Preparing for Retirement at Middle Age–Avoid Common Mistakes So You Can Sleep at Night!

Like it or not, your joy and contentment in life’s second half will depend in large measure upon the state of your finances. A firm prerequisite for stress-free living in your fifties, sixties and beyond will be the ability to retire happy and carefree at the precise moment in life when you are ready emotionally to move on. Some of us may choose to pursue a career well into our seventies because we love what we do and work adds balance to our lives. This is great!

Unfortunately, others may be forced to work full or part-time, perhaps in an unfulfilling job(night watchman, toll collector, Walmart greeter or McDonald’s burger-flipper) solely because of inadequate finances. Instead of joyful retirement living–travel, relaxation, grand kids, giving back to the community–they must continue in the workday grind simply to survive–a truly mournful situation!  

Recent calculations from the Employee Benefits Research Institute (cited in the September 5, 2012 Wall Street Journal) reveal that 44% of men and women born between 1948 and 1978 (Baby Boomers and the leading edge of Generation X) won’t have income adequate to retire. Worse yet, this study assumes interest rates rise to normal historical levels in 2014, an unlikely prospect. Are you among the 44%?

To sleep soundly through the night and to awaken each morning refreshed, energized and looking forward to a bright new day, you and I need a life in financial balance, both now and in the future. Cash inflows must meet or exceed cash outflows. Whatever your age, I trust you have in place solid plans for your future and have begun to set aside funds and to invest for retirement. If not, there is no time like the present to get started!

Planning ahead for retirement is a sound strategy in anyone’s book, but in today’s economy building a healthy retirement portfolio is far from easy. What’s a safe and worthwhile investment today? Potential drawbacks exist for just about every option:

  • Unless the President and Congress act before the end of 2012, taxes will rise and govenment expenditures will fall parcipitously, the “fiscal cliff” many economists project will throw America back into deep recession. Tax-free municipals look good, but which ones are safe from default?
  • CD’s, money markets, bank savings accounts, short-term US Treasuries and investment-grade foreign notes pay close to zero interest. They offer neither the compounding required to grow your portfolio nor the income needed to fund future retirement expenses.
  • Investment-grade corporate bonds and longer-term US notes offer historically low rates accompanied by significant risk of loss of principal when inflation and future interest rates rise, as they surely will.
  • Long-term trending of the US stock market indicates we are in the midst of a secular bear market so near-term and intermediate-term growth prospects are neutral at best. Despite recent stock gains, risks today appear to outweigh opportunities.
  • Gold, silver and other precious metals can serve as an inflation hedge but they produce no income and pay no interest or dividends. You make money only if someone is willing to pay you more than the (perhaps) inflated price you paid to buy in. Funding for retirement expenses comes only from selling the asset. In the near-term who knows where gold and silver prices are headed?
  • Commodity futures and real estate investments can be highly speculative. Commodity  futures are subject to frequent, often violent price swings. As demonstrated in recent years, real estate prices can go down as well as up, making real estate extremely illiquid during deep recessions. REIT’s can be a good inflation hedge, but you must be certain to focus on commercial properties with stable, high-end quality tenants. 

Scarcity of investment options is not your only challenge:  our country faces potential inflation like never seen before! With current US debt outstanding of $16 tillion and growing by $1 trillion+ each year, at some point lenders will demand their money back and refuse to lend us any more. When this happens, will the US  default, the dollar crash, our economy tumble and inflation roar like never before? If not funded soon, Social Security and Medicare surely can’t continue in their present form for much longer. How can you and I protect ourselves from foolish politicians in both parties who continue to spend $1.40 for every $1.00 in tax revenue taken in?

Inflation can be the silent thief of your prosperous, carefree retirement. Given our recent average of 3.2% annual inflation, your portfolio must return 3.2% each year simply to stay even. Lord help us should we return to the 18% annual inflation of 1979 or even worse! The greatest danger is to the latter years of your retirement. If you remain in good health and good spirits, thirty or more years of quality retirement living is not out of the question but you don’t want to run out of money before you run out of time!

At Middle Age Renewal Training, we are renewal coaches not financial advisors, so I won’t suggest where you should invest your retirement nest egg. I can offer some practical suggestions:

  • Whatever your present age, it’s never too late to develop and jump-start your personal “strategic retirement plan.”  It’s simply crazy not to plan out your future and to begin accumulating assests now. Either invest for your future now or plan on getting up and going to work every morning when you’re eighty eking out a threadbare living at whatever work you can find.
  • Visualize and pray for good health, a sound mind and a joyful lifestyle for years to come but prepare for contigencies just in case. Like it or not, many of us will spend our final years in a nursing home. Have you examined long-term care insurance options?
  • Establish retirement goals in the same manner you have set targets for your career. It doesn’t make much sense to scope out retirement finances without first visualizing how you and your spouse plan to live out your golden years. Do you intend to travel around the world? If so, how will you pay for it? Rember, you and you alone are CEO of your retirement and you will need a “strategic plan!”
  • Make reasonable sacrifices now so that you can experience joy and contentment in retirement. Won’t your present car survive another year? Do you have to eat out 3-4 times a week? Pay yourself first. How much can you put aside each week to build your retirement portfolio while still enjoying your life today? 
  • Don’t place all your eggs in one basket. Diversify your investments among different asset classes, instead of simply holding a broad variety of individual stocks, equity mutual funds or stock-invested variable annuities.
  • Understand and master the concept of buckets of money. Plan out anticipated retirement expenses year-by-year. Funds needed in your first five years should be invested differently from funds you will not need for ten to fifteen years.
  • If you presently have or plan to invest in conventional IRA’s or 401(k)’s, by law you must begin taking distribution at age 70 1/2. Factor in required IRA distributions when estimating future cash flows.
  • Routinely stay in touch with how your portfolio is doing. Take corrective action as needed; periodically rebalance your portfolio based upon market trends and changing retirement objectives.

I know from personal experience, planning for retirement is not a fun activity, especially with the sour economic and political threats looming on the horizon. It becomes less of a burden when accomplished as part of comprehensive, positive, long-term life plan. I suggest you don’t plan retirement finances alone. Even the most accomplished athletes–and certainly all novices–benefit from sound coaching and so will you. If you don’t already have one, contact a qualified, trusted financial advisor. It will be up to you whether to turn the entire investment process over to him or her or whether to build the portfolio yourself, with his or her advice. Any qualified financial advisor can recommend a quality attorney and/or CPA when needed.

Would you like additional advice on investing for retirement? Tune into the September 17, 2012 weekly podcast of my Internet radio show, “Middle Age Can Be Your Best Age” on My guest is Nathan Reeder, Owner/Principal Advisor of Midwest Retirement Services. What we have to say may shake you up but hopefully will inspire you to take positive action now.


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