Retirement planning is a topic that financial types go on about endlessly. There are good reasons for this, but that doesn’t make the message any more interesting.
Sometimes, to develop a new level of appreciation for a topic, one must frame the topic in a new way. Here goes:
Amanda Lang, the better-looking half the the Lang and O’Leary Exchange, has been saying something over the past few months that has caught my attention. I’m paraphrasing, but still calling this a quotation, because the important point is the idea, not the exact wording. In a nutshell, Lang says, “People need to realize that they have a lifetime of expenses, but only a limited time to accumulate earnings.” She then often adds, “Every dollar you spend now is a dollar you’re robbing from your future self.”
The truth of these statements is self-evident. When you’re no longer able to generate income indepently, the alternatives are clear and unambiguous: either you have already saved enough money to support yourself, or you’re dependent on the state and/or your family to support you.
The problem with the second option, I trust, is also self-evident. Apart from the humiliation of perpetual financial dependence, relying on others for your basic survival, purely from a practical point of view, is not a good place to be. Friends and families have fallings out (as well as themselves to support), and government funding is often barely enough to get by, even assuming you have no extra medical or other special expenses. Government have also been known to target their most vulerable citizens when they need the cash, so relying on it as your only means of support is not something I ever want to have to do.
Perhaps a handy-dandy analogy is in order. (The seemingly odd choice of picture at the top of the article will quickly become apparent.)
When driving to from one town to another, you would never leave the gas station with less than the amount of gas you needed to arrive at the next town, would you? Yet this is exactly what people some people do (analogy-wise, I mean). They start off on their journey through retirement without sufficient funds to see them through to their final destination. They end up stranding themselves on the side of the highway, relying on the kindness of passing strangers to help them reach their destination.
Where the analogy falls apart is that, unlike a gas station, you can’t “load up” on retirement assets all at once, just before you embark upon retirement. The only way is to start planning – and taking action – years before you retire. How to do this isn’t really the point of this post. (Although regular readers will know that my approach is to invest in stable, dividend-paying stocks, ideally dividend aristocrats.) The point is simply to give you yet another reason to appreciate that if you haven’t already done so, it’s time to start thinking – and acting on – your financial plans for the future.
Now, if you’ll excuse, me, it’s five minutes to five, and Amanda and that other guy are about come on.