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Neighbors of Kane County

In order to form a more Perfect Retirement

Nov 01, 2017 08:30AM

by John Masus

No it’s not 1787 and we are not writing a new Constitution.  But maybe we should be doing that when it comes to the rules of the game as it relates to retirement. 

We read so much about the fact that so many people are not prepared for this life transition.  The Boston College Center for Retirement Planning says that about one half of all age 55’s have not saved anything for retirement and in fact about one in three people could not meet a $400 emergency expense without borrowing.* So, for them retirement will not be an option unless they can live on Social Security, or if they are homeowners perhaps they can find other potential options.

However, for those individuals who want to do their retirement funding in such a way that they can be better prepared, here are some thoughts that may help.

The sooner you start the better.  The more you put in the better.  OK that’s it.  You can use the rest of this page to draw on.  Perhaps a happy face using crayons.  

Speaking of art, I had taken up drawing about four months ago and I was sitting by the Batavia dam during the early summer heavy rains  and I decided to draw it.  About half way through,a couple came walking by and probably thought they were seeing an artist at work.  Perhaps somebody famous.  I was ready to give them my autograph just in case. 

When they asked to see my sketching I turned it toward them to look.  Out of kindness I thought they would say something nice.  Instead the man said “What’s that?”  I said “the dam”.  They looked at the sketch and with a painful smile at each other they looked back at me and the guy says “0h”.  Not oh that’s beautiful or oh can we have your autograph?  Just Oh. Then they  walked on and mumbled something.  I guess they didn’t understand abstract art. That had to be it right?  You miss so much if you can’t understand abstract art.  My wife didn’t understand it either.  She also misses a lot.  

Are you expecting more?  Alright here’s more.

Things come up in retirement that require cash payments.  A leaky roof, car repairs, a new washer dryer, your spouse’s third cousin by marriage asks for $25,000 to start his own Laundromat.  You ask how he’ll pay you back and he tells you that you’ll have a lifetime of free laundry.  You start to think about that.

But where will the money come from?  Since you are drawing income from your retirement accounts it wouldn’t be in your best interest to take the money from there because that could reduce your monthly income.  But hey….. It’s free laundry.

So what to do?  Well forget the cousin.  As for the other life expenses, they must be dealt with.  This is where the second pot of money comes in. That is money you can use that’s especially accumulated for these situations.  Not only can it pay you an income with very little taxes or with no taxes at all but it can also act as your safety net.

This shouldn’t be thought of as something extra but rather an important part of the retirement plan.  It’ important enough to run it side by side with your IRA/401k parts so that it becomes automatic.  There are a couple of different ways to create this second pot of money that we can cover this in depth in my next article.  So for now I’ll just say, if you see a distinguished individual sitting by the dam painting in water colors (more realistic, that might have been my problem) come up and say hello.  You never know, you may be talking to the next Claude Monet.  

*The Economist Dec. 2016

If you haven’t found something strange during the day, it hasn’t been much of a day.     J.A. Wheeler  … Physicist

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

John Masus is a LPL registered principle with clients in 24 states.  Securities offered through LPL Financial. Member FINRA/SIPC.  Masus Financial Grp. Ltd. is a Registered Investment Advisor and a separate entity from LPL Financial.  MFG has been located in downtown Batavia for over 24 years.