In theory there is no difference between theory and practice. In practice there is.Yogi Berra
Its October, AKA the major league baseball postseason. As a lifelong baseball fan, I take the wisdom of Yogi Berra seriously. And when it comes to planning for the autumn of life, Yogi is spot on.
It seems as though every day an article titled 5 Tips for Retirement Saving or something similar hits my inbox. I scan for the authors name, and Im amazed by how often its distinctly contemporaryJennifer, Brandon, or another name of that vintage. Jennifers title is something like staff writer, and I immediately picture a fresh-faced young person with a newly minted journalism degree. After work, maybe she jumps in her starter BMW and heads to a local watering hole with her friends to gripe about student loan repayments.
Jennifer means well. After all, shes just doing her job. She recommends setting financial goals, getting out of debt, living within your means, and saving from a young age. I wont argue with those recommendations. Jennifers grandparents probably did just that. If you can pull off following that advice to a T, chances are youll accumulate a good deal of wealth.
However, once Jennifer has tried to put her advice to practice for a couple of decades, she might understand that its neither simple nor easy, despite how it might sound. Most people know what they should do, but its often tough and painful to execute in real life.
During my 74 years Ive met a lot of successful and rich retired friends who sure didnt go about it Jennifers way. How many baby boomers do you know who married young, raised a family, put their children through school, and consistently saved in their 20s, 30s or even 40s? There are a few, but manyif not mostyoung families lived through a decade or more of Why is there is so much month left at the end of the money?
Several times a month a 50- or 60-year-old Millers Money subscriber writes in asking for help with how to accomplish a last-ditch push to save. Truth be told, most of my friends never got serious about retirement until after theyd raised children. It doesnt mean they were right; its just the way it was. Should they have started earlier? Of course. But they didnt. Some didnt know how, some were overwhelmed by day-to-day expenses, and some overspent on stuff, stuff, and more stuff. Many got serious in the nick of time, but they did it.
Retiring Rich When Youre Under the Wire
Whatever your age, fretting about what you didnt do is futile. Start making the needed changes today.
The best place to begin is to define rich. For our team, rich means having enough money to choose whether or not to work and enough money that you control your time. Rich means you live comfortably according to your personal standards. If youve lived a middle-class lifestyle, a rich retirement means you can maintain that same lifestyle without worry.
Ten days out of high school, I was on a train to Parris Island, South Carolina. One of the best teachers I ever had was SSgt. Thomas R. Phebus. He was an archetypethe ideal combination of common sense and straight talk. Im going to take a page out of his book and share some straight talk on how to make a rich retirement your reality.
The 9-Step Program
#1Saving money is a pain!
When I entered the work force, every major company and most government agencies offered some sort of pension plan. The bottom line: come work for us at age 25, stay for 40 years, retire at 65, and well continue to pay you until you die, normally another 20 years or so.
Pension plans are no longer the norm. Corporate America just couldnt do it. Some filed for bankruptcy and broke their promises. Either way, in the private sector, 401(k)s are the new norm. Theyre optionalno one makes you contribute.
Now local governments are filing for bankruptcy, many unable to fulfill their pension promises. No matter whom you work fora big or small corporation, a government agency, or yourselfif you want to retire, be damn sure youre savinghellip; no matter what youve been promised.
#2Plan to work your tail off.
I dont know anyone whos accumulated even modest wealth working 40 hours a week. If you want to work for 40 years and pay for 60-plus years of life, chances are youll have to do more than that.
When you work, you trade your time, talent, and expertise for money. When you retire, you trade your money for time. In theory, you can work 60 hours a week, live off two-thirds of your income (40 hours worth), and invest the remaining one-third (20 hours worth). However, if you start saving early, perhaps saving income equal to 10 hours of work will be enough. Your savings will have more time to accumulate and compound, and youve bought yourself extra leisure time along the way.
If both spouses are working hard outside the home, which is the norm today, work toward living off of one paycheck and investing the other (or using it to pay off debts and then start investing). Many of our retired friends did just that.
#3Dont complain when others have more.
Someone always will.
This one saddens me. We have a few friends who chose to work 40 hours a week for most of their working lives. They felt it was important to spend more time at home with their families, and theres nothing wrong with that choice. Still, its a trade-off.
I look at it as though they enjoyed mini slices of retirement time when they were young. If thats your choice, dont begrudge others who chose a different path and worked and/or saved more. They dont owe you anything.
#4Get out of debt and stay that way.
Virtually every wealthy friend I have only started to build wealth after eliminating debt, including home mortgages. Some theory-loving pundits suggest taking out a low-interest mortgage and investing the money with the hope of earning more than the mortgage interest. Oh really? Most peoples investments dont perform that well.
The chart below highlights how poorly the average investor stacks up: