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REVIEW: Money Magazine’s 7 Secrets to a Richer Retirement

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REVIEW: Money Magazine’s 7 Secrets to a Richer Retirement

Over the weekend, I came across the October 2010 copy of Money magazine that apparently I had stashed away. The lead article in this issue is titled 7 Secrets to a Richer Retirement. After reading through the article, I thought it would be worth reviewing and sharing some of the valuable points.


#1 “Get a good picture of the future you”

According to research, our brains are not programmed to identify with our future selves. For that reason, we have a hard time trading rewards today for rewards in the future. That single character trait is often the biggest hurdle to preparing for retirement. Socking money away means that today’s you can’t have something. But if the future you is a stranger, then it is difficult to trade something you want so that a stranger can have something years from now.

So what you need to  do is get to know your future self. Here are two ideas from Money’s article:

  1. Write down what your life will be like when you retire. Where will you live? How many kids and grandkids will you have? How will you spend your time? What car will you drive? How big is your house? Is it paid off?
  2. Consider one of your grandparents of the same sex. Use him or her as a proxy for yourself. See what his or her life is like and what you potentially are facing as you age.

My Review: Self-visualization can be a powerful motivator, but don’t stop here

#2 “Try to beat the other guy”

We are all at least a little competitive. Money recommends putting that to good use and apparently some research says it helps. Basically, if we find that we are lagging behind our peers when stacked up side by side, then some primal need kicks in and we make positive change.

ING actually launched a site where you can see how you compare. Statistics show that more than 20% of the people who spend time on the site make improvements. So maybe you should check out INGCompareMe.com.

My Review: Can be helpful in helping you to get motivated, but don’t spend too much time playing online staring at what everyone else is doing

#3 “Use reminders and checklists”

One of my favorite moments in the Disney movie Up is when the dogs are easily distracted by squirrels. We humans are prone to easy distractions as well, especially since preparing for retirement can be a 40 year process. So creating reminders and checklists can help you stay focused.

One great tip from the article is to create email alerts for yourself, though be specific. For example, send yourself an alert that says, “Put $2000 in Roth IRA by June 1,” or “Add $1000 to emergency fund by Sept 1.”

My Review: One of the easiest tips to implement and it can really pay off

#4 “Think bite-size pieces, not whole enchilada”

MetLife in 2008 released a Retirement Income IQ Test that indicated that most people overestimate how long their savings will last. In fact, “experts advice retirees to start withdrawing no more than 4% of their money each year to keep from running out – but 69% of people think they can take more. (quote from Money article)”

Apparently the problem is that we are all trained to think about our retirement fund as one large lump of money when we should actually think about our retirement needs in terms of what we will need each month. Tools like T. Rowe Price’s Retirement Income Calculator can help you estimate your monthly income in retirement. Compare that number to what you you want to have and you’ll have a better idea whether or not you are on track.

My Review: I absolutely agree that you need to consider your monthly income in retirement rather than just a single pile of cash in the bank

#5 “Make friends with an annuity”

If you’ve read any of my prior posts on life insurance companies, then you know that I have some strong feelings on the topic. Though I have to admit that an annuity can make a lot of sense for some people. Basically, by trading in some of your nest egg, you can create a stream of monthly income. The danger lies in the financial security of the insurer. So be careful choosing a company if you opt for an annuity.

My Review: Determine how you will disperse your nest egg to yourself and that may include some insurance options

#6 “Take losses in stride”

Research shows that as you age you become more loss averse. Meaning, you are less likely to take risks and feel the pain of a loss much more than the joy of a gain. The problem that this can cause is that you may invest too conservatively and not have enough money to last.

To help abate your concerns and maintain a healthy portfolio, you should stay financially educated. Don’t stop learning and watching. Also, don’t put too much into stocks after you retire and keep it that way. If you aren’t overexposed to stock market fluctuations, then you are less likely to freak out if the Dow Jones has a bad day, week, or month.

My Review: Just stay informed and don’t let small losses distract you

#7 “Protect the future you”

Personally, I’m looking forward to this problem. Research shows that as you age, your brain undergoes some subtle changes that make you more optimistic. In fact, you become less aware of danger. One reason why older people are more susceptible to scam artists.

So Money recommends the following to help keep your optimism in check:

  • “Stay active” – Stimulating both your brain and body can help keep your thoughts clearer
  • “Simplify your finances” – Have fewer things that you can mess up
  • “Be hard to find” – Don’t talk to strangers who could be scam artists
  • “Arrange now for help later” – Create a durable power of attorney so that a loved one can step in if need be

My Review: Nobody wants to face the reality that you can’t take care of yourself, so take care of yourself physically and mentally so you can

For the full article, check it out on CNN Money.

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