They are wrong! There is actually a better way to purchase things. I call it the “better than debt-free” method, and it actually beats paying cash.
How is that possible?!? The conventional wisdom says that paying cash for things is the answer. But this ignores an important, but little-known principle of finance…
What do I mean by that? Let’s say you’ve decided you’re going to beat the financing and leasing rackets by paying cash for major purchases. So you start putting money aside into a savings or money market account. When you hit your savings target, you pull your money out to pay cash for that item.
Now how much interest are you earning on that money?
You’re earning ZERO interest, of course. Which is why financing, leasing and paying cash are all losing scenarios.
Fact: You’re either going to pay interest to others to finance things, or you’re going to lose the interest or investment income you could have earned, had you kept your money invested instead.
When you Bank On Yourself, you do pay interest on your policy loans. But the interest you pay ends up in your policy, as I explain in detail on pages 100-102 of my book.
But far more important, as Dan Proskauer puts it…
The Bank On Yourself method offers something you truly deserve, but may not have – financial security and peace of mind. With Bank On Yourself, you can sleep well knowing your savings can only grow, never shrink. With Bank On Yourself, you know, rather than hope.”
Bonus: Some companies have a feature that allows you to continue to earn the exact same interest and dividends – even on the money you’ve borrowed!
However, only a handful of companies offer a dividend-paying whole life policy that meets all the requirements to maximize the power of this concept AND pay you the same interest and dividends, regardless of whether you’ve borrowed from your policy .
And if your policy isn’t structured properly, your cash value won’t grow nearly as fast, you could lose the tax advantages, or both.
So, whether you’re on the side of the line that Dan Proskauer is on, and you want to strengthen your financial position and have predictability and peace of mind… or you want to be on that side of the line, chances are excellent that Bank On Yourself can help!