The decision to retire is a huge step in everyone's life. The problem is if you are not really ready to retire it can also be a huge mistake.
As far as we are concerned, our decision was made once we were able to determine if we will have enough money to pay our expenses, live comfortably for our lifestyle, and be able to have a more secure financial future.
We began by using a simple checklist:
1) How much do we have saved.
2) How much are our monthly expenses.
3) How much will we have coming in after we retire.
4) How much will we have going OUT after we retire.
5) If we do not have enough coming in to pay our expenses, where will the money come from.
6) Will we be able to keep up for inflation.
7) Are our investments in line with our goals.
8) Will we have enough to do without getting bored when we retire.
9) Do we have health insurance, car insurance, home insurance to cover any unforeseen event that could wipe us out.
10) Do we have a back up plan.
Now this checklist can vary from person to person, but it is a good start. We urge everyone to at the very least, be honest with yourselves and answer the basic questions noted above.
The Next Step
Obviously, there are steps we needed to take for ourselves, and we believe the steps pertain to nearly everyone reading this. Here is a brief outline of what we did to be able to retire:
1) We downsized our home by selling our existing larger one, to one that is much smaller and used the proceeds to pay cash for the new home. (not everyone can do this so one might downsize to an apartment with an affordable rent)
2) We paid off every bill we had, such as credit card debt and car payments.
3) We took 5 years worth of expected basic expenses from our invest-able cash and set it completely aside. For emergencies, as well as OUR back up plans.
4) We told our kids (grown and on their own) that we were retiring and we will need to watch our expenses.
5) We began to invest in income producing securities, almost exclusively dividend paying stocks.
6) We continued to save as much as possible before we retired and socked every dollar into those investments.
7) The very first portfolio we started with was a basic one with ONLY the biggest and best stocks on the planet that would pay us to own their shares.
8) If we recall, our first stocks were Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), IBM (NYSE:IBM), and Altria (NYSE:MO). Of course those changed back and forth just as our portfolios do now, but the rules were to have what we considered the best of the best and to keep investing in them.
9) We reinvested all dividends right back into the stocks. The compounding was amazing.
10) Once we had enough coming in, and reduced our expenses so that the income could pay the expenses, we were ready to retire.
We realize that everyone's journey is unique and it is never a one size fits all approach. Some folks already have oodles of cash, some folks are just beginning to save. Time horizons to when you want to retire are important to understand because that will also give you more flexibility, and time, to get to where you want to go.
A person or couple with a 5 year horizon faces different issues than those with a 25 year horizon. If we can offer any suggestion at all it would be as basic as the following:
1) Save as much money as you can, as soon as you can, for as long as you can.
2) Never spend more than you have coming in (after savings are taken out)
3) Only invest if you are comfortable with various levels of risk.
It is that simple.....even if you are already retired, if you spend less money than you have coming in, you will never run out of money...ever.
The level of income will determine how much you can spend and the resources that you have to get there are the basic tools required for your journey into a more secure financial future.
It Is Your Journey, No One Else's
The portfolios that you have become familiar with; Team Alpha Retirement Portfolio, Team Alpha Growth And Income, and The Young And Restless Portfolio . They are each geared for various levels of investors.
The portfolios are suggestions, not recommendations. The decision to invest in any particular stock is yours, but the basic parameters and philosophy are obvious within each portfolio, which we now update with our EMail Service.
You can mix and match them, choose different stocks that reach your specific goals, and you can begin building your own portfolio, and managing your own financial future.
As we mentioned, the stocks we began with were huge blue chip, mega cap, dividend winning stocks that continually raised dividends each and every year. They still do, and here are the current metrics that we believe could start anyone on the path to a more secure financial future:
|Stock||Price||Yield||Payout %||Fwd PE||Yrs Consec|
Each of these stocks are dividend winners. MO can be traced back to its original Philip Morris days with 47 increases in a 44 year time span, and the newer Altria has 6 consecutive years under its belt as of now.
While T has a payout ratio that appears out of line with the others, the 30 consecutive years of increases, speaks for itself, as well as a rather low forward PE ratio.
The road to a more secure financial future, we believe, lies with dividend paying blue chips with plenty of money and a history of giving shareholders, "raises" by virtue of an increased dividend each and every year.
The Bottom Line
YOU are the captains of your ship and the masters of your financial destiny. Once you decide, commit, and remain diligent and focused, you CAN reach your own personal goals!
Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Please remember to do your own research prior to making any investment decisions.