Darren Rowse threw down the gauntlet with another group writing project. This time it's a Top 5 post extravaganza. So here's my take on the top five ways you can kill your retirement dreams.
- Count on anyone to provide for you in your old age. Expecting a big inheritance? Medical bills or a change of heart can change that expectation in a heartbeat. Expecting those pension checks to keep coming? Companies are looking for any excuse to hang retirees out to dry. Expecting your Social Security check to keep coming? It may come, but all you might be able to buy with your monthly check is shattered dreams.
- Make any assumptions about how much you need to save. Assuming an 8% rate of return over 25 years, or assuming inflation will be at 3%, or assuming that your home will be worth $1.5 million, or assuming that you'll have 4% annual raises, or anything else like this is an invitation to coast with your retirement savings accumulation. Many, many things can get in the way of these assumptions. Here's the only assumption that should really be seriously considered: Save X% of your income, with X being as close to 100 as possible.
- Believe that working 40 hours a week is enough. Some people aren't in a position where they can clock out after eight hours. But if they are, why does productive work stop there? I look back at all the time I've wasted and it disgusts me. (Not time spent with my family — time puttering around, watching TV, playing games, etc.) Gary North, a very wise and highly successful writer, follows this advice: “To be a success in life, all you have to work is half a day. It doesn't matter which half.”
- Buy lots of stuff on credit. The magic of compounding lets people of modest means become millionaires. It also allows bankers to become billionaires at the expense of those with consumer debt. Carrying a balance on a credit card weighs you down for years and robs you of your capacity to save for retirement. Everything is more expensive if it's financed, and your extra money goes to paying off that interest instead of fattening your nest egg.
- Believe that retirement is about anything except money. If you had $10 million in very safe investments earning 5% per year, you could draw $500,000 per year without touching the principal. Wouldn't you think about quitting? Would it matter what age you were? Of course not! Heck, I could draw less than half of that, still be living large, and get richer each year! Retirement is not about age. It's about money. The more you have, the more quickly you'll be able to retire, or have the option of doing so.
Enjoy the rest of the few hundred Top 5s over at the group writing project!