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American

Retirement Myth

Even a $1 million retirement nest egg isn't enough anymore

• With more retirees responsible for their own financial security, even a $1 million nest egg isn't nearly enough.
• Considering the looming retirement savings shortfall, experts say there are only two ways out: Earn more or spend less.

A cool $1 million has long been considered the gold standard of retirement savings. These days, it's only a fraction of what you will really need. For instance, a 67-year-old baby boomer retiring now with $1 million in the bank will generate $40,000 a year to live on adjusted for inflation and assuming a sustainable withdrawal rate of 4 percent, said Mark Avallone, president of Potomac Wealth Advisors and author of "Countdown to Financial Freedom." It's worse for a 42-year-old Gen Xer, whose $1 million at retirement will only generate an inflation-adjusted $19,000 a year when all is said and done. And a 32-year-old millennial planning to retire at 67 with $1 million would live below the poverty line. That's what Avallone, a certified financial planner, calls "million-dollar poverty."

Amazing as it seems this CNBC article is spot on as to America’s retirement nightmare.  For those of you who are in your 40’s or 50’s it most definitely earn more and significantly spend less.  Spend less by downsizing to significantly smaller house capturing the gain then buying down your new home with a 15 year or 10 year mortgage (available at credit unions).  With a fully paid off house AND debt free – no car loans and God forbid student loan debt along with credit cards – what retirement dollars you do have will obviously stretch further in a debt free environment.  As you age you may need to move into an assistant living community the sale of a fully paid off house will help defray those costs.  Between your savings and Social Security a reasonable retirement is doable.  No around the world cruises or 4 and 5 star hotels…A working class retirement – not great but doable.

For those who are retired or younger follow my blog in regards to managing our four diametrically opposed assets.  For those of you who don’t want to follow my 4 asset approach here is another alternative.  The Hussman Funds will allow you to reinvest your dividends at any percentage you desire whether it is 1% or 100%.  So…Disregard any retirement savings plans – 401k, Roth IRA, etc. – use only after tax dollars invest in Hussman’s Strategic Total Return Fund with 50% reinvested with the other 50% of the dividends paid into your checking account.  Buy like a madman…Start with a percentage you can live with, every time you get a raise increase the amount by one half of the raise the same with promotions or bonuses.  As the amount increases in your checking account; increase the amount going into the fund.  Keep the pressure on with the long term goal of 100% of your income going into the fund.  Hopefully an organization will create an app that does just that – similar to automatic increases to your 401k plans.  So yes it can be done. Simple.

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DYI