There are too many people who retire poor. Some are forced into early retirement before they are ready. For others, health concerns might have influenced their decision to hang up their hat, and for some, just flat poor money choices.

Workers can barely stick their neck above the waters, and people are forced to retire poor. The situation is common, although this is more prominent in some countries than others.

“Money is not an essential thing in life but its right up there with oxygen,” according to Zig Ziglar

Money may lag behind health, great relationships and meaningful career in terms of importance, but as Ziglar says, “it’s right up there with oxygen.” The sad fact of life, however, is that less than 5% of people will be financially free by age 65.

In other words, over 95% of the people will retire poor.

And according to one study, nearly 40% of American’s middle-class face poverty in retirement.

Why Do People Retire Poor?

In his excellent recording of ‘The Strangest Secret’ in 1956, Earl Nightingale tracked the fortune of some 100 individuals who started bright-eyed and bushy tailed at age 25. These people were all well motivated and eager to be successful. ‘By the time they are 65, only one will be rich, four will be financially independent, five will still be working, and 54 will be broke depending on others for life’s necessities’.

These are alarming statistics and justifiably should provoke us to beg the question ‘why are 95% of people broke at 65’? or rather ‘why are 95% of people retire poor’? The following ten reasons provide the answers.

1. They Never Clearly Define Financial Freedom
Freedom can have a different meaning for different people. So, attaining financial freedom can have a varying definition to individuals.

However, the simple and straightforward definition of financial freedom is

Passive income = lifestyle expenses.

P.I ≥ L.E

To attain financial freedom and avoid being poor at retirement, the passive income from your assets must be higher than or equals the income you require to fund your chosen lifestyle

Most people retire poor simply because they have no clear definition of financial freedom for their life.

2. They Never Make Freedom an Absolute Must
Many people are too lazy to be productive. If you ask a hundred people how they intend to get rich, most will tell you they would love to win the lottery or married an heiress; or inherited a fortune. As you can see, most people retire poor because they don’t have a plan.

Sadly, hope is not a strategy, and to attain financial freedom and retire rich; you need to be relentless and ruthless in the pursuit of your goals.

3. They are Unaware of the Power of Their Subconscious Mind
Ever come across the sentence, Rich people think like rich people and poor people think like poor people?

Believe me, we all have a self-concept. You have a self-concept for your weight, your business intelligence, and your communication skills. Equally and critically, you have a self-concept for your current financial reality.

It’s quite fascinating, but many people who won the lottery very often lose it all within a short period.

Correspondingly, many people who become bankrupt regain their lost fortune quickly. For example, Donald Trump, who loses is wealth and got into debt, but today he is one of the richest in the world.

Your subconscious mindset your financial thermostat. Similar to a thermostat that controls the temperature of a room, your financial thermostat dictates mostly your financial reality.

If you are serious about becoming financially free at retirement, you must first examine what financial files are stored in your subconscious mind. If you have the wrong data, you will continually have an adverse financial reality; which might result in that you retire poor. So, it’s essential to do the checking fast.

Harv Eker sums it up appropriately when he says ‘the only way to change the temperature in the room is to reset the thermostat.’

4. They are Surrounded and Influenced by Other Poor People
Many people fail to realize the influence their reference group has on their destiny. Ziglar once said, ‘you can’t be flying with the eagles if you’re scratching with the turkeys.’

If you are truly serious about attaining financial freedom, it’s essential to surround yourself with specialist financial advisers.

At a very minimum, you need a dynamic accountant — equally, a banker who understands you and your business. You also need access to people who they are financially free.

Learn from them, model them. Imitate them, success always leaves clues. Learn from the people who retire rich and as well hear from the horse’s mouth – learn from the people that retire poor as well.

There is a common saying that says ‘birds of a feather flock together.’ You can proactively begin today to choose to surround yourself with financially free people.

5. They Never Confront the Brutal Facts of Their Financial Reality
If you ask people about their financial status, most will tell you they don’t want to talk or think about it. Many will say to you that they will have a financial adviser or financial planner to handle their finances.

Unopened brown envelopes and bank statements are the two most frequently unopened letters in the world. The reason for this is that there is an inherent aversion within us to confront the brutal facts of our finances.

To supercharge your pursuit of financial freedom, it is instructive to handle your finances yourself and confront the brutal truth about your finances.

One of the surest ways to retire poor is to avoid facing the truth about your finances.

6. They Don’t Save
Many people will retire poor simply because they have no golden goose and those that do frequently murder it in the name of immediate gratification.

Do you remember the fable of the Golden Goose? Long, long ago, this family came into possession of a Goose that lays Golden Eggs. After some time the family got greedy and killed the golden Goose in other to extricate more golden eggs.

Sadly, by killing the Golden Goose, they also killed the producing mechanism for their income.

If there is ever a habit that everyone should imbibe in, it should be the habit of saving. But sadly, millions of people always have one excuse or the other not to save. But without saving, your financial dreams might be in a faraway land.

Pay Yourself First!

In his classic book, ‘The Richest Man In Babylon’ – George S. Classons advises that we should pay ourselves first. Even though there will be hundreds of excuses for not doing it, but that will be the greatest sacrifice you will make toward attaining financial freedom. It is widespread to see workers buying new cars or moving to an expensive neighborhood when they received a pay raise. People who could not delay gratification will most likely retire poor.

7. They are Unaware of the Power of Compound Growth
‘Compound growth is the eighth wonder of the world’ – Albert Einstein. Compound interest can make or break you financially. In fact, it can make your life merry or miserable.

Why?

Compound interest can grow your wealth tremendously and as well increase your debt incredibly.

8. They Work for Money as Opposed to Having Money Work for Them
Usually, income is manifested in three ways;

• Earn Income: – This is the income that generally comes in as paycheck or a salary for product or service rendered.
• Portfolio Income: – This represents income derived from stocks, shares, investments, and pensions.
• Passive Income: -This is income that comes without you having to work full time for it. An example would be rental income, royalties, patents, online products, or services.

In his excellent book – “Retire Young Retire Rich” – Robert Kiyosaki suggests that earned income is the worst source of income for several reasons. Firstly, it’s the highest taxed income. Secondly, you have to work hard for it, and it absorbs all your valuable free time.

Thirdly, there is limited leverage. That is, the only way to earn more is to work longer and harder. Finally, there is precious little residual value in this income in that each day you have to start afresh again.

A significant difference in mindset between rich and poor is that rich people have money work for them as opposed to working for money. This is the true path to financial freedom.

If you want to retire poor keep working for money without an alternative source of income.

9. They Lack The Knowledge, Skills, and Coaching to Become Financially Free
As you know that Knowledge is power, but only a few are ready to pay the price to acquire that knowledge. Poor people are the set of people with the worst reading habit. They find it challenging to invest in financial education.

Without a solid financial education, attainment of financial freedom will be a very rigorous task. As the saying goes; “Life is tough, but you can make it tougher by been stupid.” So is “Attaining financial freedom is tough, but you can make it tougher by being financially ignorant.”

It is vital to acquire and sharpen your financial skills to be financially free. Luckily, with the advent of the internet, the acquisition of knowledge has infinitely become accessible.

There are no excuses now.

To generate a steady, safe, and consistent income from investing, you will need to acquire good financial knowledge and sharpen your skills with good practice over some time. The knowledge acquisition can be through books, financial games, or through seminars and business coaches.

It is straightforward for employees to acquire more practical skills and knowledge than to gain financial knowledge. This is what keeps most people in the rate race and ended up retiring poor.

10. They Have No Plan, or They Lack the Will Power to Follow Through
There are a lot of differences in the strategies used by all of the great investors. However, they all have two things in common; they all had a plan, and they stick to it. It is imperative to have a plan for how you are going to attain financial freedom.

Your quest for financial freedom will be doomed without a plan. Planning is essential. Even a bad plan is far better than no plan at all. (At least you know it’s terrible, and you can work on it to make it better).

Most people never map out a plan for their retirement and the most significant percentage of those that do, do it too late. To avoid being retired poor, you need a plan early in your carrier. A plan that will cover you to your financial destination.

You can study the strategies of great investors and choose the one that appeals to you and stick with it. Consistency of purpose and practice is what ultimately wins out in generating ongoing profits.

Wrap It Up!
In their excellent book, ‘The Millionaire Next Door’ – Tom Stanley and William Danko highlight how two families, living in the same type of house and employed in the same job end up with totally different financial scenarios. By their late 40s, one is financially free. The other is deep in debt and despair.

The reason is not education or opportunity or lucky breaks. It’s straightforward; it’s a matter of choice.

To retire rich or retire poor is a choice, and nobody can make such a decision for you.

You have yet another chance today to choose the path you want to follow. The path to becoming rich and wealthy and the path to remain poor. So, choose wisely.

(This article first appeared on The Money Mix.)

Many young people neglect to plan for their retirement during their early working lives, arguing that they will take care of it later in life when they are earning a bigger salary. However, on the flip side of the coin, as people get older they assume that they must rebalance their portfolios into more conservative investments.

Luckily, most people are choosing to retire later in life.

If you have left investing in your retirement until later in life, there may be a risk in investing too conservatively (not enough exposure to growth assets like shares and listed property) as your investments need to continue to outperform inflation in retirement. Alternatively, you may be tempted to invest in very risky investment schemes. It is really important to construct portfolios which have clearly set out objectives that will be able to meet the targeted return before and after retirement.

How much income do you need per month? Will you need to buy a new car or fund a holiday? You need to know exactly what your retirement goals and dreams are. This will give you an accurate indication of how your assets have to be invested to cover these expenses. You need to be comfortable and knowledgeable about your retirement. You should know exactly how much money you can safely draw to enjoy your retirement without eroding your capital base.

One of the most important things to try and achieve by the time you retire is to be free of debt. You don’t want to be in the position where you have to settle a mortgage or other debt with retirement capital.

Just because you are retired it doesn’t mean you should stop working. Instead, you should re-focus your sights on a pursuit of happiness. People often still make money during retirement. With a lifetime of experience behind you it wouldn’t make sense to not stay busy. View this as the time you have been waiting for to do something you have always wanted to do, but felt like you never had the time to do. Who know, it may turn out to be a successful business venture.

If you need some help working out a retirement plan or would like to revise your current plan give me a call and we can work something out.

It’s often said that the best years are the forties – and for so many reasons! Whilst everyone is different, it’s good to state at the start of this article that this perspective is becoming even more prevalent.

Some forty year-olds are in their first marriage with kids, others are in their second or third… with kids. Some have never been married and have no inclination of doing so. These situations place people in very different landscapes, but they all have one thing in common – over forty years of life behind them.

It poses a unique opportunity to view the ‘hike up the mountain’ from a higher perspective than before, and with the goal of retiring even closer in sight than it was in your twenties and early thirties. It’s healthy to pause and reflect, but it’s crucial to then keep on moving forward!

Forty-year olds need to prioritise staying on top of their finances as this is often a time of higher rising costs – regardless of your life choices.

Here are four quick things to consider!

Managing money and investments in your forties

There are often various significant demands on your time during your forties from building your career and family, which means that many investors in this age demographic don’t set up a proper financial plan or neglect to review the plans they already have in place.

If your employer is not contributing to a pension or provident fund for you, it is critical to save for your own retirement and to utilise the tax deductions allowed by SARS in full to build up tax-efficient, inflation-beating long-term investment savings over your working life.

Risk cover should be a priority

In your forties your biggest risk is that you will lose your ability to continue to generate an income. If you don’t belong to a group life scheme through your employer’s retirement fund, it is really important to ensure that you own a personal risk income protection policy to provide adequate cover for your needs.

If you cannot generate an income it also means that you can’t save and invest. If you are unable to work and earn regular income due to an accident, illness or disability event it could turn out much more expensive than to untimely pass away. It is therefore important to ensure that you have adequate cover, including disability and dread disease cover, and to review it as you earn a bigger salary over time as your lifestyle expenses will also increase.

You should also ensure that appropriate medical (health care) and short-term insurance cover is in place and is sufficient for your specific needs.

Tertiary Education Saving

One of the most popular options for this savings goal is the National Treasury’s “new” tax-free savings account (TFSA). Individuals (including minors) are allowed to invest up to R30 000 a year (up to a lifetime limit of R500 000 per person) in a TFSA that can grow tax-free.

It is also more flexible than approved retirement funds as it is fully accessible before 55 and not limited to the Pension Funds Act’s Regulation 28 asset-allocation rules. However, this TFSA is not a replacement for a good investment-linked retirement fund vehicle.

These TFSAs are excellent long-term savings vehicles and investors have access to the money prior to retirement. The longer the investment time frame, the better. It will take roughly 16 years to reach the lifetime capital contribution limit in these accounts.

Play catch up with your RA

Some forty-year olds may only be beginning to save for their retirement. There are strategies to accelerate your savings plan – but you need to meet with a qualified financial planner.

An appointment with a qualified financial advisor for a wealth planning diagnosis is similar to visiting your medical doctor for a regular health check-up.

If your health state has never been checked to see if you are at risk for cancer or other serious diseases, you would never know if you have a reason to intervene and adapt your behaviour. This is also the case with financial planning. If you haven’t done any retirement planning needs analysis and if you do not have an appropriate strategy in place it is important to see a professional financial advisor to assist you in drafting an integrated lifestage plan and to assist you to implement it according to your priorities and goals.

In performing the financial needs analysis to identify shortfalls concerning specific areas of importance an independent financial advisor worth his/her salt can add considerable value with sound guidance and by offering appropriate alternative solutions.

Are you in your forties? Do you have friends who would benefit from this article? Please feel free to share it with them – or get in touch through my contact page!

Several points for this article were taken from: source