019: Retirement and You: What You Needed to Know Yesterday to Get Started Today
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Some people ❤️ love it, some are living it, and a lot of people are wondering if they will ever be able to achieve it.
What are we talking about? Retirement!
Everyone wants a safe and secure retirement right? Those long lunches, beach cruises, and who knows? Maybe getting a set of golf clubs and puttin’ around the ol’ green might be your ideal future self. What could be better than waking up, actually enjoying your morning beverage of choice and then going to restaurants and still getting 10% off wherever you go? We can think of few greater luxuries.
Of course, for many of us, the first question might be simply how? How does one go from working, saving, managing expenses and not even knowing what the heck a 401k even is to buying property in Florida, ready to spend your days ☀️ tanning, traveling, or just resting? 🤓🤓
However you picture your ideal retirement, we’re here to tell you, retirement planning doesn’t have to be hard, but you do need to know the right steps. There is so much advice about their money, how you should retire and what you need to be doing. We’re here, your financial BFFs, to cut through the noise and bring it back to basics.
Today, we’re breaking down the 7 key steps to retirement planning. What this all comes down to is something we have preached many times on Cashflow Multipliers 〰️ identifying your financial goals and how long you have to achieve them. From there, you’ll learn how to save and invest so that you can achieve that blissful retirement you envision.
Okay, but how does retirement actually work?
Other than living out your future days in retirement in complete joy, how does retirement actually work? In a simple definition, retirement is the phase of life in which an individual no longer works.
Some of you are so in the weeds of your job, that it’s basically become your identity at this point and you can’t imagine living a life without that part of you. You know, the high strung, always stressed working part.
Unless you choose the passive income route, of course. 😌😌
So, where did this idea of retirement stem from? In the 18th century, this concept became more popularized when life expectancies began to increase. Of course, the timing of when people retire can depend on a couple of factors. Life, technology and society has changed just a little bit since the 18th century.
One factor is physical ability, a person might retire because they are no longer physically able to work due to age or medical conditions. Think of jobs that require a lot of stress on the body, like a firefighter or construction workers. Those are physically demanding jobs that require a lot of strength.
Shout out to those who are in that line of work!
Another factor a person might have to retire is the eligibility to receive certain retirement benefits, such as social security or a pension. A person might turn 65 years old, for example, and choose to retire because they have become eligible to receive their retirement benefits. This shouldn’t be a person’s only way to achieve freedom in retirement, and we’ll get into more of that in a few, but it’s definitely a way, and a good start.
And did you know that you only need to be 50 years old to be eligible for a full, free membership with AARP? Say ‘hello’ to discounted movie tickets a whole lot sooner.
We prefer a matinee showing anyways.
Lastly, there’s the ‘semi-retired’ option which means you’ve reached retirement age but have decided to keep working a limited amount. We can hear a sigh of relief from our workaholics out there. This is a great option because it allows you to receive partial retirement benefits while earning a limited income. Some would say, having your cake and eating it too. 😬😬
Retirement Planning = Goal Defining
It shouldn’t come as too much of a shock to know that you just can’t, ya know, stop working without having a plan to have some sort of sustainable income. Those long lunches aren’t going to fund themselves. Retirement planning is the process of preparing for the life you want after you’ve stopped working. Coming up with a solid retirement plan starts with defining some of your goals. 🎯
So, what are they? Well, that’s only something you can define. For some of you, the goal might be to move closer to family and have your own home for your grandkids to visit. For others of you, it might mean moving off the grid and to another country. Finally being able to write the next great American novel in a chateau on the French Riviera.
What this all comes down to is one simple question: “what kind of lifestyle do I want to have?” and the second most important question: “how much income will I need to maintain this lifestyle?”
This is going to require some homework on your end. Owning property in Wisconsin is going to cost way less than living on that dream vineyard in Italy. Once you have a better idea of what your desired retirement looks like, you want to identify what gaps you need to fill to reach your goals. Financial planning for retirement includes estimating expenses, identifying possible income sources, and creating a saving and investing plan.
And unlike your latest obsession with your airfryer recipes, retirement isn’t a ‘set it and forget it’ type of thing. This is a life-long process. Don’t be that person that opens up a 401K plan through their employer and then never revisits it with a financial advisor regularly.
You work too damn hard to never check in on that 401K ever again. This is because your retirement needs and goals will likely shift over time, and you will need to fine-tune your strategy every so often.
Now that we’ve primed you on the importance of retirement and how you can get there, we’re going to break down the process into 7 steps that are easy to follow so you can get started today.
The 7 Things You Need to Know About Retirement Planning
Listen, no one is expecting you to know everything about retirement planning from the start. This is the stuff they need to teach in schools and for whatever reason, don’t. But as we mentioned, all of this comes back to identifying your goals and seeing where the financial gaps might be. And remember, this is a lifelong process, the first step is simply to commit. Our goal by the end of this is get you in a place where you feel confident by following these steps:
- Understand Your Timeline
- Establish Your Freedom Metric
- Calculate After-Tax Rate
- Determine Investment Goals & Risk Tolerance
- Begin Saving for Retirement
- Invest & Build Wealth
- Starts Estate Planning
No. 1 Understand Your Timeline AKA Act Your Age
The first thing you want to do when planning for retirement is to determine how much time you have to prepare for retirement. That’s why for those of you 30 or younger listening to this podcast, you’ve hit the gold mind. You have a lot of time ahead of you to do the work of saving for retirement.
Seems simple enough, right?
Ah, yes to be young and planning for retirement. ✨
To do this, take your expected retirement age and subtract it by your current age. So if you’re 30 today and want to retire by the time you’re 65, that’s 35 years of savings. Those of you who have a longer retirement timeline can afford to take riskier approaches, such as investing in stocks. This is because you have been afforded the luxury of time to withstand and recover from any mishaps that might happen in the market. If you have less time before you retire, it’s generally advisable to take a more conervative approach.
No. 2 Establish Your Freedom Metric AKA Vanquish the 2am Night Sweats
For those of you who have been here long enough, you know exactly what we’re talking about when we say ‘freedom metric’. The freedom metric is the number in which your passive income, aka your cashflow autopilot, equals or exceeds your expenses. 😘😘
Basically, you don’t have to worry about bills coming in every month because you can afford that nice dinner at Nobu and pay the mortgage on time.
When you know your freedom metric, you’ll be able to calculate exactly how much money you’ll need your passive income stream to generate in order for you to be financially free.
This is the number that will give you a big sigh of relief and know that your life is changed forever. No longer will you lay awake at 2 am, anxious about what would happen if you lost your job, or how you’re going to fund your kids’ school, or how to pay for an unexpected car repair. 😎
And even greater than that? You won’t suffer the mental and physical burnout from long, hard, hours working or the painful amount of wasted time stuck in traffic, every single day of the work week.
No. 3 Calculate After-Tax Rate AKA Show Us Your Work
You know in movies when the person dies and you see the widow or widower go through their partners will? They’re looking at the properties they’ve bought and stocks and bonds they’ve invested in over the years leading up to their retirement?
Of course, the juicy part is when certain investments come as a surprise to the partner.
Those things are called portfolios, and most retirement plans include them. Inside you’ll see various stocks, bonds, annuities, and/or apartment investing. Ideally, your portfolio will grow with you as you age and come to retirement, and you’ll obtain retirement income via tax returns.
Of course, you’ll have to factor the necessary evil that is taxes in all of this. ✌️ Depending on the type of asset, your returns will likely be taxed unless you invest in a tax friendly apartment investing asset class (hint hint!).
Because you’ll want to estimate your retirement income and expenses as accurately as possible, be sure to calculate your rate of return on an after-tax basis. This is because your rate of return will be higher than what you get to pocket because of taxes.
No. 4 Determine Investment Goals and Risk Tolerance AKA Practice Your Vegas Moves
Like anything in this life, no risk=no reward. However, that doesn’t mean you can’t have a strategy. I mean, even those who count cards at the blackjack ♠️ table have some sort of framework.
Not that we’re giving you any ideas‼️
The same goes for retirement, the majority of retirement plans include an investment strategy. Part of this includes balancing your ability to tolerate risk with meeting your retirement objectives. We suggest a financial advisor to talk about your objectives and how much you’ll be able to stomach to meet these goals.
You don’t have to do anything too crazy and we don’t want you to feel like going “all-in” is the only way to secure a stable retired future. However, keep in mind that the lower the risk, the lower the yield, aka reward. You’ll have to tolerate some risk if you hope to earn some sizable returns. 🙌
Who knows? Maybe you’re just one investment away from that cottage by the sea.
No. 5 Begin saving for retirement AKA Put Your Money Where Your Mouth Is
There’s definitely no hard-and-fast rule here, but identifying that number that is comfortable for you would be the start. Now retirement may be decades away, but it’s never too early to start saving for it right? Now, you know from the previous episode that for us we aggregate that you don’t save your way to retirement but rather invest your way to retirement. But that doesn’t mean you don’t save the money to you know invest in cash flow-producing opportunities right?
We mean, money has to come from somewhere here! 🥰🥰
No. 6 Invest & Build Wealth AKA It’s OK To Ask for Help
We’ve broken down a lot already when it comes to retirement and its options on how to fund it, from stocks and bonds, mutual funds and our personal favorite 〰️ apartment syndication. Deciding what you’d like to invest in depends on your retirement timeline, like we made in point number one. And how much risk you can tolerate, like in point number four.
It’s also important to check in with yourself. Do you want to manage all of your accounts yourself? Do you prefer to have someone else do the work for you? Whether you decide to manage your investments completely on your own or with an investing expert, you’ll need to know some wealth-building tips.
No. 7 Start Estate Planning AKA Plan for Your After Life
One of the biggest misconceptions about retirement is that estate planning is only reserved for the wealthy. 😵😵 Look, you don’t need some Downton Abby castle to start planning for your estate after your death. We know that sounds a bit morbid, but, protecting your assets by planning for your estate ensures your legacy is protected and gives your loved ones the gift of not having to stress about what happens after, ya know…
The big choke.
If anything were to happen to you, an estate plan would ensure that your hard-earned retirement savings and investments will be distributed to those you designate. This way, your loved ones will not experience hardship upon your death. And hopefully avoid any of that legal drama.
Estate planning is often associated with the idea that it is an expensive, laborious, legal process for the wealthy. However, you don’t need to be a Dame to start. Anyone can benefit from having an estate plan, and there are many easy and inexpensive options to make state planning accessible.
The Best Time to Start? Yesterday.
Ask anyone who’s retired today, “hey, when should I start saving and investing for retirement?” and their answer will be yesterday. Simply put, the best time to start saving for retirement is now. And more specifically in your 20s. When you’re young, you have more time to save, invest, and take risks.
Not that you didn’t take enough risks in your 20s already.
However, now you have a chance to recover from those risks in case any of them go awry.
We’ve said it before and we’ll say it again: only you know what your dream retirement will look like. Will it be drinking mojitos on the coast of Mexico? Jet-setting to once-in-a-lifetime excursions to Antarctica? Spending more time with your kids and grandkids in your own home? Who knows, it could even be a combination of all three!
Regardless of how humble or lofty your goals might be, retirement planning is absolutely critical to have a safe and secure environment. If you haven’t already started, consider this to your sign. Start preparing for your retirement today to make sure you have as much time as possible to grow your wealth. Trust us, your future-self will thank you. 😉😉 And don’t forget to download your Apartment Syndication Survival Guide to get you there.
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