A Race Between Time and Money: Strategies for a Successful Retirement

A RACE BETWEEN

TIME

AND

MONEY

Strategies for a Successful Retirement

John Lau, CFP® and Matthew Lau, CFP®

Copyright © 2019 John Lau, CFP® and Matthew Lau, CFP®.

All rights reserved. No part of this book may be reproduced, stored, or transmitted by any means—whether auditory, graphic, mechanical, or electronic—without written permission of the author, except in the case of brief excerpts used in critical articles and reviews. Unauthorized reproduction of any part of this work is illegal and is punishable by law.

This book is a work of non-fiction. Unless otherwise noted, the author and the publisher make no explicit guarantees as to the accuracy of the information contained in this book and in some cases, names of people and places have been altered to protect their privacy.

ISBN: 978-1-6847-0255-8 (sc)

ISBN: 978-1-6847-0254-1 (e)

Library of Congress Control Number: 2019904754

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

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Lulu Publishing Services rev. date: 04/25/2019

To the men and women who

go to work every day to earn a living for themselves and their loved ones. Whether it’s paying bills, sending children to college, paying your taxes, or saving for retirement, your honest and often unheralded labor contributes greatness to our society.

This book is dedicated to you.

Preface

Just as the phones we use and the way we shop have evolved dramatically, properly preparing for retirement has transformed from being a relatively quiet and simple affair to one requiring careful planning and maintenance. Though there have always been challenges facing retirees, they have never converged to create a retirement perfect storm the way they have now in the current climate.

One challenge facing Americans today is that they are simply living longer. In and of itself, this is great. From a retirement-financial-planning standpoint, however, it means more years of retirement that need to be funded with existing assets or with income from sources such as Social Security or, now with declining frequency, pensions.

Pensions used to provide most workers with reliable income at retirement, especially full-time workers at large establishments.¹ These pensions were defined benefit plans, meaning that there was a promised benefit amount available to employees at retirement, calculated using an employee’s years of service and their salary history. Over the past few decades, however, employers have increasingly replaced these defined benefit plans with defined contribution plans; no longer is it promised what an employee will receive at retirement, only what the employer is willing to put in, if anything. Not only does this reduce employers’ costs and eliminate an employer’s mandatory funding requirements, but it also shifts the responsibility of investing that money from the employer to the employees. Of those pensions still remaining, many have failed to be funded adequately and are on an unsustainable course.²

Another main source of income for today’s retirees is Social Security. Many of the claiming strategies available to retirees allowing them to maximize their benefits are being phased out with the Bipartisan Budget Act of 2015. Knowing the claiming strategies still remaining can be the difference between maximizing one’s benefits available in retirement or leaving money on the table.

Add to this the always-present challenges of taxes and inflation. While there’s not much you can do to eliminate these challenges completely, proper planning can mitigate these challenges effectively.

When it comes to inflation, health care costs are particularly relevant. The rising cost of health care, especially during the later ages of retirement, has become an increasingly large part of household expenditures.³ Accurately projecting these expenses and their rate of increase over your planned retirement years can be difficult and should be taken into consideration when planning for retirement.

Not all the challenges facing retirees are external, however; retirees’ worst enemies can be themselves, especially when it comes to investing their money. Investing can be a complex and time-consuming undertaking, and every retiree’s personal financial situation will have a unique approach to best achieve the risk and reward levels appropriate for a successful and peaceful retirement.

Whether you address them or not, these challenges are a real and present hurdle for those preparing for or currently in retirement. The good news is not only that you are aware of these challenges but also that there are action items available to meet and overcome each of these challenges.

The overarching retirement concern is whether you will run out of time or money first. In this race between time and money, there are a few keys to assuring your money will come out ahead: the empowerment to prepare for retirement, the drive to act, and knowledge of the issues surrounding your personal financial situation. This book aims to provide that knowledge so that you may retire with the comfort that you are financially sound and will continue to be for the duration of your retirement.

Disclaimer

This book was written to provide general information and guidance to a large audience. However, the authors realize that every reader’s personal needs and circumstances are unique. Therefore, competent, professional advisers should be consulted for your specific needs. Any statements contained in this book concerning US tax matters are not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that future performance of any specific investment or investment strategy will be profitable or equal any historical performance level(s).

Furthermore, A Race between Time and Money is meant to be a supplement to information contained in published articles and other texts. It is not meant as a complete guide to personal retirement. You are encouraged to read as many other materials as you can on this subject.

While every effort has been made to make this book error-free, it