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Thursday, March 30, 2023

Preparing for Retirement

By Andrew RobbinsCSMS Magazine staff writerMoney empowers you. Accumulate lots of money and you are freed to retire and chase those special dreams you waited for all your working life.But, retirement doesn’t happen in a vacuum. It is an event that requires planning and action. Start by paying off debt and eliminating credit card, auto, and mortgage payments.Borrowing and spending enslaves people. Saving and investing have the opposite affect. They create assets that free you.Discretionary income has traditionally been invested in assets such as bank Certificates of Deposit, United States Treasury instruments, or cash management accounts. Investments in mutual fund or self-directed trading accounts provide a wide array of retirement savings options.In the past, home ownership was thought to be a low risk source for asset accumulation. Today investing in real estate requires further scrutiny.In addition to the sub-prime problems, property insurance and taxes are rising. To quote Alan Greenspan, “The housing bubble has burst.” Combine an over supply of housing with escalating maintenance costs, and purchasing a home may not be the best investment strategy when compared to other alternatives.Across the nation property taxes now rise 100 percent, or more, every few years. A $4,000 tax bill soon jumps to $8,000, and then catapults to $16,000 annually. The big question facing homeowners is, “Who can afford to buy us out?”The media sells airtime to investment firms that gain financially if we follow their advice. Financial advisors persuade us to invest our retirement money in products they sell. One advisory service recently declared, “When the Baby Boomers retire they will continue to leave all their retirement money invested in the stock market.” But, will this be wise?Enjoying my seventh year of retirement this summer, I walked the Mackinac Bridge connecting Michigan’s upper and lower peninsulas. Another retiree, Doug, drove me to the bridge walk. Along the way we discussed several topics including asset preservation.Doug explained, when he retired he immediately cashed out of the stock market and his mutual fund investments and placed all his retirement assets into low risk cash accounts. Doug, a tradesman, had retired at the same time as several of his work mates. Two months later news of Enron broke and the stock market crashed.Doug’s retired friends who had failed to convert their stocks and mutual funds to cash suffered huge losses in their retirement accounts and were forced to return to work. Being in cash, Doug weathered the down market and today is still enjoying his retirement.What does this mean for you? If you are living on a financial ledge and your equities suddenly trade lower, their fall can be disastrous for you.Historically, every year the market averages a 10% correction while earning a return on investment of just over 8%. Don’t be the last retiree to draw your money from the market. No one wants to be left holding that empty stock market bag!Note: Andrew Robbins is the author of It Took My Breath Away: One Man’s Experience May Save Your Life.

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