The New Retirement

By Mark Folgmann

“Preparing for the future”

Americans have historically depended on the “Three Legged Stool Theory” for their retirement security driven by a monthly pension, social security and their retirement savings. I believe this strategy is dead and gone and for most will never return. If I’m right we must change our paradigm and step outside the traditional retirement box. The past will not repeat itself and most of us will grow old without the benefit of a pension and some may not even see any benefit from social security. A mobile workforce with the average employee changing employers 7-10 times in a career will force us to think differently about our retirement years. Somewhere along the line we decided that we had the right to sit back and enjoy life somewhere around the age of 62. This was a great strategy when we had three sources of income, a paid off home and typically only lived another 10-12 years. Now with pensions all but obsolete, social security at great risk and a national savings rate at -2% we are kidding ourselves if we think we can retire under this obsolete system. On top of all that most are still carrying debt at retirement and may live another 30 plus years. Even with all that against us we can still thoroughly enjoy our later years with a few slight adjustments.

First of all the Financial Service Industry will not save you with all their fear tactics, hot investment tips and their efforts to make you believe their on your side. Their Not. I believe that most people are far worse off with a financial planner or advisor than they would be on their own. After 25 years of observing the tactics of this industry I firmly believe that almost all advisors destroy more value than they create. Remember the financial service industry is a zero-sum game. Every dollar in fees or cost has to come out of your accounts. Don’t get me wrong, there are some people that reach a point where they are uncomfortable handling their affairs and it makes sense for these people to get some advice but for the most part it’s a loosing game. The advisor will win, his mother ship will win but in the long run you will suffer. An extra 1-2% in fees over a lifetime could eat 30-50% of your profits and all that loss goes to the industry.

The future solutions revolve around multiple streams of income and common sense. Part of the preparation for the “New Retirement” involves thinking about what you love to do and what specific skills you have. We were downtown last weekend with my grandson Mark and ran into a retired clown making balloon animals for kids for $1 each. I thought wow, if he did this 6 days per month at different locations and passed out 100 per day he is generating about $600/month. Do you realize he would have to save about $150,000 to generate the same income? What if he also repaired small engines one day per week in his garage and generated another $800/month and owned a rental house that paid him another $750/month. Of course I’m only giving you a hypothetical illustration but you probably get the picture. It would take over $750,000 in his 401(k) to generate that kind of income. Every single person has different interest and skills so the hard part is to determine what you really love to do and figure how to create lifetime incomes from it. Over our working career we must continue to refine and develop new skills so that we can create multiple streams of income while enjoying the work. The butterfly effect tells us that minor changes create major results and it’s my feeling that we need Americans to be productive and not sitting on the sidelines for the next 30 years. Next time we’ll discuss other things you can do to prepare for the “New Retirement”.