CHAPTER 1
Why You Should be Concerned
The stark fact is that one of the following statements is probably true of your retirement plan today:
• It does not exist at all.
• It does exist but only in your head as thoughts and good intentions.
• It exists and is partly in place, but at this pace, it will not produce enough in time.
• It exists, but you fear new global economic turndowns or unforeseen expenses cropping up.
Statistics that will scare you
'The risk that retirees will outlive their assets is a growing challenge,' says the US Government's Accountability Office. Increased life expectancies and healthcare costs, coupled with declines in financial markets and home values over the last few years, have intensified workers' concerns about how to manage their savings in retirement. And what are some of the US Government's suggestions?
• Delay taking your Social Security (to seventy years old).
• Buy an annuity to supplement your monthly income.
After pouring that bucket of cold water over your head, the US Social Security's Trustees said in May 2011 that it would not be able to pay recipients in full beginning 2036 anyway. What a bombshell. In other words, as highlighted in The Economist,
'The pension hole just keeps getting bigger. Assets owned by pension schemes have generally been falling in price while their liabilities have been rising relentlessly. The numbers boggle the mind.'
Assets falling; liabilities rising relentlessly—that's not what we want to hear, is it? Especially when we see population demographic trends like the percentage of Americans in retirement age increasing from 11% in 1990 to 20% by 2020, from roughly 30 million to 55 million , or the number of Western Europeans over age 65 doubling in the same period. And it's not just the 'Old World' that is ageing rapidly. Consider the statistics of ageing in China: the number of retirees is set to double between 2005 and 2015, to 200 million people. Because the economy of China has been established using cheap labour from the countryside, how will the economy function when by 2050 the number of retirees has risen to 430 million people? And with the one-child policy in place for so many years, a married couple faces the prospect of caring for four ageing parents between them, instead of sharing the burden with siblings as in so many other countries.
Consider this next nugget regarding retiring Americans: 'Financial advisors estimate that the percentage of Americans who can actually save enough money to afford a reasonable lifestyle for twenty-five years without working is about 3%.' That's 3%! Now, you may or may not be living in the United States, but often this is where trends start and then fan out to the rest of the world, and it is simply a fact that chances are, wherever you live, your government is going to be ever less able to support you in your old age at the time when life expectancy (for developed nations) is increasing, and your costs of long-term medical care are increasing along with it.
Anne Karpf, writing for the United Kingdom's Guardian News, wrote about chronologically old people in the UK and the quality of medical care they should ideally receive:
'[A]ny group of older people needs to have enough [money] not to be reliant on a public sector starved of cash, and whose staff is amongst the lowest paid and lowest status of all public health workers'.
The line in the sand has been drawn: which camp will you be in?
Will you be in the camp of those with financial independence or those without? Statistically, as things stand, you will reach a retirement scenario where you have not saved enough. Anne Tergesen writes,
'[A]s people start to think about retirement, they recognize that they don't even have enough to pay their uninsured future medical expenses, much less have any savings for a decent income in retirement. The only solution is to work longer or to rely on their children as our ancestors did. But their children hardly realize the problems their parents will have—and they haven't saved enough either.'
In short, it is clear that you will need your money, your own money, to pay for a comfortable and independent retirement. There are many other aspects of ageing to consider as well, see if any of the following apply to you.
Is your 9-to-5 job helping or hindering you?
For those still in a 9-to-5 job, consider the aspects of ageing while still in full-time employment. With every year that goes by, chances are that holding on to your job becomes ever-more difficult. You may be perceived as being too expensive, too set in your ways, too unwilling to follow the rules, too lacking in energy or focus, or becoming a less ideal employee for other reasons. These kinds of perceptions (I call them excuses, but then I am sixty years old) are held generally by people younger than we are, so it's hardly surprising we hear them. But as you draw nearer to your desired retirement age, you may be struggling more and more to hold on to your position, a position that may not even be bringing in the money you know you will need for retirement. You may see yourself in a negative spiral, where it seems like the more you struggle, the worse it gets, and the less able you are to bring in the kind of funds you need to secure a future where increased costs of health-care are going to be a reality. So many may question, is the 9-to-5 job by itself the solution? While for a lucky minority it may be, we take the position here that finding other additional revenue sources is the sensible course of action.
Is your home an asset or a liability?
For those of you who own property, consider the aspect of ageing in your home. You may be living in a house where the mortgage exceeds the current market value of the property, even to the point where the monthly mortgage has increased to the level where you need to dip into your retirement funds to prop it up. Not a pretty picture, is it?
Does either of these scenarios sound familiar to your situation or to those close to you? Well, for the good news, and there is a lot of good news for you in this book, consider the following as you start to prepare for retirement:
• Nobody said you can only have one source of income, did they?
• Nobody said you can only work 9-to-5, did they? How about working when you like?
• Nobody said you cannot find other ways to use your valuable experience and knowledge, did they?
• Nobody said you cannot learn new skills, did they?
• Nobody said you cannot meet new people and start new networks and interest groups, did they?
We will be looking at this list in detail throughout the book to help you open yourself to new financial choices and speed you up to your retirement goals.
Defining your dreams
Know that you do have choices—a lot of choices—in how you make your income. My job is to help you uncover some of these choices. We will go through every one of them with you, things that are both doable and available to you wherever you live, as long as you have Internet access. As we proceed together we should be able to picture our own retirement. What kind of picture do you see for yourself? What are your goals for that period of your life?
I am guessing you do have an idea what retirement will look like for you—and I am also guessing you don't like the picture much, or you want to see what other people are doing—that's why you're here. But the fact that you are thinking about it even now is already a good thing, as it means you will be open to some new suggestions and tips how these very important retirement years can create for you the comfort and independence you are dreaming of. It is important you define your dreams—use some of the ideas here—as you make your plan for the comfortable and independent retirement you want and deserve, and then do something about it.
That is why this book is so important.
CHAPTER 2
Taking Stock: My Position Today
Glad you're still with me; that's great. Now before we look at the new opportunities that are out there waiting for you to discover and work them, we need to take a look at you to find out where you are to determine how prepared you are for the next step. How well do you know yourself and your own situation? In order to define how ready you are for this important challenge, we will be taking stock of two things in this section:
1. Mental Capital: how ready am I now for the changes ahead?
2. Physical Capital: my portfolio and how it leads to abundance tomorrow
Mental Capital: How Ready Am I Now for the Changes Ahead?
To begin, let us consider the state of our 'mental balance sheet'. Just as our own physical wealth is a composite of our life's experiences and decisions, our mental state also shifts with our life's events, each victory and defeat altering our 'mental balance sheet'. In reflecting on our past experiences and the emotional baggage we may carry, we can examine our own 'mental liabilities'. We can ask ourselves,
• What is it that controls me?
• Who is it that controls me?
Whilst I can hardly claim that I can change your personality in a few pages of a book, I can highlight for you some characteristics of typical behaviour that may let you answer those questions for yourself. So by the end of this chapter you will be able to say,
• I know what controls me.
• I have control over what used to control me.
• I know who controls me.
• I can control those who seek to control me.
Having answers to these vital questions is essential if we are to move towards a financial plan that truly reflects 'know thyself'.
In the next section we will look at the worlds of worries and fears because they are the two biggest detractors from your mental capital. We will look at how you can easily make some small changes in how you behave, act, and react, with a view to altering your mental balance sheet for the better and preparing you for the stimulating challenges ahead. So before we plunge into the darker depths of exploring our fears, let's look at fear's light-weight first cousin, which is 'worry'.
Worry
Are you a worrier? If you said yes, then you are honest, which is good. But you are not alone; almost all people are worriers to a greater or lesser extent. Given that we know that worries are something we would like to reduce in our lives, how can we reduce them? Well, let's break up worries into small groups. That should help us dial-down the amount of mental energy and stress that we are expending and show us the reasons behind the worries. The first of these groups is:
Worries About Things That Are Outside Of Your Control
As the saying goes, 'I do not know what I do not know'. Let's say you are commuting to work in the morning. For your journey to the office, will there be a traffic jam that will make you late for work? Well, that is always possible, but you don't know that there will be one, so meantime, why worry about it? If, conversely, a traffic jam looks likely because there has been an announcement of new road-works, digging and so on, then you know you need to start out fifteen minutes earlier tomorrow, or take another form of transport or use another route to minimize if not remove your worry on that point.
I want you to think of one thing that is on your mind right now that is out of your control. What is it? Now, think how pointless it is to worry about that thing, when there is nothing you can do about it—no 'yes, but ...' in the answer please. So, do you feel a bit better about it already? You do? Good.
Now as you work through this book, your situation in retirement is a worry, isn't it? This is an example where the solutions, remedies, action steps—call them what you will—towards a more ideal retirement for you are in your own hands under your direct influence and control. You must not think there is nothing that you can do about the financial situation in your retirement and worry. On the contrary, there are many things you can do, which we will cover here. Many things, you will see, can come into your circle of control. So take that particular worry off your shoulders, too, right now.
Our second group of worries is:
Worries about things that are not worth worrying about
With each item that causes you to worry, ask the question of it: is it worth the worry, or not worth the worry? To those not worth worrying about, by definition, we can say good-bye. Eliminate them from your thoughts altogether. For those that you deemed worth worrying about, we have a solution. First, I want you to make a brief list. Ready? Now imagine what things are worth worrying about, and over which you do have control. It must be both (remember, we already figured out before that something you have no control over, you have no business worrying about). Write them down.
So, do you have your list? Good. Now, write beside each item on the list, what is the worst thing that can happen, if that worry turns out to be true?
I have prepared an example—it's relevant to our topic, and it isn't pretty: 'I worry that I won't have enough money saved for my old age'. Is it in my control? Answer: Yes it is within my control. Is that something worth my worrying about? Answer: Yes, of course it is. So let's go on to consider what is the worst thing that can happen if your plan for old age never gets to exist? You may need more paper at this point, several sheets of paper probably. Write down those 'worst-case scenarios' against each worry. Be brutal, such as:
• I could lose my home.
• I may have to declare bankruptcy.
• My savings and pension will be woefully inadequate.
• My life-partner leaves me.
• My kids don't want to share in my burden.
• My kids can't afford to share in my burden.
Not pretty so far, eh? And we could go on. Now, review your own list; what does it say? If you have been honest with yourself, the list might shock you with the possible negatives of having no retirement plan. If you have made an honest list, and it doesn't shock you into the need for a plan for old age, then my friend, nothing will! But the good news is that you have control over taking action to change your circumstances of retirement.
One great way to reduce your worry is to have a plan. We will explore the fine art of planning, an amazing aid, in greater detail later on. For now, consider that when we plan for things, we rationalize solutions for them, and in doing so, we remove many of the emotion-clouded thinking that was making them a cause for worry. In the course of putting the worrisome item into an action plan, we will ask ourselves the two main questions, 'is it within my control and worth worrying about?' Often just asking those questions will dispel the worry. If not, then once the item is part of a plan, it will be easier to see how any further worry about what is not within your control is just wasted energy.
Fear
The silent killer. Now let's take it up a notch. For many of you reading this book, there are any number of practical and understandable reasons why you are not yet where you want to be with your retirement plans (for example, you didn't know how, you were too busy raising a family, and so on). While some of these reasons are of course commendable, for other readers there is a deeper and darker reason why you hold back at critical times of decision in your life.
Fear. My ultimate 'F' word. Why didn't you take that action, make that phone call, say yes instead of no, take that chance? Instead you said to yourself, 'oh that's too risky', 'that will never work', and my favourite, 'but what if' ...? These are my contenders for the award for possibly the worst combination of three words in the English Language—but, what, if? The negative thought-director followed by the conditional qualifier, the ultimate door-slammer, bucket of cold water, opportunity avoider. But, what if ...?
But what if I'm wrong, and it doesn't work?
But what if the market goes the other way?
But what if ... the sky falls in, Henny Penny?
Underlying all these sentiments is that little F-word, fear. Winston Churchill once said famously, 'we have nothing to fear, but fear itself', (not to trivialize this grand statement, which was issued against the background of a major World War, the loss of which would certainly have made retirement an unlikely source of concern).
When I speak of fear, I am not talking about the haunted castle, thunderstorm, 'there's a vampire right behind you' type of fear, which is just us humans enjoying scaring each other. I am talking about the energy-sapping, goal-blocking type of fear that has us all afraid to take those steps outside of our comfort zone, those steps that we know we want to take and that we should take. It is that fear fairy that sits on our shoulder whispering, 'no, don't try it, too risky, not interested, it will never work'. When any idea comes along—this little fear fairy says, 'leave it; another better, cheaper, easier idea will come around soon', as yet another year drifts by with no action taken.
