Archives for November 2016

Does the 4% Rule Still Apply for Retirement

In the past, experts said that in the first year of retirement withdraw 4% of your retirement and increase from there each year based on inflation. But the question now is, is this still a worthy rule. Let’s look at the fact.

Right off I will give you two reasons why this may not work for you:

  1. Many have very low balances in their retirement fund.
  2. Low interest rate could cause the saving to deplete too quickly.

According to recent data, the average 65-74-year-old only has about $140,000 in their retirement account. If you apply the 4% rule, then they are only withdrawing $5,600 per year. This is significantly lower than they would normally live on and makes them dependent on Social Security or pensions.

The biggest portion of your retirement saving is most likely invested in less volatile investments such as government bonds or corporate bonds, that only yield about 3% returns. If you would use the 4% rule to withdraw then the money would not replenish quickly enough to last you the remainder of your life.

So how can the 4% rule apply to retirement if most people do not have enough money to maintain the withdrawal rate. We all know that the 4% rule is not perfect, but is it a starting point. It can also help you determine how much money you want to save before retirement. If you look at what 4% of $100,000 would be that is only $4,000 per year. Which is not enough to live on without supplemental income. It also shows just how much you will need to save to continue living life the way you have gotten used to living.

So is there something better than the 4% rule? Sure, but they are even scarier than the 4%. If you want to have around $50,000 a year without supplemental income, then you will have to determine what the withdrawal rate will be and save according. This could mean having to save up to or more than 1 million before retirement. This can be a scary number for people who have not done a lot to save their money over the years. Having a good financial advisor is key to making sure you are where you want to be when you retire.


Mental Tricks to Make More Money

Ok, so it is not easy becoming rich, but it is more than just bank accounts that separate the rich from everyone else. It is their think process also. For many rich, making money requires a different type of thinking; it requires you to believe that you can make money.

So how do rich people think differently? It is as simple of believing in themselves. According to the article “6 Psychological Tricks Rich People Use to Make More Money,” by Kathleen Elkins, there are six mental trick that rich people used to give themselves the green light to earn more money.

  1. They tell themselves there is no shortage of money, even if they don’t have enough at the time. People who are rich are not afraid to use other people’s money to make them more money. Many times the rich have great, expensive ideas that need financial backing to make them realized, and in the process, making them profitable.
  2. They set their expectations unreasonably high. Middle class set their expectation low and reasonable, but the rich set high expectations and they don’t take failure as the end. The ambitious goals give them something to work towards and risks to overcome.
  3. They think money is a game. Most thinks that life and money are games. Business is the vessel for the game. They chase the next big deal and court the next big financial advantage. The excitement is the game. Playing games makes it fun while pushing them towards higher levels of expectations.
  4. They make money their friend. Money is a tangible friend that they worry about and have fun with. It solves their problems and create the life that they envision.
  5. They block their fear. Many of the rich operate on a different level of consciousness where fear is not something they think about because it does not exist. They think outside their comfort zone and explore the unknown because that is where the deals are made and where the excitement is found.
  6. They believe that getting rich is natural. The middle class struggles because they expect to struggle. The rich or at least the ones on their way to being rich have the one single minded drive to believe that becoming rich is a wish fulfillment along with happiness and success.

So if you want to become rich, all it takes is a change in mindset. Stepping out of your comfort zone and into the unknown. Shut down your fear and take a leap.