Financial Opinion and Insights

Too Many Kidding Themselves About Retirement?

Jim Lorenzen, CFP®

Jim Lorenzen, CFP®

A report from Lee Conrad of Financial Planning magazine cites a new study from the Society of Actuaries concluding that nearly half – actually 48% – of America’s baby boomers have NO financial plan in place in case they live longer than expected.

In addition – and it should come as no surprise – 71% of the survey respondents indicated they’d be taking Social Security benefits before the age of 70.

A few weeks FINRA, the industry’s regulatory body, launched a web tool that investors can use to test their financial I.Q.  Another one investors can use to test their economic IQ is available from the Council for Economic Education.  How much do people know?  You can read the entire 82-page report here.

A few days ago I was talking with a family that said they planned to buy a rental home inside their 401(k) plan.  I asked them if they had a written financial plan.  They didn’t.  So, I asked, ‘How do you know you should buy a rental income house at all?”  They wanted to. 

While a rental income property might very well be an excellent investment, no investment should be made in a vacuum – every investment should be made within the context of how it fits with an overall plan.  One additional point I doubt they’d considered, since they’d never owned income property before:  Owning rental income property isn’t as passive as owning other investments.  In fact, it might better be described as a business.  Owning income property and being a landlord isn’t as easy as the infomercials make it look.  It takes work, and it’s not all profit.

Acting on financial decisions made with no plan in place is literally like putting the cart before the horse.  Hopefully, in 2011, more Americans will get the message.