In his 1937
book “Think and Grow Rich,” Napoleon Hill identifies the 6 basic fears we all
share. The first on his list is the fear
of poverty. (Number six is death. Somehow public speaking didn’t make the list.)
Unfortunately, far too often we see people
in their golden years struggling to scrape by.
We all know someone retired and trying to live on a fixed income, often
just Social Security. For me personally,
I can’t even count on that. According to
the latest government projections,
when I turn 65 in the year 2040, Social Security will have already been
bankrupt for seven years. The same
projections have Medicare going bust seven years before that, in 2026, so here’s
hoping Obamacare works out.
Most of
us rely on our earned income as the path to fortune. We work hard, try to get promoted, climb that
corporate ladder to the top. As we move
up, our incomes should rise also. Frequently
they do, if not as much as we might like.
So why do we still see so many people with relatively successful careers
end up struggling in retirement?
We can
always count on the NY Times for all
the depressing stats, but the bottom line is, the cost of living is zooming
along, while wage earners are stalled out on the start line. Almost none of us are going to get rich from
our paychecks alone. Throw in a little
bit of keeping up with the Joneses, and you end up with 36%
of working Americans having saved basically nothing for retirement at all. While this may be good news to the cat food industry,
it doesn’t bode well for everyone else. However,
that doesn’t mean you can’t still build a decent nest egg and retire in
comfort.
The good news is, while wages have
been stagnant over the last few decades, stocks just hit another
record high. Historically, stocks
have gone up by 10% to 12% annually, depending on whose numbers you believe. Do you get an annual 12% raise? I sure wish I did. Your stock investments will. Sure, some years will be better than others,
and some might even see your investments go down in value. Consider the bad years a chance to buy stocks
“on sale”. In the long run, your stocks
will end up substantially more valuable than they were when you bought
them. To paraphrase my old economics
professor, your investments will appreciate at a much greater rate than your
labor will. Use that to your
advantage. The key is to just get
started. Happy investing.