Tuesday, March 4, 2008
Do You Know The Biggest Mistake In Most Retirement Advice About Retirement Income?
Do You Know The Biggest Mistake In Most Retirement Advice About Retirement Income? How much retirement income do you really need to retire? After reading many warnings to people about the need to save money for retirement, I have come to the conclusion that most of the financial retirement advice addressed to consumers is bad advice because it is based on a limited understanding of money. Most personal finance retirement planning articles round up the usual suspects of retirement planning and list them as reasons to be afraid that you don t have enough money to retire: Most people have not saved enough money. Prices will go up and up. You will probably need more for medical expenses as you age. And worst of all (!), you might live 20-30 years after retirement at age 65 and will probably outlive your money. Such retirement advice articles explain all the ways you can calculate how much retirement income you will need, what costs will go up and what costs might go down. Most retirement planning articles assume that you will pay off your mortgage. They also assume that your only sources of retirement income will be retirement funds, pensions, and Social Security. These articles often help you calculate how much of your nest egg you can safely withdraw each year to avoid running out of money. The unexamined assumptions of such articles create fear in the minds of people. They do not teach anyone the single most important skill required to live those 20-30 years beyond retirement age in abundance: how to make money. Every single one of these money fears is based on a single assumption. After you retire from your job, your retirement income will be fixed because you won t earn any more money. This is one of the biggest money limitations imaginable. You must anticipate an uncertain future in which the money available to you is limited by the amount of money you amassed in your earning years. According to typical personal finance retirement planning advice, you are supposed to imagine living 20-30 years without making any new money, completely dependent upon what you earned in your working life. This type of retirement advice also depends on an unstated assumption that the amount of money you have available to you as retirement income also depends on the decisions of other people. Other people will decide whether or not you still have a pension, whether or not you still have Social Security income, the amount of interest you earn on your "safe" savings accounts and CDs (certificates of deposit), and the returns on your mutual funds. This is why such articles create fear. They teach that your only security is to amass as much money as you can while you are still earning an income, and then use it very carefully before it is all gone. The underlying assumption is that you will have no other sources of additional income. In other words, you are essentially powerless to increase your retirement income after you retire from your job. Kalinda Rose Stevenson, Ph.D. Discover the difference between earning money and making money in a real estate investing book , "No Money Limits." Visit http://www.NoMoneyLimits.com for your Free "52 Heart of Money Insights."