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The Most Common Obstacles To A Stress-Free Retirement

By June 7, 2023November 22nd, 2023Active Investor Education, Food for thought
Couple calculating how much they'll need for a stress-free retirment

And how to overcome them

Over the past 30+ years, I’ve seen 1000s of self-directed investors cripple their long-term profitability and endanger the idea of a stress-free and self-sufficient retirement in the process.

There a countless reasons for which these situations have occurred.

Some were unique to the individual’s circumstances.

Some were one-in-a-million occurrences.

But some mistakes were repeated over and over again. And they “killed” portfolios regardless of their size, investors’ background, retirement goals, etc.

The bad news is these mistakes are still wreaking havoc in portfolios all over the world.

The good news is there are ways to stop these portfolio killers from affecting you, so you can enjoy a stress-free retirment.

All it takes is knowing what they are and then figuring out the best way to handle them depending on where you are on your investing journey.

Which brings us to today’s article.

Continue reading to discover the most common reasons why investors come unstuck in the stock market…

And the actions you can take to prevent the same fate.

Let’s dig into it:

Longevity Risk And How To Ensure You Have Enough Funds For A Stress-Free Retirement, No Matter How Long It Lasts

Who would ‘ve thought living LONGER would pose a problem for many retirees?

Well the stark reality is, it does. Not in the sense that people don’t want to live longer, of course. But in the sense that the average nest egg is likely to run out years before we inevitably meet our maker.

You see, most people invest with “safe” options such as mutual/managed funds. And by my calculations, the returns they get in doing so are likely only going to grow their nest eggs enough to cover 10-12 years of retirement (whilst enjoying at least the same level of lifestyle as when they were working).

Yet, the average length of retirement in Australia is 30 years for a couple (Source: Australian Retirement Trust). Meaning you’ll need a lot more funds to actually live through and enjoy retirement as most of us imagine it to be.

You know the scenery:

Sunset walks along the beach, country drives, clear skies and deck chairs…

And yes, you deserve all these things and more. But if you rely on mutual funds and government pensions — your chances of actually getting them are slim.

Here’s why:

The Dangers Of Relying On Government Pensions And What To Rely On Instead

The lifespan increases I mentioned above have put even more pressure on the already over-encumbered government pension funds.

So much so that they are getting ready to burst as we speak.

Take the UK, for example. Their Government Actuary’s Department, or simply the guys that pay out pensions, have calculated their funds will go bust in the 2030s. This happened in 2019. And I doubt anything has changed in the meantime (at least not for the better).

The U.S. is dealing with a similar situation. Their Union Pension funds are expected to bleed out by 2025, which is eerily soon. Government-managed Social Security funds have a slightly better perspective — they’re expected to last until 2032.

The same thing is happening here in Australia, New Zealand, and virtually anywhere on the map you stick your finger.

But will governments actually let pension funds dry out?

Of course not. But the “fixes” they’ll make to resuscitate them will hurt you one way or the other.

I’m talking about raising the pension age (ringing any bells?) and/or the amount retirees get. At the very least, governments will borrow more when the time comes. Which will still indirectly (e.g., tax raises) affect your nest egg’s size.

So what’s the takeaway from all this pension fund talk. It should be pretty clear:

You can’t rely on government-funded pensions if you want to enjoy a comfortable & stress-free retirement.

Instead, you should seriously consider taking matters into your own hands so you can grow your savings sufficiently enough. And you should do so now.

It’s much easier than the financial fraternity makes it out to be. All it takes is a few simple steps and slight habit changes…

And you’ll be en route to a financially self-reliant and stress-free retirement.

The exact changes you need to make is a topic for another article. Here, I’m sticking to introducing the most common portfolio killers…

And the next one is particularly dangerous, especially in the long run.

Inflation: Don’t Let It Blind-Side You

Been watching the news lately?

Inflation – it’s everywhere, and it’s rampant.

Just hearing the word “inflation” is probably enough to make you feel uneasy.

That’s because with rising inflation comes rising expenses. And if your investment returns aren’t enough to keep up, well there goes the real value of your nest egg.

If you haven’t been prepared for these current rises, you’re setting yourself up for a world of worry and financial stress later on. So I suggest you start doing something about it now.

And the only way to get ready is by ensuring your savings always outgrow the inflation rate.

Cash in the mattress or bank definitely won’t help you do this.

Same goes for mutual funds.

If you look at how they’ve performed historically, the returns on offer simply won’t do enough to grow your nest egg so you can enjoy a self-sufficient and stress-free retirement – in spite of inflation and market declines.

And both are as sure to happen as the sun will rise tomorrow. So, if you aren’t ready to minimize their impact on your savings…

You will create the infamous Retirement Gap. Meaning you’ll probably have to delay your retirement plans as a result.

To prevent this scenario, take action now. Evaluate the investment returns you/your fund have achieved so far. And if they aren’t at least 10.25% annualized, start looking at ways to improve them.

These 7 elements might help.

How To Get Ready For Financially Covering All Health-Related Risks Retirement Brings… And Prevent Your Spending Habits From Undoing You

Inflation isn’t the only reason expenditures rise…

Lifestyle creep is a big factor among retirees.

More often than not this happens as a consequence of the extra free time and the desire to live life to the fullest that comes with retirement.

A better investing strategy might be able to help with this, but not forever. Changing your mindset and setting clear spending limits based on your priorities is the only long-term solution.

On the other hand, a better investing strategy is crucial for covering health-related risks. No one wants to experience medical trauma, but the harsh reality is the chances of it happening rises as we age.

So, plan for this fact. And ensure a part of your nest egg remains intact to cover these situations.

Yet another thing you can’t do if your savings don’t grow at an above-average rate. Unless you want (and can) work through your retirement.

To stop this from ever becoming an option, do this:

Understand The Potential Pitfalls On The Road To A Stress-Free Retirement… And Act Now To Avoid Them

Today’s article hopefully helped you see the dangers of retirement nary a few warns you about. The financial fraternity certainly doesn’t.

Even more importantly, I hope you’ve grasped why taking control of your investing is your best bet for decreasing the chances of any of the above obstacles affecting you.

I wish I could have offered a step-by-step sort of guide for handling each obstacle. But unfortunately, things don’t work that way.

However, if you take this general advice and at least research how you can take control of your investing and grow your returns…

The steps will start appearing in front of you one by one. As long as you make the first one today…

To your success.

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