Three Big Mistakes in Retirement Planning
Three Big Mistakes in Retirement Planning
by Ben Stein
Monday, April 3, 2006
[Ben Stein]
A few days ago, I sat at an outdoor café on Las Olas Street in beautiful Fort Lauderdale, Fla., and had a dismally tasteless lunch. Next to me was my lovely wife of many decades and a friend from the movie business who now lives in Florida. The friend is in trouble.
He had gone through a magnificent career in Hollywood as a high official at a very big studio, the head of two major production companies, and a reputation as big as a Cadillac. Then, very relentlessly, his career unraveled or imploded or maybe just plain went away.
Partly, the problem was that he was tired of Hollywood. But partly it was also that in Hollywood, age is everything, and by his mid-fifties, he was considered too old to be totally hip to what the young moviegoer wants to see.
A Basic Idea Too Commonly Ignored
So far, it's a typical picture of life in Hollywood. It happens to everyone. The difference with my friend -- and with many friends I have in Hollywood -- is that this man, whom I will call Kevin, has made a foolish mistake. In fact, he has made a few foolish mistakes, and these cost him dearly.
His first mistake had to do with probably as basic an idea in consumer finance as there is -- and likely the most frequently ignored and misunderstood. It was explained to me in stark, stunningly brilliant terms by my friend and colleague, Ray Lucia, a nationally operating Certified Financial Planner, host of a huge national radio talk show about money, frequent guest on Fox News, rock singer, and generally supersmart guy.
The key in financial life, Ray told me when we first met years ago, is to "match your liabilities with assets."
That is, for every liability that's going to come down the pike, Ray explained, you must have a matching asset to meet it. My pal Kevin, like about 40 million other Baby Boomers racing towards retirement, had not taken the time and trouble to plan for the largest possible liability -- retirement. He mostly just never thought about it.
But when he did think about it, he engaged in what psychiatrists call "magical thinking". He thought he would somehow one day just strike it so rich that money would fall from the sky. Thus, he didn't save, didn't make a retirement plan, and just hoped for the best.
Life Happens
Alas, money didn't fall from the sky. Instead, he left the Hollywood labor force about 10 years earlier than he'd thought he would. He had some modest savings and a small inheritance, so he didn't starve. And he has a house he will soon sell. But he didn't make provision even remotely adequate for maintaining his pre-retirement lifestyle. Now he's tortured by anxiety, had to drastically shrink his lifestyle, and is just plain sad.
The second giant mistake he made, embedded in the first, was in failing to foresee that in life, the bad scenario can and does often happen. It's not called "life" for nothing. Kevin should have realized that he would probably be the victim of age-ism, like so many of us. He planned for the most optimistic outcome, but that scenario rarely happens.
http://www.my-credit-guide.com
by Ben Stein
Monday, April 3, 2006
[Ben Stein]
A few days ago, I sat at an outdoor café on Las Olas Street in beautiful Fort Lauderdale, Fla., and had a dismally tasteless lunch. Next to me was my lovely wife of many decades and a friend from the movie business who now lives in Florida. The friend is in trouble.
He had gone through a magnificent career in Hollywood as a high official at a very big studio, the head of two major production companies, and a reputation as big as a Cadillac. Then, very relentlessly, his career unraveled or imploded or maybe just plain went away.
Partly, the problem was that he was tired of Hollywood. But partly it was also that in Hollywood, age is everything, and by his mid-fifties, he was considered too old to be totally hip to what the young moviegoer wants to see.
A Basic Idea Too Commonly Ignored
So far, it's a typical picture of life in Hollywood. It happens to everyone. The difference with my friend -- and with many friends I have in Hollywood -- is that this man, whom I will call Kevin, has made a foolish mistake. In fact, he has made a few foolish mistakes, and these cost him dearly.
His first mistake had to do with probably as basic an idea in consumer finance as there is -- and likely the most frequently ignored and misunderstood. It was explained to me in stark, stunningly brilliant terms by my friend and colleague, Ray Lucia, a nationally operating Certified Financial Planner, host of a huge national radio talk show about money, frequent guest on Fox News, rock singer, and generally supersmart guy.
The key in financial life, Ray told me when we first met years ago, is to "match your liabilities with assets."
That is, for every liability that's going to come down the pike, Ray explained, you must have a matching asset to meet it. My pal Kevin, like about 40 million other Baby Boomers racing towards retirement, had not taken the time and trouble to plan for the largest possible liability -- retirement. He mostly just never thought about it.
But when he did think about it, he engaged in what psychiatrists call "magical thinking". He thought he would somehow one day just strike it so rich that money would fall from the sky. Thus, he didn't save, didn't make a retirement plan, and just hoped for the best.
Life Happens
Alas, money didn't fall from the sky. Instead, he left the Hollywood labor force about 10 years earlier than he'd thought he would. He had some modest savings and a small inheritance, so he didn't starve. And he has a house he will soon sell. But he didn't make provision even remotely adequate for maintaining his pre-retirement lifestyle. Now he's tortured by anxiety, had to drastically shrink his lifestyle, and is just plain sad.
The second giant mistake he made, embedded in the first, was in failing to foresee that in life, the bad scenario can and does often happen. It's not called "life" for nothing. Kevin should have realized that he would probably be the victim of age-ism, like so many of us. He planned for the most optimistic outcome, but that scenario rarely happens.
http://www.my-credit-guide.com