A lot of people we work with are looking for investment vehicles to plan for their retirement. They want to ensure a comfortable life for themselves and their families after their working years. I’m always pleased when a younger person declares the same goal because younger people have a tendency to worry about retirement when it’s too late to do much about it.
I put together a few pieces of bad advice that I’ve heard over and over. There’s no one-size-fits-all approach to managing your finances before or after retirement. For some reason, these little myths are repeated everywhere. Hopefully this helps set the record straight and convinces some people to start investing now.
1. “My job isn’t physical. I’ll always be able to work.”
This is something young men say and old men regret. Even if you’re a 9-to-5 desk-job professional, there comes a point when we all need to stop working. Your health could decline, your company or career path might throw you for a loop, or maybe your spouse or family will pull you away.
Working does have bonuses. The longer you work, the more secure your retirement will be. Plus, if you’re like me and you enjoy your job, work can give you a sense of purpose every day. But plan for your retirement so you can work on your terms.
2. “I need $X every year to survive once I’m retired.”
First, let me say it’s good you have an actionable number in mind. That’s a good start. But this number always seems to forget to include one factor: inflation.
You may need $75,000/year now to live the life you want, but in 10 years that same money will have significantly less buying power. Typically our money is worth 3% less every year, but that’s an average figure over many years. In 1980, we had an inflation rate of nearly 15%. Suddenly that $75,000 is worth a lot less.
It’s good to have some numbers in mind when you invest, but don’t set them as a ceiling. If you hit your retirement goals, keep investing.
3. “I’ll just borrow from my retirement accounts to pay this bill.”
It’s almost always a mistake to take money out of your retirement accounts to pay for something. Those accounts offer special privileges that you can’t find anywhere else. They are designed to encourage people to plan for their golden years.
Unless you are facing a true emergency, resist the urge to touch money in your 401k, IRA or other investment accounts. Every penny in these accounts is needed to exploit compound interest. Removing money or stopping your contributions can set back your retirement more than you think. Plus, you’ll face penalties and have to pay taxes on some of it.
Written by Mark A. Mascia, President and CEO of Mascia Development
Mark manages the investment and operating activities of Mascia Development, a diversified value real estate investment firm that acquires, owns and manages retail, medical office, family offices, multi-family, and industrial real estate properties in the most promising long term growth areas nationwide. Through crowdfunding, they create powerful real estate opportunities for high net worth individuals.
A fully integrated real estate company, Mascia Development has in-house capabilities in acquisitions, financing, re-development, and construction; and their principals have experience in property and portfolio management, leasing, and maintenance.
Mark has a strong career in real estate, previously managing a property of portfolios valued over $1.1 billion. Mark has worked at Archstone-Smith (a former publicly traded REIT) and Monument Realty, one of the largest office real estate developers in the Washington, DC metro area. Mark teaches real estate development and finance at New York University.
For more information, visit www.masicadev.com.
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