What do you do if you don’t plan for their future? You will have a difficult old age. Planning removes the uncertainty surrounding retirement. An extreme example: The desperate guy who went to jail to tide him over financially.
Some people don’t think about what happens if they do not plan for a secure financial future. Such a person was Timothy Bowers. You see, he never took the time to plan. So at age 62, when he lost his job as a deliveryman for a drug wholesaler, he was left in a jam. He was too young to collect full Social Security benefits, which starts for him at 66, and also had no medical insurance.
After looking for work for several months, he found only minimum wage jobs. At 62, he could receive limited benefits, but they weren’t enough to live on. And he’d be stuck with them the rest of his life.
Bowers figured full Social Security benefits would be sufficient. But he needed something to bridge the gap until 66. The action he took was unusual.
He decided to rob a bank. Not to actually get the money, mind you. But to get arrested.
Bowers received only $80 from the teller. Before exiting the bank, he handed the money to the security guard and awaited the police so he could be arrested. When he met with the prosecutor and judge, he stated that he was about to turn 63 and a three-year prison sentence would suit him fine. That way, he would then be at the magical age of 66 and would be eligible to receive full Social Security and Medicare benefits.
The authorities were afraid that, if they didn’t incarcerate him, he would do something more severe to ensure he landed behind bars. The court granted his request for jail time. The prosecutor at the time said: “It is not the financial plan I would choose, but it’s a financial plan.”
The bottom line is that you need to craft a financial plan for retirement, which could last 40 years and must keep up with inflation. A good advisor can help you do this. Far too many people retire without reviewing their investments in the years before they quit working. The asset allocations they set up years ago probably moved away from what they want. Portfolios require constant attention to keep the right balance between risk and return and proper diversification.
At 10 to 15 years before you retire, get a good idea about what will be your future income, including, pensions, Social Security and investments. And look at your portfolio – individual retirement accounts, 401(k)s and non-retirement accounts. Then re-do it a couple of years before retirement.
Look at expenses like housing costs that might go up or down, health-care costs, different types of taxes (some increase, others drop), travel expenses and so on. Next, review your probable income sources like Social Security (the longer you wait, the more income you will receive), your pension (if you’re lucky to have one), rental properties or other cash-flow holdings.
Otherwise, there’s always Bowers’ plan.
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