How Much You Should Have Saved by 50 – Episode 218

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[00:03] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your hosts, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel and once again, we have bestselling financial author and president of Partners for Prosperity, Kim Butler with us today. Hi Kim. Hello Todd, happy to have a discussion with you today that will benefit lots of people. Kim, we’re going to be talking and this is something that you found on the web and it was under CNBC Make It. I don’t know what the Make It section is, this is new to me, but it’s in their money

[00:56] section and it’s written by Emmy Martin and it was written on September 1st, 2017. So I hope that’s enough that you guys can go out and find it if you want to read the article, but it’s here’s how much money you should have saved by age 50. Now it starts out that says most American retirement savings are dangerously low and I completely agree with that, but it quotes a 2016 report from the Economic Policy Institute working age family had 5000 in savings for retirement in 2013. So pretty pretty recent numbers. Now at the same time, financial services company Fidelity put out an estimate that if you’re going to retire at age 67 by age 50, you need to have a minimum of six times your annual salary.

[02:05] So unless your family is making $800 a year, you have a huge gap to make up. And after reading this, I would think there’s some people that think why even try? Yes, that is a challenge, isn’t it? So let’s address a couple of these things. The first thing that I want to point out is that at age 50, if you have six times your income, I guess in theory, they’re thinking that by age 67, that’s going to somehow have, let’s see, multiplied like times 10. And so I think that’s a crazy unrealistic interest rate that they’re asking people’s investments to grow. Because my question is, what are you going to do with the other years? In other words, at 50, if you only have six years of your income saved, then what

[03:10] are you going to live on the other years and to think that your investments can grow and or you can all of a sudden magically start saving massively amounts higher percentage of your money, that math is not going to work. And that’s absolutely part of the reason that I stopped doing financial plans, is it left people feeling helpless because the math didn’t work. You know, you can throw some assumptions in there and if you tweak it enough and you falsify tax brackets and you shrink down inflation, which is a huge, scary thing to do, and it’s done all the time, and you bump up your investment rates a little bit, you can make the math worth. Sorry, you can make the math work, but it’s purely a mathematical exercise.

[04:03] It’s not anything based in reality at all. Well, I think the other thing is, too, is that when we think of age 67 and I think if I went back 10, 15, 20 years ago and thought about what I would be planning to do at age 67, the assumption would be that your expenses would be relatively low because you’d be reading a newspaper, watching television and maybe planting some flowers in the front yard for fun. And as we see our clients that are actually 67 and 77 and 87, they’re doing all kinds of exciting things. They’re not living on porridge and watching out the front porch. Absolutely. If you go and visit growingbolder.com, you see life lived on the edge and in a good way of people that are, you said it well, 67, 77, 87.

[05:07] What about 97 or a hundred and seven? I mean, we need to start talking about lives as if that’s normal because that is what is going to be normal. Somebody you’re in my age today and in their fifties, piece of cake going to learn to live well past a hundred in order to do that. You’ve got to have work continuing well into your seventies and eighties. Otherwise inflation is going to absolutely eat you alive. We had a circumstance in our family. Just recently, my husband’s father happened to hear the amount that his childhood home sold for. And this is in Houston. So Houston’s a pretty normal real estate market, you know, goes up and down, but not a lot and his childhood home sold for a certain amount.

[06:00] And he was just absolutely flabbergasted by that. Oh my gosh, I wish I’d kept that home. That’s so much money, et cetera, et cetera. And Todd said, well, let’s put a calculator to it. It was a 3.7% return. The value of the home over 50 years ago to the value of the home today. In fact, I think it was 59 years. It was only 3.7% and your realtor would say, yeah, that’s pretty typical. The pretty typical price appreciation on homes is around three to 4%. And here my father-in-law had been thinking it sounded like it was 10 or 20%. And yet that’s what inflation does. It just is a really a stealth oriented tax, really. I mean, it reduces our dollars. That’s what taxation does. And inflation does it in as quiet and steely of a way as it can come up with.

[06:56] And that’s why so many people are so shocked by its impact. I think what’s most interesting is, is the message here is that if you’re 50 and you have 20 times your annual income, you still need to be thinking about remaining active and continuing cashflow. You’re not four times ahead of the game. And if on the same token, you’ve got one times your annual income instead of six, the same rules still apply. Yes. So well said. And that’s why our seven principles of prosperity, one of them is flow and the focus on cashflow. You know, we had a conversation earlier today that is on our podcast or will be shortly about self-worth. And so this is a good time to just pick up on that, how self-worth is

[07:50] so much more important than net worth and also how cashflow is so much more important than net worth. And yet most typical financial advisors are measuring things based on net worth. And it’s just not indicative. And this is back to the CNN article. You know, they, they talk about it right there. They actually at least had that right. Okay. You need, you need to focus on income. You need to focus on, well, they said six times your income, but it really should be like 25 or 30 times your income. And yet I want people to still have hope. You know, if you’re in your 50s, 60s, 70s today, find work you love and do it as long as you possibly can. Take sabbaticals, take long weekends, do whatever you need to do

[08:37] to get rejuvenated again, but find work you love and keep on working. And within that then save. It’s so critical that we save. And even if we just start out saving 1% of our income and then two and then 10 and then ideally 20 and possibly even 30, and we even have clients saving 40% of their income, then you can really build the security and the peace of mind that comes with having an emergency opportunity fund. I’m not even talking about investing yet, just having cash. And then of course, secondarily is that cash flow. That should be your second goal. First cash, second cash flow. So I guess our response would be to the question of why even try? It’s because number one, that’s what you were put here to do.

[09:28] And that’s what makes life interesting. And number two, I think this would be a great point to give away your gift. We haven’t done that in a little while. You’re right. So we have a book called Financial Planning Has Failed. And yes, it does talk about how incorrect some of those assumptions are that those two larger organizations filling CNN were making, but it gives solutions. It gives examples of places to store cash. It gives examples of where to get investments that do cash flow to help people with that arena. And then of course, it gives examples of what to do to get money to grow. You know, if you are the person that is at age 50 and already has six years of income saved, hopefully more, but even if that is all that you have saved,

[10:20] then that money needs to be growing for the next 20 or 30 years until you get up to age 70 or more. And so we’ve got investments where growth is the primary goal, but it has a secondary goal right behind it, and that is to not lose principle. You know, here we are in 2017, you and I both having thought that we would have had another market correction by now, we haven’t, that’s fine, but we all know it’s going to happen sometime. It’s just the nature of it, the cyclical nature of the stock market up, down, up, down, up, down. And so we must seek out investments that do not go down. So if you’re curious about that or curious about investments that cash flow, or as I said, curious about a place to store cash, that’s going

[11:05] to get you a better environment than the banks, then please go to partners number four, prosperity.com slash ebook. And there’s an audio version there as well. Again, that’s partners number four, prosperity.com slash ebook for the book. Financial planning has failed. It’s the only place it’s available. It’s not on Amazon, but you can get it for free at partners for prosperity.com slash ebook. And if you have any questions or you’d like to make a comment, hello at partners, number four, prosperity. And as you’ve said, we love to have listeners questions on our podcasts. So please send them in. Hello at partners, number four, prosperity.com. I think we can honestly say that we have never backed away from a question.

[11:56] I mean, I, when we very, very, very first started this podcasting thing and we had a live caller come in, call in, just rattling off all that profanity. We had to learn a lesson there, but we have never backed off of it. We have never not answered a question. So if I just want you to know, that’s how serious we are about this stuff. I mean, you can ask anything that you want and we will find the answer. Absolutely. Yep. We’re happy to have dissenters. We’re happy to have arguments because that’s how people learn. Super. Well, this is the no BS money guy for the prosperity podcast. Saying thanks again, everybody. And we’ll talk to you again real soon. Thank you for listening to the prosperity podcast to take control of your money

[12:47] and have it work for you. Visit us at partners for prosperity.com. If you liked this episode, make sure you subscribe and leave a review.