How Are You Approaching Retirement?

by: Integrator

I've been reading too many overly pessimistic articles recently on how people are inadequately prepared for retirement. It's prompted me to share my thoughts and reflections about how I'm preparing for it.

If you spend any amount of time reviewing the financial press, one of the common themes is how poorly the average American is prepared for retirement. Between needing to meet the grind of day to day expenses, buying a house, paying for kids college and just living life, it doesn't leave for much left over to save for the future.

Or is that just an excuse that we give ourselves to get by?

Here are the specific things that we are doing to prepare for our retirement today.


Truth be told, we are putting most of our retirement eggs into the 401k basket. I expect by the time we are done saving and investing with this, and when we are ready to finally put the feet up, this would have accumulated a balance in the high 6 figures, perhaps more.

I really view our 401k investments as the safest, surest way to get to a comfortable retirement. Why is this? It's because all of the assets are invested in the S&P 500. Its safe, steady and unspectacular. Best of all, you won't have a disaster with your money in the index, precisely because its invested across so many businesses.

Almost as important is the tax incentive to grow this balance aggressively. I max out my 401k. I'm not just talking about hitting the company match. I'm at the $18,000 mark in terms of funds contributed. I'd have my wife also do the same. Unfortunately her company only offers a 401k variant which doesn't allow the maximum contribution each year.

Don't be shy about sinking as much as you can into this vehicle. This is a slow, unspectacular, sure fire way to let your money compound in a tax free way for years, and then wake up one morning and find your dream of a comfortable retirement is here.

Dividend Investments

I'm hooked on the cash flow that dividend investments provide. I really am. My ~$25k per year in dividend income is something that I now count on. Its all allocated into expenses that we have to meet. I love seeing this money role in like clockwork. I want to continue growing this. This is substantially Aussie Dollar dividend income today. I'd love to juice this up, with approximately $5k in annual US dollar dividends over the next 5-7 years.

Rental income from property

I like the rental property we have because its in a great area, it can be easily tenanted, and its very high yielding. That leads to great cash flow every month, directly into the bank account.

The aim is to have all of our living expenses, including the mortgage payment, be covered by dividend cash flow, property cash flow and dividends flowing from our 401k investment within the next 10 years. That way the 401k principal is free to just sit there and compound freely, and not ever need to be touched.

The above 3 things will form the baseline of our retirement strategy. I hope to have 100% of my retirement needs covered with these 3 things.

However I'm not sitting idle and content with just this. I have a couple more irons in the retirement fire to kick things along a little.

Growth Portfolio or "Project $1M"

This is an ambitious, some may say crazy plan to turn $220k into close to $1M in about 10 years. This portfolio is out and out high growth names that are seeing outsize growth and earnings prospects. The key with these businesses is can the growth continue and have you paid too much for that growth. I will get solid answers to both of these questions in 10 years time. I hope I like what I hear!. If Project $1M plays out well, its not just going to pad our retirement. It will likely bring the date of retirement well forward.

Venture Portfolio

I've mentioned in the past the existence of an even more ultra high growth portfolio. This contains the assets of speculative companies that have the potential to transform whole industries and create significant wealth in the process. If things play out properly in this portfolio, it could mean a 10x return over 10 years of the capital thats deployed in here. However the assets in here are ultra high risk, hence this part of the portfolio is not going to receive much capital.

But boy, if this portfolio plays out well, our retirement could be out on Hawaii, or somewhere else nice and warm!

Still, I'm not counting on this as a realistic play for retirement. It's a semi educated guess on some promising, really rough businesses. How they shape out is anyone's guess. I look forward to providing a more detailed update on what's currently in this portfolio soon.

Social Security?? Pensions??

What about social security I hear you ask? My wife's also pension eligible. What about including that for retirement?

Frankly, I have no idea if either of these things will be around at the time we need to call on them. I don't have much faith that the social security system will provide us with anything more than play money at the time that we need to draw from it. Company pensions have been hacked and clawed at so extensively, that I've told my wife not to expect much if anything from her's.

I believe in controlling my own destiny for retirement as much as possible. You don't do that by depending in some governments ability to manage a debt problem, or the generosity of your employer to honor their promises.

I'd love to hear your plans for retirement. How are you approaching it? Are you doing anything differently?