Time & Money

It’s about time!

There are three factors that will affect your future financial success:

  1. How much you set aside for your future
  2. The rate at which your money grows, after taxes and inflation
  3. How long do your saving before you retire

These three factors are related!

For example, if you achieve a higher rate of growth than you expected, you probably won’t have to save as much to reach your goals. However, if your returns are less than you expected, you either won’t reach your goals or you’ll have to save more money than you had planned. It’s worth noting that many pension plans, both private and public, throughout the U.S. are having trouble meeting their obligations because they didn’t set-aside enough money based on projected rates of return that didn’t materialize. As the Chief Executive Officer of your own individual investment company trying to achieve a secure retirement income for yourself, you don’t want to fall into this trap.

While these factors are related, they’re not alike!

How much you save: This can be adjusted up or down, though most people do feel limited due to other obligations, i.e., saving for college, paying a mortgage, property taxes, medical bills, and all the other things that place demands on income and assets. But you do have some control over this factor.

Rate of return: This can be adjusted up or down, as well; but you have little to no control since the marketplace determines the value of assets, including even the interest you receive on bank accounts. Even as interest rates rise, achieving a positive real return – after taxes and inflation – can often prove problematic. Even a ‘guaranteed’ rate that may look good today could look bad tomorrow in a high-inflation environment, especially if governments (national, state, and local) find additional ways to take your money, whether at the gas pump, the checkout, or through other assessments.

Time: This is the ONLY factor YOU can control. There’s a catch: It’s also the ONLY factor that doesn’t expand. Time only decreases. Yes, you can work longer provided your health continues to be good and you’re able to either find work or start a business; but, it’s worth noting a lot of Harvard MBAs are out of work and the odds of making a business succeed are against you at any age, let alone post retirement. Even if you work past 65, how far past 65 can you work? While some work even to age 80, you may not want to count on it.