A recent MSN
Money article noted a Charles Schwab Corp. survey that reported, “Of those
surveyed, 89 percent said they are relying on themselves for retirement funds
once they stop working full time. Five percent said that they are relying on
the government and 4 percent said that they are relying on a spouse. Sixty-one
percent of respondents said that their 401(k) savings will be their only or
largest source of retirement savings.”
It went on to say that, “The figures are based on an online
survey of 1,004 workers, between the ages of 25 and 75, who contribute to their
employer's 401(k) plans.”
As someone who is on the cusp of the Generation X/Y
intersection, I find myself pondering how exactly my retirement will look in
another 30 or so years. The way the
government is digging this country ever deeper into debt at an alarming rate, I
have a feeling that I could largely be going my retirement alone.
Asset diversification
Many analysts and advisors advocate investing heavily in
stocks, but I find that this is easy to do when you’re playing with someone
else’s money. While I have money in
stock-related investments through my IRA, I also like things like cash, bonds,
commodities, and tangible property.
Diversifying assets spread over a variety of types and risk
levels can help balance out the unexpected such as housing market bubbles, tech
market implosions, financial crises, and recessions, not that these things
happen very often (note the sarcasm).
Spreading retirement savings over a variety of areas can minimize the
risk that a major collapse in any one or two areas could completely destroy a
retirement nest egg.
Reverse investing
Carrying debt into retirement can be an additional financial
burden at a time when income may already be reduced. By paying off debt and remaining debt-free as
retirement nears, it’s just another way that I can cut costs and reduce my
dependency upon outside sources of income.
Moving into retirement without a mortgage, without vehicle
loans, without student loan debt (for us or the kids), and without other
sources of consumer debt, we hope to limit the number of expenses that we will
have during our golden years. Not only
will eliminating such debt now allow us to put more money toward retirement
savings, but it reduces the amount we must pay in interest on such debt.
According to an infographic
on creditloan.com the average American’s interest payments on debt is
$600,000 over the course of a lifetime.
This is why we’re looking to avoid the majority of this additional cost
slowing us down on our path to retirement and making it hard to go it alone in
old age.
Dividend reinvesting
I’m a big fan of dividends and reinvesting those dividends
over time. This is why I have my IRA
funding a dividend reinvestment plan that spreads its investments over a
variety of stocks -- both foreign and domestic -- bonds, and cash, and that
pays a regular monthly dividend that generally yields in the six percent range
annually.
In this way, I not only allow this aspect of my retirement
to move with the stock market but dollar cost average with the monthly
dividends being reinvested into the fund at various levels as the stock market
rises and falls.
Disclaimer:
The
author is not a licensed financial professional. The information provided in this article is
for informational purposes only and does not constitute advice of any
kind. Any action taken by the reader due to the information provided in
this article is solely at the reader’s discretion.
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