SAVING TOO MUCH MONEY?

Are We Saving Too Much Money for Retirement? This topic has been the subject of several magazine articles and internet sites recently. Some of these have been downright hostile to the financial community. The premise is that brokerage houses, insurance companies, and financial planners have shown that the average person will need assets of one to two million to retire comfortably. As I have said before, the calculations are mathematically correct and are based on the average inflation rate, life expectancy, and average returns from various asset classes. The devil is in the details. Small changes in assumptions we make can have a huge effect on the final sum needed for a comfortable retirement. The final result can be off by large amounts and are usually biased on the high side because many clients instruct those making the calculations to use somewhat pessimistic assumptions. So why is the financial services industry telling us that we need to save too much. Their detractors say that it's so we can make more money selling financial products. I don't agree with this hypothesis. Many of those who make these calculations actually believe the results. I don't.

Maybe We Aren't Saving Too Much, Just Worrying Too Much. Several years ago, a financial planner made a big issue out of saying that the College For Financial Planning taught students to use a method for calculating retirement needs that under estimated the amount of assets needed by $15,000. If we could come that close every time I would be forever thankful. In my opinion, these calculations are an exercise in futility. In the future, our retirement will be a much more dynamic situation with frequent adjustments necessary to stay on track. We may need to work periodically, change our residence, use reverse mortgages, and change our spending habits.

Our Health is Probably The Most Critical Variables. The high cost of health care can deplete a good sized retirement nest egg in a hurry. We can use long-term care insurance to offset some of this risk but the most reliable risk management tool is to stay healthy. If you are retiring, you will need to budget some of your time and money for maintaining a healthy lifestyle. I don't claim to be an expert in this area but you had better become one regarding your own health. Not only can poor health deplete your finances, it can also damage your ability to enjoy life regardless of how much money you have.

My Posts Have Been Less Frequent Lately. I have been busy with the business of life. Enjoying beautiful spring weather, planting flowers, and catching and releasing numerous bass. I particularly enjoyed a visit from my old friends and business partners, Larry and Helga Davis. Maybe some of you other folks would like to come by. Give me a call and lets make some plans.