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The Importance of Creating a Cash Surplus You Cannot Outlive

Picture this:  You have saved $320,000 in your 401(k) and are well prepared to retire next year.  You have added your Social Security benefit and your hard-fought income goal in retirement has been met of $60,000 a year, $40,000  from the 401(k), and Social Security income of $20,000.  You feel excited and happy! Now you start taking money out and enjoying the good life.  You are in good health and plan on living 25 years or more.  Congratulations!

Now, the picture changes, as it has for most on my clients.   In less than a year they go from happy and comfortable, to bewilderment when they realize in eight more years they will be totally dependent on Social Security income.  I have seen the fear in their eyes many times.

Calculate the numbers: 

  • $320,000 saved
  • Divided by $40,000 from 401(k) withdrawals to live on.
  • This equals just 8 years of income, 8 years!

And now you realize your mother is still alive at age 94, you can see your retirement money will be gone at age 73. 
What do you do now?
Answer:  Cut your withdrawals from $40,000 to $10,000.  This is the only thing you can do.  You need at least $10,000 but if you take any more, you can easily run out of money before you reach age 80.  You make this cut and get very depressed.  Your thoughts go back in time about how you calculated your screen-shot-2016-09-16-at-2-31-17-pmsavings so you would have more money than all the other people you have worked with.  After all, $320,000 is far more than any friends and work associates have been able to saved.  You were proud to be disciplined and save money.

So how could it be so worrisome to have met your goal of $320,000 and yet you must live on only $10,000 a year?  You have to do all this, just so you don’t run out of money when you are age 73. 

  • Why didn’t your 401(k) investment adviser tell you this would happen? 
  • How is it that you have plenty of money and yet cannot take enough income to live comfortably? 

All your questions go unanswered.  You went without many extras during your working years just so you could live comfortable at retirement.  Now your thoughts turn to your friends and associates, what will they do?  They don’t have half the savings you have?

There are solutions!  Just not through a 401(k) and its managers. These people are trained to focus on a good rate of return, never emphasizing that unless you’ve saved at least $1 million in the stock market, you aren’t prepared for retirement.  And who would want to risk putting all their money here anyway? It’s absurd. There are many, many other ways to create a safe and predictable retirement that you cannot outlive. Contact me for ways to put your money in motion NOW to create a cash surplus you cannot outlive: peter@moneymastery.com.

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