Over the last 20 years many things have changed with retirement. Much of this has to do with the unsustainable lifestyle cost of people living until 85 and the ever rising cost of health care. There was also a shift away from the concept of lifetime employment with one company, lifetime marriages and traditional mortgages. All these changes destroyed the traditional retirement path. The baby boomers are the first generation never to retire in America. Baby Boomers are so woefully unprepared for retirement and they have all the familiar excuses; the kids' education costs, the housing crisis, bad stock markets, job changes and divorce. The result is a generation of Americans that will live the longest in history but with a rapidly declining standard of living.
The fate of the Gen X and Y generation is even worse. My generation has all the same issues of the baby boomers but worse. The baby boomers had the 80's and 90's stock market, which averaged double digit returns. They had a housing market that went consistently up, but Gen X and Y, not so much. The current generation of younger people is way behind. Homes are expensive, lifestyles are important and when it comes to saving money, forget about it. Saving money is not that important compared to a night on the town or a trip to Thailand. We are so focused on current experiences that we are sacrificing the totality of our lifestyle over the course of our lives.
There are no guarantees anymore, not even Social Security. The 401k does not work the same as a pension. There are no pensions for people unless they work for the public sector and soon that system will end. We are on our own, to make money, live our lives and hope we never get too old to work.
Life in America in many ways has never been better, but when it comes to retirement, forget about it. We live for the now and the spending mentality is the norm. One day, working gets old and is not as fun or easy as it used to be. Enjoying the last 10 or 20 years of your life without having to earn a paycheck is now just a lottery dream.
I refuse to let the carefree retirement dream die. Saving can be fun, financial security feels great. Owning a home and paying it off can be a reality and making money in the stock and real estate markets might be a very real opportunity over the next 20 years.
Here is my advice: First, you must make a budget and stick to it. Learn how much you can save or the ways you can adjust your lifestyle so you can save at least 15% of your gross income. Second, use your tax deferred or tax free retirement accounts like your 401k, IRA or Roth IRA, especially the Roth IRA, as it is a source of tax free income*. This is a dream come true at retirement! Third, save for your kid's college costs and start a savings plan to buy a house. Make sure you protect yourself with health insurance and life insurance. That's it. Just put the plan in place, save and invest your money wisely and one day you'll be able to do whatever you want. Start a plan early and save as much as you can when you are young, since it only gets much harder when you get older. Most importantly, get help from a financial professional; you only have one chance to do it all correctly.
Gerber Kawasaki Wealth Management
2716 Ocean Park Blvd #2020
Santa Monica, CA 90405
Securities offered through LPL Financial Inc. Member FINRA/SIPC. Investment advisory and fixed insurance offered by Gerber Kawasaki Inc., a registered investment advisor, not affiliated with LPL Financial Inc.
This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. Investing involves risk including potential loss of principal.
*Roth IRA's have rules and qualifications to receive tax free income; this may not apply to you if you do not qualify.