401(k) Specialist Issue 1 - 2020 - 44

401(k) STREET SMARTS
The Retirement Rules of Thumb
By Steve Savant
IT'S DIFFICULT, PERHAPS impossible, to
get a handle on retirement without rules of
thumb.
There are two rules of thumb that must
be integrated into our finances for a better
retirement: elimination of debt and lifetime
guaranteed income.
Many comprehensive retirement
planners warn that the five years before
retirement and the five years after retirement
is the danger zone for retirees. Money
mistakes made during this time can put
you in the poor house.
Money moves in that 10-year period,
euphemistically called by some advisers the
" red zone, " can significantly impact (for good
or bad) the senior lifestyle a retiree will lead
for the 30 years to come. There's no greater
pre-retirement financial blunder than not
addressing the elephant on their budget's
balance sheet, which is debt.
That's any debt. Retirement planners
don't often address it because there's no
money in debt reduction. Nevertheless,
the obligation-dare I say the fiduciary responsibility-is
theirs if they claim to be the
quarterback of their client's finances.
It's critical to a person's retirement
happiness to eliminate monthly debt payments,
whether it's on a home, car, credits
cards or tuition. Yes, maybe (hopefully) not
their tuition, but their children's or grandchildren's.
Shockingly,
Baby Boomers are entering
retirement with all these types of debt,
unheard of in prior generations. The children
of the 60s are now in their 60s, some
in their 70s, who live for today and give no
thought for tomorrow.
Here's a red zone alert for clients: You
can't continue to service debt throughout
your retirement and pay the ever-increasing
costs of the necessities of life. You'll go
broke well before your demise.
So, five years out from retirement you'll
need to go on a cash spending diet, live the
44
ISSUE 1 2020 | 401kSpecialist.com
" The five years before retirement and the five years after retirement
is the danger zone for retirees. Money mistakes made during this time
can put you in the poor house. "
life of a monastic monk and cut your ties to
people who frivolously spend money whom
you're unconsciously competing with in your
social circles. Remember the old axiom: bad
company corrupts good morals. Bad money
habits are immoral and a severe detriment
to your ultimate retirement happiness.
Don't like the advice? The No. 1 demographic
group filing for bankruptcy are retirees,
and that number is growing. It's too
late for baby steps. You're nearer the point
of no return than you realize. A fine tuning
of your finances won't work. Your approach
to money needs to be in the extreme and it
needs it now!
Here's the next critical red zone alert: You
can't pay guaranteed retirement expenses
with nonguaranteed income. Whether it's
bond interest, stock dividends or real estate
rentals, the income, or at the very least, the
original principal, is at risk.
The solution is to maximize your monthly
Social Security benefits in tandem with a
guaranteed lifetime income annuity (including
an annual cost of living adjustment) to
pay for your guaranteed monthly bills. It
should be antithetical in retirement to use
market-driven investments that are subject
to volatility to pay for life's necessities.
The bad rap on annuities is just plain
slander. It defames a legitimate and necessary
financial product. It's just fake news
from mutual fund and ETF manufacturers.
So, to those red zone retirees out there,
start shopping for a guaranteed lifetime
annuity, maximize your Social Security
benefits and get out of debt!
Steve Savant is a syndicated financial columnist,
talk show host and a popular platform speaker.
Steve is a co-contributor to Advisys, Insmark and
LifeSpecs. His videos and content are distributed
to over 280 media outlets and 200,000 Twitter
users. To contact him visit www.lifesizesolutions.
com, email steve@lifesizesolutions.com or call
(520) 261-4599.
http://www.lifesizesolutions http://www.401kSpecialist.com
401(k) Specialist Issue 1 - 2020

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