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It's 2016 and the U.S. political landscape is turning out to be one for the history books. Years from now, many may look back with amazement that any of the candidates, that were running for president, were not in prison! Okay, so why would I say that? Not because any of them deserve to be in prison. However, if you listen to or read any of the commentary on the candidates themselves, or see any of the television ads, or listen to any of the radio ads, you would be certain that all of them are criminals, liars, or any other adjective you want to attach. I have spoken with several people who are not citizens of the U.S. that are confused and wondering how anyone could make a well thought out choice with so much negative noise. It's true! I can listen to or watch any number of programs and everyone has a different opinion on their interpretation of their personal bias. Whatever happened to the good old days of truth-based reporting substantiated by the facts?
Perhaps there never have been the good old days and it's always been this way. If that is the case, then how can anyone ever make a good choice? A bad choice could have disastrous consequences. So why would I be talking politics in an article titled, "So you want to retire?" Well sadly, the same environment exists today in the retirement landscape that exists in politics. I can listen to any number of radio, television, or podcast broadcasts, hosted by financial entertainers or financial advisors, and the commentary is designed to promote their financial bias. Unfortunately, they also use these platforms to loudly proclaim that they are the only ones that can be trusted and that everyone else is only in the business to make money.
Let me give you an example. While watching a news channel recently, a commercial came on sponsored by an investment advisor who boldly proclaimed that a certain financial strategy was extremely bad for anyone to purchase. The reason was based solely on that the advisor who sells that particular product was going to be paid a commission. The message of the ad was that anyone who receives a commission was not to be trusted and that their firm had the answers. If I didn't know any better, it would be easy to assume that this firm was providing investment services and advice purely out of benevolence for all of mankind. That somehow, they were able to pay for primetime ad space on a major national news channel from their charitable reserves. So let me just set things straight before I go any further. Everyone gets paid! There, I said it. I revealed the big secret of the financial industry. I feel like the masked magician on TV revealing how magic tricks work. Just like any other product or service we need or consume, somebody is being paid somewhere for providing it.
Now that the cat is out of the bag, let's focus on the dilemma that is facing most Americans today. I really want to be able to retire someday but I don't know how. In order for us to understand this dilemma, perhaps a history lesson will be a good starting point. Prior to 1980, most workers were provided with a pension from their employers. What is a pension? Simply, the employer was responsible for saving and investing a portion of an employee's wages designed to provide that employee with a guaranteed income when he retired from that employer. Almost every American worker had a pension. In 1980, a monumental switch occurred in America. The pension was replaced with the 401k. No longer would the employer be responsible for saving and investing for their employees, and the risk associated with that activity. Now the employee would be responsible for saving and investing their own wages and understanding the risk associated with that responsibility. No longer would the employee be guaranteed a retirement income from their employer. It now fell completely on the shoulders of the employee to decide what to do and how to do it. By the way, there was no grand introduction to this new responsibility, no educational series of training courses to help the American worker understand this new responsibility. Just a soft tap on the backside and proclamation of, "Good luck."
So we see this massive switch of responsibility and risk now placed on the shoulders of the American worker, little to no education on how to proceed, and is it any wonder that almost forty years later that America is experiencing a retirement income crisis?
Now to today. We are starting to see the first American workers who were completely responsible for their own retirement savings begin to reach retirement age. The stark reality of being responsible for providing their retirement income from their personal retirement savings is starting to set in. Now cue the noise. Massive confusion is afoot with thousands of advisors and financial entertainers proclaiming their wares. And the American worker is left to decide amongst the sea of noise what to do.
So what to do? First, stop listening to the noise. Take a deep breath and understand this: you can do this! Second, take inventory of where you are today. If you believe you are behind, and most are by the way, make a decision to start. Begin where you are. Do not try and catch up all in one step, just get started. Third, whether you believe you are behind or on track in your retirement savings, understand that strategy is far more important than the financial product you will purchase. Let us look at it this way. What is harder to come by: the tools and equipment needed to climb a mountain or the skill and technique? I can purchase the tools and equipment anywhere. However, the skill and technique on how to employ those climbing tools will be key to your climbing success. The tools and equipment in the financial world represent the financial products available to everyone. Frankly, you can purchase them from anyone. The skills and technique on how to employ those tools is a different story. Why is skill and technique so important? Understanding on how to strategically employ all the financial tools available, without bias, will be key to your future retirement success. Skill and technique require a "begin with the end in mind" approach. If retirement income is the goal, then it would make sense to understand how retirement income streams work, wouldn't it? In fact, it is a must!
Now that we are responsible for our own retirement incomes, it should be a rule that we must understand how income streams work in retirement prior to us even saving. Of course for most of us, we have already embarked on this journey. However because it's a rule that I just declared, everyone will need to understand how you will generate income from that 401k you are investing into. Why you may ask? Well, let me answer that question with a question. Don't you want to get the most income possible from your retirement savings when you retire? Understanding how income streams work in retirement and how to strategically use all the available tools will be key to your retirement success. Aligning yourself with a financial professional who, without bias towards one tool or another, will also be key to your success. A comfortable retirement is within reach and is one that everyone who has saved deserves. Learn today what may benefit you when you hang up the work gloves and embark on your retirement journey.