There continues to be no lack of pressure on American's to get to work on building a prosperous retirement. 

Study after study, article after article, report after report continues to show what most advisors already know, American's are woefully unprepared for retirement. 

There are a lot of reasons that this is the case, lack of savings and investment, poor estimates of what post retirement spending will actually be like and the paralysis of just not being able to get started on "planning" for your golden years in any meaningful way. 

"Numbers scare me. I'm not alone in this. Scientists who study math anxiety say that the anticipation of crunching numbers can lead to the kind of agitation that, on a brain scan, looks a lot like the perception of physical pain." So said John Schwartz in his March 2015 blog post titled "Retirement Reality is Catching Up With Me" which ran on the 11th of that month in the New York Times. 

And, there are a lot of numbers to be crunched to get it right. If that weren't bad enough, the numbers need to be crunched on pretty much a regular basis, year-over-year.  We have family and life issues that change the pattern of spending and it's timing, we have market issues that impact the value of assets as well as their ability to provide either an income source to supplement us or a pool of funds we can draw on when needed to adjust to changing circumstances. 

Many an investor has been duped by the notion that "making 8%" on their portfolio means that they'll make 8% every year. Little do most pre and post retirees know that "averaging" 8% can be woefully different than earning 8%.  I mean, if the top half of your body is put in a freezer and the bottom half in an oven, we can surely figure out what the temperature of each could be to get you to your ideal 98.6 average temperature. But I'll bet you're going to be pretty uncomfortable no matter how that plays out. Averages and how we actually arrive at them can be at mathematically daunting to say the least. 

Investing for income, another notion that on it's face seems to work, inadvertently becomes an "income straight jacket" as investors allocate assets towards dividend paying stocks and long-term bonds. That's good for generating income, right?  Well, it might be, for at least a period of time. Once the Fed starts raising rates and inflationary pressures kick in we have a problem. Our dividend and interest payments from our investments are more or less locked in so now our "income" isn't keeping pace with inflation and the gap between "what we get" and "what we need" is ever increasing. In addition, both dividend paying stocks and longer term bonds are susceptible to interest rate swings, driving down the value of most investors holdings. Hamstrung, they won't sell because of depressed prices to improve their overall "income" return and they can't live any longer only on what's coming in. 

Is it any wonder that nationally the Pension Rights Center motes that the nation, as a whole, is almost $8 Trillion short in funding retirement. An increase of $2 Trillion from just five years earlier.

So what to do? Here's five things that should hold you in good stead as you move toward and through your retirement time;

  • Your magic number isn't about what you accumulate. It's about what you plan on spending during retirement. Five million dollars in banks, brokerage and retirement accounts isn't enough money if you plan on spending six million 
  • Build a long-term investment strategy and stick with it. As a sage market observer once said, "If they ain't ringing a bell to tell you when to get out of the market, I can assure you that they ain't ringing one to tell you when to get back in."  Market timing is akin to pipe dreams and tooth fairies, it'd be wonderful if it worked, but it doesn't, it won't and it never has
  • Don't forget randomness. The likelihood that a series of investment returns won't deviate from it's expected return is ZERO.  Any plan, no matter how well thought out, no matter who the provider of it is that portends that the way you average 8% is by earning 8% every year has a probability of success equal to ZERO
  • Follow the money. In 2015 everyone's asking, where to put their money when things are most uncertain. If you can't make money on cash (which you can't) and you can't make money on intermediate term bonds (bonds with maturity/duration periods of 3-7 years) then the only result is....it goes back into the market. In 1986 you may have been able to get 9% on government bonds or; ride the market tumult out.  Government bonds at 9% were a good alternative in 1986. The paucity of a 0.15% return on cash isn't an option for you, nor is it for any investment banker, mutual fund manager, endowment or any other living creature who might derive their compensation in whole or in part on making market type returns
  • Get your head out of the sand.  Unless immediate death is your post retirement plan, get comfortable with the fact that as medical technology improves so does your chance of living longer. I know you think that you can pull this one out of the fire at the last minute, but you can't. Taking more investment risk, working longer, downsizing etc. all seem like real options but there's two little problems there, which are [1] sometimes you can't and [2] they all begin from the premise that retirement will then be "based on a lifestyle less bountiful than you had envisioned and less hopeful than you'd planned for."  Those aren't good things. Plan ahead, well ahead for this goal. 

Best that you start actually thinking this one through. I know that finding out that there's a problem isn't a comfortable reality for anyone, but finding out early leaves time to adjust, plan, and rethink things a bit. Finding out too late, leads to chaos, bad decisions, and the severe likelihood that all you'll do at that point is compound your problem. 

Confront the issue, understand the pitfalls and gaps, develop or buy the expertise to deal with them and remember, retirement is suppose to be at least as good a time as your working years were, if not better. 

But that isn't going to happen by chance. You have to make it so.