UlTImATE SUccESS GUIdE5 to 6%. If they were to put their money in a CD, for example, they can
expect to make around 0.05% a year, up to nearly 1%. Other options?
They can find a money market account, or settle with a savings account.
In all likelihood, neither option will offer even as much as 1% inter-
est. They would be making less than inflation, meaning they will lose
money every year.
After all, 2011’s inflation was 3.2% and 2012’s inflation was 2.1%. It is a
safe bet that you will lose money picking any of the three options above.
During some years, clients have made more than 10%, but they don’t
expect it every year. They reap enough benefits to stay even, and never
lose a dime. Again, it is like going in for a layup in basketball. Our goal
is to be safe, and we want to score an easy point, not a difficult one.
PlAn Well, PlAn eARlYThe second thing I do differently is I tell my clients to start preparing
for retirement early. My mother taught me the multiplication tables
before I could read. She is a math wiz herself, and I like to think of
myself as numerically inclined. One of my most treasured childhood
memories is going out to eat with my parents. At the end of the meal,
my dad always gave me the bill. I’d say I was about five when he
started doing it. I’d take it to the counter, count the change, and figure
out the tip.
Going back even farther, my mother said at 4 years old, I was checking
to make sure the numbers were correct at the grocery store! I like to
think of those exercises as preparation for my career today.
Planning is key to staying afloat during retirement, and planning early is
another thing I suggest my clients do. General advice, in my experience,
says that people should start planning for retirement five years before
their working life ends.
I disagree. I tell them to keep one number in their heads – 70 ½. At the
age of 70 ½, no matter how well preserved your IRAs and other retire-
ment accounts are, you will be forced to begin taking a certain amount
from them each year. These withdrawals are called required minimum
distributions (RMDs), and they are required. What is worse, the per-
centage amount you have to withdraw grows each year.