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This chapter is from the book


I've been in the financial services industry since 1979, but I've really never been in direct sales to consumers; rather, I have always trained others and assisted them with their clients. That means that although I have earned a variety of professional designations within the financial services industry, I have never chosen to make a living by providing advice directly to consumers for a fee or for a commission. I have, however, done just about everything else in the industry, including training tens of thousands of financial planners, stockbrokers and insurance agents.

I think it's important for me to explain to you why I have never done what is commonly referred to as personal production, or consumer sales. I have always been one to leverage my skills, whatever they may be. To that end, I've felt that I could do the greatest good and better leverage my time by working with financial planners and their clients. I have done this through my writing, through my training of financial planners, and through the one-on-one contact that I have had over the years working with people just like you. To continue with our analogy, I have spent much time on the mountain covering all types of terrain and every conceivable situation.

During those times when I was fortunate to meet face-to-face with consumers and their financial planners, I got to see, hear, and feel the concern over the issue of not having enough money to live comfortably in retirement. I've seen the aftermath of bear markets when people have lost 40 percent to 60 percent of their life savings and, as a result, lost the ability to choose when and how to retire. And during the process, quite frankly, I've seen some horrible mismatches between clients and planners.

I've also learned that we all live incredibly full lives, which makes it difficult for us to focus on and follow through with tough decisions. With family, work, hobbies, and other social and athletic activities, we tend to put off decisions and dealing with issues that require consideration of one or a combination of the following criteria:

  • Complex issues

  • Issues not immediately important

  • Issues that deal with health or mortality

  • Issues that two parties don't immediately agree on

Wake-Up Call

The number one reason people fail to meet their retirement goals is:

  1. Their investments don't earn enough

  2. They don't save enough in their 401(k)s

  3. They don't do anything

  4. They don't have enough time

And the answer is:

  • C. Procrastination is the single biggest reason people fail to reach their retirement goals.

When the topic of retirement planning comes up, it's no wonder that people choose to procrastinate—all four of the criteria laid out above could well be factors in postponing action. Let's look at these individually as they relate to accumulating or distributing retirement assets and try and find a way to put each issue into a perspective so that you can feel empowered, not paralyzed.

Complex Issues

Complex issues, by definition, scare many people. The word "complex" summons up images of the investment of large amounts of time and a tremendous amount of concentration to understand a given issue. We often further complicate the matter by wanting more information than is necessary to make a decision. As I mentioned earlier, I don't want to dissuade anyone from doing research and making fully informed decisions, but you must keep the issues in perspective or the task gets out of control and the result is procrastination.

Let's illustrate this with the purchase of a new watch. If your objective is to be able to have an accurate timepiece, do you really need to know exactly how the watch is made, or do you just need to know it tells accurate time? If you were choosing a surgeon, would you be more interested in the doctor's credentials and experience or in understanding every step of the surgical process? Granted, in some cases you may want to understand both.

Retirement planning is a very complex topic, with many different strategies to meet your goals and tens of thousands of products to apply once you have chosen your strategy. The best way to climb this mountain is by taking one step at a time, just as the professionals do. Actually, in mountain climbing, climbers often acclimate to a given altitude by repeating the same leg of a climb again and again and again. In retirement planning and in Retirement Countdown, we'll take one step at a time and encourage you to repeat it until you're "acclimated" to the topic. That's how we will eliminate fear and empower you to take action. You have to make the goal achievable or you'll never get started.

Issues Not Immediately Important

"Oh, we have plenty of time!" We all have to prioritize our workload, whether it's personal or business. In that process, we engage in what I call "life event triage." Triage is the French word made popular by medical and war television shows and movies. It means to sort or prioritize and is the process that emergency rooms and field combat medical operations use to determine the order in which people are treated. The more serious the illness and the greater the risk of death, the higher the patient is in the order of treatment. From a personal perspective, we use life event triage daily. It's called time management.

Key Point: The Rule of 72

An interesting tool you can use to illustrate compounding and inflation is the Rule of 72. Simply divide 72 by any number and the quotient will be the amount of time takes to double your money. Example: divide 72 by 10 and it will take 7.2 years to double your money at 10 percent (72÷10=7.2). Or assume that inflation is growing at 3 percent a year. Divide 72 by 3 and you'll see that the cost of goods or services doubles every 24 years (72÷3=24).

The problem with retirement planning is that most people think they have so much time before they retire that it's a low priority and they keep pushing it off in favor of issues with more critical timing. This is a very dangerous position to take because your ability to accumulate assets for retirement is based primarily on time and investment return. Without both of these working in concert, it will be difficult to achieve your goal. If you start too late, you'll be counting on a high rate of return to make up the difference, leaving you exposed to much greater market risk. The less time, the more difficult it is to take advantage of compounding. You'll learn more about this later in the book, but one of the key elements to achieving financial independence is compounding your returns.

It might be helpful for you to know that interest is applied two basic ways: simple and compound. The difference is significant. Simple interest is interest on a principal sum of money only, and not on the interest itself that is being earned. Let's say you put $10,000 into a certificate of deposit at the local bank earning 3 percent simple interest each year. The first year, and each year after that, you'll earn $300 in interest.

Compound interest is interest on interest, so the interest is being applied to both the principal and the earned interest. In the same example, interest in the first year would be $300, or 3 percent of $10,000. In the second year, however, your interest would be $309, in the third year, $327, and so on.

In Table 1-1, we see an example of how compounding impacts money over time. We use a principal sum of $10,000 invested in an interest-bearing account for 20 years. Column two shows us 6 percent simple interest, column three shows us 6 percent compound interest, and column four shows the difference in dollars with the percentage difference in parentheses. You'll note that in the first five years, compounding generates only a 3 percent improvement over simple interest. But 20 years out, the difference is a staggering 31 percent. Now imagine the impact of starting your retirement planning 10 years late!

Table 1-1. Value of a $10,000 Investment with Simple and Compound Interest

End of Year

Total ($) with 6% Return

Improvement with Compounding (Difference)

Simple Interest

Compound Interest








382 (3%)




1,908 (11%)




4,965 (21%)




10,071 (31%)

Issues That Deal with Health or Mortality

When HBO launched Six Feet Under, it took a big risk by wrapping a prime time show around a family-owned mortuary. Although the show has been a critical success, the subject matter is one most people embrace cautiously. When the mortality in question is our own, we often run as far as we can in the opposite direction. Therefore, people tend to procrastinate on decisions that involve facing mortality or our own human weakness. This tendency presents very real problems when we are trying to prepare for funding our lifestyle choices after our retirement.

Life expectancy tables are simply an actuarial projection of the years that we have remaining in this life. Your own life expectancy may be shorter or longer than what a table might suggest based on your gene pool. If you had parents who lived into their 90s, your projected life expectancy would be different from that for someone whose family history is less favorable.

Life expectancy and quality of life are two topics that I ask you to openly and honestly consider. They are critical pieces to the retirement puzzle, and you just can't ignore them; you must be honest with yourself about them. The simple fact is that we are living longer, which means that our retirement assets need to carry us further. If you retire at age 65, you are likely to live another 20 years. In addition, we must also look at the ongoing costs associated with our healthcare. I won't get into too much detail here because we will cover this area exhaustively in Chapter 3, but we can't let the fear of these issues paralyze us and keep us from preparing for retirement.

Key Point

This life expectancy table shows that the average male at age 65 will live another 15.75 years, and the average female at age 65 will live another 18.6 years

Life Expectancy




Joint [a]





















Issues That Two Parties Don't Immediately Agree On

According to a 2002 study done by the Administration on Aging, 17 percent of men over the age of 65 live alone and 40 percent of women over the age of 65 live alone. While the difference between the numbers may speak to issues of biological life expectancy, stress, and lifestyle, the vast majority of retiring households have two or more people to support at retirement and for some number of years thereafter.

Financial planning for couples is much different from financial planning for one person. With two people you can have two opinions, two levels of risk taking, two health profiles, and so on. It also makes it more difficult to choose the right financial planner because of the two unique personalities at work along with the new dynamic of a third person. Sometimes procrastination sets in as couples find it easier to do nothing than to meet this challenge head on. You need to face the facts and develop common ground so that compromises can be established. If one party has a very low tolerance for risk and the other party is very aggressive, you're going to have to find a common ground or reach an agreement on whose perspective will be used without alienating the other party.

Perfection and Procrastination

Before leaving the topic of procrastination, I'd like to make one final point. Early in life, we are taught to embrace concepts like "a job worth doing is worth doing well" or "if you can't do it right, don't do it at all." This focus on perfection can be empowering to some and incapacitating to others. Perfection is always a goal to reach for, but in my opinion, it should not be seen as the only acceptable result. Without seeking perfection, we can find ourselves left without adequate motivation to accomplish our goal. But if we set perfection atop the highest pedestal, admiring it and becoming frozen by its challenges, we often do nothing. With regard to your retirement planning, you are well advised to seek perfection and accept reality.

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