Posted July 20, 2021
By Zach Scheidt
Skipping One Night of Netflix Could Save Your Retirement
Last night I watched an old favorite movie with my kids.
Growing up, Herbie Goes Bananas was one of the few movies on the "approved" list at our house. And while we only had a low-quality VHS recording of the movie from when it aired on TV, I still have great memories of laughing at this 1980s classic with my siblings.
Sharing those memories with my kids last night was a trip down memory lane. And I wouldn't trade that time with them for anything in the world!
But with that said, I try not to make a habit of sitting in front of the TV too much. There are just so many other worthwhile things to be doing with my time!
So today, I wanted to share some quick thoughts on how skipping just one night of Netflix could actually save your retirement – or help you make your retirement much better!
The Sad Lack of Planning for American Retirees
There are days I get depressed when reading about how some retirees are getting by in their "golden years."
I recently read a study that said the average American between the ages of 56 to 61 had just $21,000 in their retirement account.
Of course, social security payments can help. Again, the average American receives roughly $20,000 per year from this program.
Even if you combined these two numbers, that’s not enough to cover one year – let alone support a healthy retirement.
With statistics like these, it's no surprise that many Americans have to continue working, or sell their homes to free up cash for expenses.
It's no wonder people are fearful about how they’ll handle finances during retirement. And many current retirees aren't able to enjoy this special season of life the way they anticipated through years of hard work.
If you're a regular Rich Retirement Letter reader, chances are good that you're well above average when it comes to your retirement plans. After all, we talk about ways to generate income, grow your savings and protect your wealth every day!
But if you're not where you want to be when it comes to your retirement plans, today could be a turning point for you!
I truly believe that one evening of careful planning could make a huge difference in the quality of your retirement.
So why not start tonight!
Sacrificing One Evening For a Lifetime of Financial Peace
If you're like many people I know, the idea of looking through your financial picture instead of watching a movie may be a tall order.
(I actually love the process of reviewing my family's finances and my income plan... But I realize that I'm a bit of a nerd when it comes to finances and investments – and not everyone enjoys this stuff.)
The first thing I'd suggest is taking inventory of your sources of income, and your sources of wealth.
For income, make sure you include:
- Social security payments
- Any pension or employer checks you receive
- Extra side jobs you do or are interested in
- Cash you can generate from your retirement accounts
Then account for your current sources of wealth:
- Savings accounts
- Investment accounts
- Your home (if you're not renting)
- Other real estate
- Precious metals
- Any other assets you plan to use to help with retirement
By putting all of these items in one place – even on one sheet of paper – you'll have a much better idea of what you have to work with, and what you can afford, during retirement.
Next, I'd write down a series of desires – or even goals – for your golden years. You might want to group these goals into three different scenarios:
- A "base case" scenario for retiring with a minimal amount of income.
- A "what's possible" scenario for what you could do with a bit more income.
- And a "best life" scenario of things you would enjoy if money wasn’t an issue!
Try to be as detailed as possible with these goals...
Specifically, think about how much income would be necessary to pay for these three different retirement plans.
Looking Forward and Executing a Plan
Once you have your "current situation" clearly logged on a page – and your hopes for what a Rich Retirement would look like mapped out – it's time to figure out how to get from here to there!
If you find that your current wealth and income simply won't pay for the Rich Retirement you really want, don't get too frustrated! There are always some creative ways you can adjust your finances or your future plans to make it work!
One solution that works for some retirees is to split investment accounts into two categories... I suggest actually keeping two separate brokerage accounts for these different approaches.
The first account can be used for more aggressive trades targeting much bigger returns. For this account, you may want to invest in speculative growth stocks, option contracts, or more active trading strategies.
Your goal for this account is to swing hard and try to hit a few big trades out of the park. In this account you could be much more focused, maybe committing 10% to 20% of the capital in this account to each of your speculative opportunities.
The second account should be used for reliable investment gains. This account is perfect for dividend stocks, blue-chip growth companies or even for selling put contracts to generate cash income payments.
Your goal for this account is to steadily build your wealth, but doing so in a more conservative way.
Deciding how much to allocate to each account is a very personal decision. It depends on how much income you have from other sources, what amount of risk you're willing to take, your ability to work and earn extra income if needed, and so forth.
The more extra wealth and income you have aside from your investment accounts, the more you can afford to put into an aggressive trading strategy.
One concept I've been using for my own investments is to consistently move profits from the speculative account into the more reliable wealth building account.
This way, I can continue to be very aggressive with the "home run" trades that I'm taking. At the same time, I'm not risking too much of my profits as my speculative gains accumulate.
Earlier this year I opened a small brokerage account with the sole purpose of making speculative option trades. I seeded the account with $10,000.
My goal has been to take $1,000 out every time I accumulated $2,000 in profit. That way, I could keep making bigger and bigger option plays as my account grew, as well as take some profits out of the account and put them into more stable investments along the way.
If you decide to do something like this with your own investment accounts, I'd love to hear about it! Send me an email at RichRetirementFeedback@StPaulResearch.com and tell me how it's working for you.
And if you'd like to know more about how my experiment is working for my own accounts, let me know that as well!
Here's to being purposeful and having a plan when it comes to your Rich Retirement.
Editor, Rich Retirement Letter