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From Mark Ford, founder, Palm Beach Research Group: Retirement isn’t supposed to be about money worries. Yet, if you retire with too little, that’s exactly what you’ll get.
Trying to get above-market returns is very challenging under any circumstance. But when you have to get high returns to pay the bills, it can be extremely stressful.
As I write this, millions of Americans my age are quitting their jobs and selling their businesses. They’re reading financial magazines and subscribing to newsletters. They’re hoping to find a stock-selection system that will give them the 20% and 40% returns they need.
But they will soon find out such systems don’t exist. They may have a few good years, but eventually their returns will drop to 10% or less. Or there will be another stock market crash.
At that point, things will get bad fast.
But it doesn’t have to be this way.
Consider a couple with a $300,000 retirement fund dreaming of a $100,000-per-year retirement cost of living. Assuming they had a total of $50,000 per year coming from Social Security and pension payments, they still need $60,000 per year in pre-tax passive income.
To earn $60,000 on $300,000, they’d need a return of about 20%. That is highly improbable. But if they got part-time jobs that gave them an extra $15,000 in active income ($7,500 each), they would need a return of only about 8% on their retirement account. That’s very doable.
I’m not saying you should give up on the idea of retirement. I’m saying you should think of retirement differently. It’s a wonderful time of your life when you change the ratio of work to pleasure.
Instead of spending 80% of your days working for money and 20% having fun, you spend 20% of your time working and 80% having fun.
That doesn’t seem so bad, does it?