How NOT To Lose Sleep Over Retirement
According to a recent Bankrate survey, more than half of Americans lose sleep over their finances – with healthcare, expenses, and saving for retirement among the biggest worries.
This Bankrate survey was conducted in 2019 – before the COVID pandemic. Those numbers are undoubtedly higher now – a year after the start of the pandemic and one of the worst financial periods of recent times.
COVID-19 made matters worse for Americans losing sleep over their finances as many either found themselves out of work or forced to retire early. Those who were unprepared for an early retirement found financial anxiety at the doorsteps sooner than expected. Many were caught unprepared, and honestly, it wasn’t because of COVID-19. The pandemic merely shone a spotlight on an underlying problem – poor retirement planning on a grand scale.
Even before COVID, unforeseen or accelerated retirements were already common problems.
In a study published by Allianz Life, most respondents said they retired for reasons entirely outside of their control, whether they were ready to or not. For example, 34% said they lost their job unexpectedly, and another 25% said they had health care issues that prevented them from doing their job.
Most Americans face the problem that for so long, they have relied on a single source of income, and when that one source is reduced or suddenly stops, they feel powerless to change their financial situations. For most, it’s too late to start training for a new career. Many are relegated to working in retail or fast food to make ends meet.
No wonder unprepared Americans are losing sleep over retirement. More likely, they’re losing sleep over the prospect that they may never be able to retire – having to work until the day they die. According to a new TD Ameritrade survey, a third of Americans say they feel like they won’t ever retire.
I imagine most Americans dream of resting from their labors in their twilight years and spending more time with their families. Instead, most are wondering how they can stop working and still pay their bills. Everyone knows Social Security isn’t going to cut it.
Why would anybody lose sleep if this were the case? Many wonder if Social Security will even be solvent when they retire.
What can you do NOW NOT to lose sleep over retirement?
Follow the lead of wealthy investors who invest with the following guidelines.
Focus on Passive Income. Additional streams of income that can be generated in your sleep are what sets those who lose sleep over their retirements and those who don’t. Those with passive income streams are always prepared for work stoppages or loss of labor income.
Not just any passive income source will do. Public and bank options like treasuries, annuities, and Savings/CD/Money Market accounts that fail to keep pace with inflation just won’t cut it. Savvy investors gravitate toward alternative investments in the private markets to generate the type of above-market returns needed for building and sustaining wealth.
Avoid speculative investments. Speculative investments like high-risk stocks and cryptocurrency may attract all the news and social media attention, but they have no place in an elite investor’s portfolio. If you’re behind the eight-ball in your retirement plan, speculative investments can put you even further back. Leave little to chance when planning for your retirement.
Don’t consider your own home an investment. Your home is not an investment—the ideal investment cash flows. Until you sell your home, it’s a depleting asset – not a productive one. You’re constantly pouring money into your home. By the time you sell your home, any appreciation you’ve gained will be negated since any replacement home will have appreciated as well.
Saving money is just as effective as increasing income. Invest with companies and assets that offer tax breaks like depreciation, passive income treatment, opportunity zones, and energy credits. Saving a buck is just as making a buck in the long run.
Don’t overlook boring investments. The masses ignore boring investments, but they are often the 1st choice of the wealthiest investors because of their consistency and reliability.
You are your most valuable asset. Invest in yourself and your investment education. The more educated you are about private investment alternatives, the better prepared you’ll be to leverage others’ expertise. With the proper due diligence and evaluation skills, you’ll be able to entrust your capital with others to generate multiple income streams.
Reducing expenses can close the gap to achieving financial independence just as effectively as increasing income. When you no longer have to rely on your labor income to meet your financial needs, you will have achieved financial independence and no longer have to lose sleep over your retirement. Cutting a dollar of expenses is just as valuable as increasing your income by a dollar on your road to financial independence.
On the subject of expenses, live well. Focusing on your health today will reduce health care costs in the future.
Don fall into the percentage of Americans losing sleep over their retirement or lack thereof. Take the steps now to avoid the desperation facing many retirees unprepared for their retirements.
Michael Foley, president and CEO of Humabilt Capital, oversees the entitlement process, funding, and operations for Humabuilt Capital. Mr. Foley has been a full-time real estate investor since 1995 during which time he has developed hundreds of single-family homes, townhomes, condominiums, and apartments. Mr. Foley started his investment ventures in Long Beach, California, and has expanded to Apex and Durham North Carolina. Mr. Foley is a graduate of the University of California at San Diego.