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Post #24 – Summary of Retirement Planning Simplified

Thus far this blog has concentrated on general retirement planning ideas and concepts. To date the blog posts have been numbered because they are presented in a logical order for someone who does not have much experience in the area of retirement planning. In this post I will highlight the main retirement planning ideas and concepts that I have discussed in the previous 23 posts.

I think it is imperative that one adhere to the ideas and employ the concepts listed below if one is to have a chance at being successful in their retirement planning.

1. First and foremost, you should develop a retirement plan. This can be a simple plan developed on your own (when you are young this is OK as you just need to lay out some broad financial goals). Or you can hire an independent financial planner (a better choice when you are at your mid-40s or later) Post #1.
2. I believe the first and most important rule of personal finance is “LBYM.” This stands for Live Below Your Means. In the long journey of retirement planning, if you do not do this, nothing else matters (Post #2).
3. My 2^nd rule of personal finance is to always have an emergency fund of 3 to 6 months of living expenses in savings to provide a financial buffer if something bad happens during your retirement planning journey, and my 3^rd rule of personal finance is to pay all cash for everything you buy except your house (Post #3).
4. Look at the table in this blog post titled “The Cost of Waiting.” This table clearly illustrates how everyday you wait to start your retirement savings plan is very costly (Post #4). Do not delay in “LBYM” and starting a retirement savings plan.
5. In Post #7 I discuss the 4-step process to estimate your retirement nest egg requirements.
6. Post #8 provides a table indicating the recommended annual savings rate as a percentage of current salary.
7. Periodically you should check to see if you are on track with your retirement savings by comparing your progress to the guidance provided in the table in Post #9.
8. In the area of investing your retirement assets I cannot stress more the importance of selecting an appropriate equity allocation based on your personal risk tolerance (Post #11 to Post #13).
9. Portfolio “Re-balancing,” in my opinion, the most impactful yet least understood and practiced concept in retirement asset management (Post #15).

10.  Post #18 talks about the 3 biggest mistakes made by young people:

•    Starting your retirement savings program too late,
•    “Ramping up” your lifestyle after a big promotion or a big debt is paid off,
•    Paying too high management fees for retirement mutual funds.

11.  The 2 biggest Retirement Planning mistakes made by people over 50 (Post #19) and the 2 biggest investment mistakes made by people over 50 (Post #20).

12.  How to construct a simple portfolio that is easy to implement and manage (Post #22).

13.  If you are the type who wants a portfolio set up for you, check out the Lazy Portfolios discussed in Post #23.

The previous list covers the basics of retirement planning and asset investment concepts. If you only follow the important ideas and concepts in these blog posts, over time, you will have a good chance of reaching your retirement goals. Additionally, your retirement asset investment returns, over time, will be at least 90% of the performance of the best Wall Street money managers.

Obtaining only 90% of the return of the professionals may sound like you are leaving a lot of money on the table, but remember the professionals are managing their portfolios on a full time basis and have access to timely information you do not. Additionally, several studies in recent years have shown that the investment returns of the average individual investor are significantly below even the market indexes. The studies conclude that this poor performance by average investors is due to poor trading decisions which are based on greed and/or fear. What I call following the investment herd mentality. Using the ideas and concepts I have described in my blog posts, you should strive to achieve and be happy with matching the long term return of the overall market indexes.

My blog posts from here forward will be more specific in nature. I will talk about specific investment techniques, places to get free or inexpensive non-biased investment advice, alternative investments that one might consider, and other topics. The topics will be randomly selected and, thus, will not have a sequential order to them.

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