Friday, April 15, 2011

Retirement Planning 15 April 2011

THE COST OF LIVING Here, I’m not thinking about the cost of living index and day-to-day expenses, but rather about health care costs. While we have some control over day-to-day expenses (we can drive less, we don’t have to go to Europe for holidays) the same doesn’t apply to health care. Once retired, we’ll feel that health care impact on two fronts – insurance premiums and out-of-pocket costs. Now my wife and I are in excellent health, but visits to the doctor still cost us the excess. So let’s say around $60 per month. Then prescriptions and incidentals at the chemist cost around $200 per month, and our basic hospital cover (even with a $250 excess) is $250 per month. That’s in excess of $6,000 pa! The bottom line is – as I can’t afford to retire, it’s just as well I enjoy my career. If you would like me to help you explore your options for 20-25 years of comfortable retirement, feel free to contact me – Bernard Kelly – anytime. My mobile is 0414 778 518 HOW TO FIND A RETIREMENT JOB If you intend to remain engaged with society after you retire (which today probably means only you’re in your late sixties and leaving a long term job) and you’re thinking about working after “retirement”, the key question to ask this: If you had to earn only 33% of what you’re earning now, what would you choose to do? Would it be a different job, would it be a different job description, would it be a different career, would it be a different field? Suddenly the possibilities become endless. WHY THE PENSION WILL BE SQUEEZED For some time now I have been saying “don’t plan to rely on the pension” based on the premise that the government can’t afford to pay us all the pension as it did for our parents. Here are the statistics: In 2009-10, the Australian government spent fully one third of the federal budget – around $109 billion - on social security and welfare payments. That was equivalent to 8.4 per cent of gross domestic product. In contrast, during the early 1970s, the welfare state was 3.8 per cent of the total economy. Naturally, over time, welfare spending is driven by an increase in the number of recipients, including age pension recipients. However, as Ken Henry , the then Treasury Secretary, told a Whitlam Institute symposium in November 2009, the proportion of income-support recipients that are age pension recipients has fallen from around 75 per cent in 1971-72 to around 50 per cent, due to expanded support for sole parents and people with a disability. My contention is that – as the government wrestles to control spending on social security and welfare – the aged pension will also be subject to belt tightening. STOCK MARKET VOLATILITY MAKES IT IMPOSSIBLE TO PLAN FOR RETIREMENT- SURVEY March 8, 2011, Washington, D.C. - A new public opinion research report (with implications for Australia) finds that an overwhelming majority of Americans believe that stock market volatility makes it impossible to predict retirement savings. Faced with an uncertain economy, historically low yields on fixed income, skyrocketing medical costs, the potential of rising inflation, and the looming bankruptcy of Social Security and Medicare, many US workers with are rightfully concerned about their prospects for a comfortable retirement. And many are coming to the realisation that longer life expectancies mean that people may have to plan to spend as much time in retirement as they did working. Nearly three‐quarters of Americans believe that stock market volatility makes it impossible for the average American to predict how much money they will have in their nest egg when they retire, underscoring their concerns about flaws in the current US retirement system. The research also finds that Americans remain highly anxious about their ability to achieve a secure retirement, view retirement as simply surviving, and believe that the government is disconnected from Americans’ retirement anxiety. These findings are contained a new report, “Pensions and Retirement Security 2011: A Roadmap for Policymakers,” released by the National Institute on Retirement Security. The full report is available at About NIRS - The National Institute on Retirement Security is a not‐for‐profit, non‐partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy through national research and education programs. It is based in Washington DC. VISUALISATION CAN HELP WITH PLANNING We need to adapt, and think how different retirement is going to be for we baby boomers. And we need to employ new tools to understand this new environment. Remember it was Alvin Toffler who said “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn”. So let’s explore Visualisation. Visualization is a psychological technique and it can play a tremendous role in our financial planning. It’s something humans are inherently good at, says Farnoosh Torabi author of “Psych Yourself Rich”. He interviewed Dan Ariely, author of the New York Times best-seller “Predictably Irrational” and Professor of Behavioral Economics at Duke University. Ariely says “we do more vision more hours of the day than we do anything else and we’re good at it.” “What’s more,” says Ariely, “when it comes to visual illusions, we can see the mistakes.” Visualization will enable your whole body and brain to understand how this accomplishment—in this case retirement—may (or may not) resonate in your life. To visualize retirement clearly, you must be really honest with yourself and imagine all the different scenarios that could play out. Ask yourself the following questions: • Will I need to continue to earn money? • How do I envision working in my 60s? Starting a business? Currently, baby boomers and those over the age of 60 account for more than 50% of small business owners in the USA. • What will I do in retirement? Where will I live? • What kind of downsizing, if any, am I comfortable doing (e.g. reducing fixed expenses, moving to a smaller home with a smaller mortgage, selling clutter, going from two cars to one)? • Who will take care of me if I become sick? Here are some things we can all visualize with some certainty: • Living a long time. There is a good chance you (and your partner) will live longer lives than the generation before you. That’s why most financial advisors now recommend that clients plan for a 30-year retirement. With life expectancies on the rise, it’s probably safe to assume that number will increase down the road. • Inflation. While increases in the cost of living have been modest for the past several years, that trend will likely end soon. Experts predict that an inflationary period may follow in an economic cycle like the one we are currently experiencing. • A life without the pension. With the government under all manners of budgetary pressure, it is illogical to believe that the pension will be untouched. Planning for you retirement without the pension will take the uncertainty out of your future. Acknowledgements - the original article appeared at A WORTHWHILE HOBBY A friend of mine, in his mid-sixties, started to write a book on “the history of finance” as a retirement project. But has now switched to “the history of malt whiskey”. Apparently the research is easier – the distilleries send him their histories all written for him to cut and paste – but the big bonus is that some of them have sent him six bottles “to assist with the evaluation of the product”! US BABY BOOMERS CONCERNED ABOUT RETIREMENT People are scared. Embarrassed. Ashamed. They don't want to tell anyone. How could it be that everyone else but them seems to be on the right financial track heading into the retirement tunnel known as the post-work years? The answer: everyone else isn't – if a recent US survey has any relevance for Australia. Only 11% of Americans are deeply confident that they're financially prepared. 44% of Americans born between 1946 and 1965 (the baby boomer years) are not confident that they'll have enough money to live comfortably in retirement, according to the Associated poll. Source: 5 April 2011 PROFITABLE HOBBIES You can now buy my manual “37 case studies of Profitable Hobbies for immediate application” at At $19.75, it’s excellent value if you think you’ll be needing an additional source of income at some stage. HERE’S MY BLOG My blog is at I use this for current news – as part of my social network tools FOLLOW ME ON FACEBOOK Go to I’M ALSO ON YOUTUBE Regards Bernard Kelly mobile 0414 778 518 Australia’s Retirement Strategist® “expect to reap an extra $449,999* when you’ll really be needing it”. PS As I don’t spend my advertising budget on traditional media, I’m able to pay you $5000 for successful referrals About Bernard Kelly: Bernard Kelly BEcon MBA CRPC Australia’s Retirement Strategist®, is a highly sought-after advisor, retirement authority, thought-leader, author and radio commentator because he makes the complicated and mundane topics of investing and retirement fun! Bernard has over 20 years’ experience providing families with financial thought. He is the author of Live Your Dreams in Retirement, Property Investing for Couples, Goolwa by Breakfast and Raising Decent Kids into Substantial Wealth and publishes a fortnightly newsletter that reaches thousands of subscribers worldwide. 19 Prospect Street, Box Hill 3128 Australia. Tel 61-3-9899 8577 mobile 0414 778 518 A BETTER WEBHOST FOR YOUR WEBSITE Following my own advice, I have now established my own “profitable hobby” – a webhosting service. Go to and also