What exactly is an early retirement? After twenty years serving in the military retirement is an option. Most who take it quickly pursue a civilian career. Many believe a retirement before age 62, the birthday at which reduced Social Security benefits are available is early. Retiring on only the age 62 Social Security benefit without a pension or substantial savings would likely be living below the poverty level. Others believe retiring before Medicare eligibility at age 65 is early. Anything prior to age 65 leaves most with an unaffordable bill for private health insurance; granted, there are folks who are disabled or fortunate enough to have their employer continue health insurance for their families but in general most pre-65 retirees are stuck with the bill.
Can you save too much in your tax deferred retirement accounts? The short answer is, yes. The longer answer is perhaps, but most Boomers will never have to worry about it. The press is full of stories detailing the sad state of retirement funding for the Boomer generation and how they are woefully unprepared for what once was a distant retirement and is now upon them. Only recently have I started picking up on articles dealing with the equally serious problem of families who have saved too much, or at least too much in tax deferred accounts. Continue reading
Tiger 21, more formally known as The Investment Group for Enhanced Results in the 21st Century, is in large regard a glorified investment club. It is an investment club with a $30 thousand annual membership fee. Collectively, the club’s 230 members control assets valued in excess of $20 billion and have a median net worth $75 million. I rather doubt anyone reading my Blog would qualify for membership. Yet the truly wealthy are worth studying in terms of how they invest and what it is that motivates them to take action. This is true because, as we have observed since the financial meltdown of 2008 – the rich indeed do get richer. The wealth of the rich has recovered while the middleclass in America continues to struggle. Continue reading
My previous post demonstrated how a young guy named Rich got out of school, worked 40 years and saved enough to retire with an income equal to his final year salary from actually working. The key assumptions I discussed were that he would need to save 21% of his income for all 40 years and get a modest salary increase every year. What I did not discuss was the probability that he would be able to earn a steady 8% rate-of-return (ROR) on his 401k year in and year out.
I should note that his discussion is for your entertainment and designed to get you thinking about the future. Implementation of any concepts described should be reviewed with a professional financial planner beforehand.
As any student of personal finance, you should readily ascertain, the actual ROR you earn may jump around considerably. I’ve been an active investor for over thirty years and I have had years with double digit gains and years with double digit losses. On balance, I am far ahead for having been in the market of stocks and bonds since the early ‘80s. Continue reading
Now that fewer than 50% of the population is actually paying federal income taxes and well over 50% are receiving entitlements in one form or another, it won’t be long until the receivers of entitlements figure out they can vote themselves more of the money pot. Take for example social security (SS). Already there are two active debates; 1) should the wealthy pay the SS tax on all income rather than the current cap just north of 100 grand and 2) should the wealthy collect a SS check in retirement. Regarding the first point, I have no problem with taxing all income or even raising the rate a bit, so long as it all gets applied to making the program solvent. Point 2 however is a dangerous step onto a very slippery slope. Continue reading