Leadership: Disturbing Numbers

Few young people think about long term financial planning.

It's so remote that they trust it will somehow take care of itself. Or they expect to take care of it later, such as when they reach retirement.

That's big mistake. They could reach age 65 with no savings and no income.

This is especially important for:

1) People in entrepreneurial careers with intermittent income.

2) People who have adopted a debt-based lifestyle.

3) People who have ignored managing their careers to maximize the return on their investment of time spent working.

Here are two important facts:

1) Your Social Security income depends upon the payments that you made while working.

First, you must have paid Social Security taxes in a total of at least 40 quarters (10 years) to qualify for any payment, regardless how much you paid during that time.

Second, your Social Security income will depend upon how much you paid into the system while working. People who paid the maximum over a long career will receive the maximum income. Those who paid less will receive less. For example, a Social Security agent told me that one person in her area was receiving only $5 per month.

2) You will need to have saved at least 25 times your annual withdrawal from savings to guarantee a lifetime income from your investments. Note that this assumes that your investments will grow by an average of at least 4% after inflation and account management fees. The amount needed from savings will depend upon many things, such as the amount received as a pension (which will be larger for those who spent an entire career working for the same company), the amount received from Social Security, and lifestyle.

Consider this a friendly nudge to being financial planning now.

Be wise in making selections. Recognize there is an inverse relationship between risk and reward. That is, those investments with high returns involve high risk. Recognize that established companies are there because they have delivered consistently reliable service over long time.

Key Point: Financial planning is an essential part of time management.

Much success,

Steve Kaye

714-528-1300

PS: My workshop on Time Management shows easy ways to prepare for the future.

Author, Speaker, IAF Certified Professional Facilitator

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