Only 3% live a dream retirement

As the years go by, a series of concerns appear that most of us did not have before.

Like, for example: will I have enough money when I retire or rather, will I be a financial burden for my family?

Of course the first sensation is fear since nobody would want to be the old man who lives thanks to the gifts of his family.

Because after so many years of work, many of us feel that the best gift we can give our children is to be financially independent in retirement.

Most of us when they talk to us about retirement, what do we think?

Normally the image of a retreat in the Caribbean comes to us, with a cocktail, continuous trips, enjoying with grandchildren and friends.

But according to a report published in Think Advisor it says that:

• Only 3% are living the retirement of their dreams.
• 37% say they live well.
• Another 37% say their retirement is more or less.
• 18% say they are experiencing work
• And 5% say it is a nightmare.

Which leaves us with this scenario, for every 10 people, 4 live well in retirement and 6 not so well.

So of course at this point the question you should be asking yourself is:

How can I be part of those 4 people who live well in retirement and not fall into the other 6 who are not doing so well?

For which we are going to share with you the main steps you must follow to achieve that dream retirement:

1.- Before starting we must know where we are financially:

Here is one of the main challenges, since, if you are a Latino Immigrant in the United States, you will have to take care of yourself a little more taking into account the following factors:

• According to a study published by Unidos US, for every 10 Latinos only 2 have a retirement account.
• While the common American at age 50 has an average balance of $196,000 saved in these accounts at age 50, the Latino has a third of that amount or about $58,000 (Source: Fidelity and US Unidos).
• If you are an immigrant and have not worked all your working life in the US, the amount you will receive monthly could be around $1,200 instead of the average of $1,500.

This tells us that the challenge is strong but not impossible and as long as you get to work on it, the sooner the better.

2.- You need to establish an action plan, leaving it to chance is not the best option:

In the Think Advisor article, 35% ask some people how do you think you will reach your dream retirement?

They said that they hoped to win the lottery, and if this was also your plan, let us tell you that the odds are going to be against you.

Therefore, we suggest not leaving everything to chance, especially something as important as retirement.

Which we could say is the biggest vacation you are going to take in your life and without receiving an income or compensation if you do not prepare.

That is why you must remember that we are experiencing the highest inflationary levels of the last 40 years, which has as a consequence:

• Your money in the bank account is worth less every day.
• No one has been able to retire or become a millionaire just by having money in the bank.

Investing your money in a portfolio with high diversification and low costs is a solution that has proven to be the most successful over time.

A portfolio that fits your profile as an investor, achieving an adequate relationship between risk and return.

There are three ways to do it:

1. You invest it yourself,
2. You are looking for a professional to manage your investment or portfolio for you.
3. You use a mixed option, one part is invested by you and the other part you transfer the administration to a professional.

What you should do without a doubt if you live in the United States is to take advantage of the tax benefits offered by retirement accounts called: 401K, IRA or Roth IRA in such a way that the return that your money earns can grow more strong in time.

3.- How do I know how much money I need to save for my retirement?

Of course my automatic answer to this question would be: you should go to a Certified Financial Planner.

Which helps you evaluate all your current financial reality, having a clear goal and action plan.

But as statistics show that for every 10 Latinos only 3 save, we share a rule that can serve as a first approach to the subject.

According to a study published by Schroders in 2022, they ask a thousand people how much money they think they will need to be able to retire comfortably in the United States and the answer was $1.1 million.

In reality, people feel that it is an adequate amount, the report indicates that only 24% of those consulted will be able to reach this figure.

Let’s do a calculation, in order to understand if that amount is the most appropriate, taking into account that for many it may sound like an exaggerated amount.

Let’s use the following variables:

• The average annual income in the United States is about $63,000 (according to worldpopulationreview.com)
• An annual report from Fidelity tells us that the average amount that a person should withdraw from their retirement plan should not exceed 4% or 5% so that their money can last as long as possible in retirement, being invested in a portfolio of stocks and bonds.

If your goal was to maintain your same income level of this $63,000 without taking into account the social security pension benefit.

We would be saying that to produce this amount annually, you should have at least a portfolio of about $1,260,000, withdrawing 5% each year.

As we know that many will wonder what would happen if we include the annual Social Security benefit in the USA, which can be in the order of $14,400 for a Latino Immigrant, the target amount would be $972,000, which would allow us to say as if it were a Spectacle of Who Wants to Be a Millionaire, that the consulted audience is right when it tells us that the amount goes for one million.

In conclusion, we could that more than worrying we should take care, start as soon as possible and avoid being part of that 60% of dissatisfied retirees.

Alonso Rodríguez Segarra

Founder & CEO Advise Financial

advise-financial.com

Alonso is a “CERTIFIED FINANCIAL PLANNER™” who is dedicated to increasing the Financial Well-being of nurses, physicians and successful immigrants in Florida and Texas. With more than 20 years of experience in the world of finance, always working for the best interest of his clients, under fiduciary criteria.