Caveat Emptor

“Caveat Emptor” is Latin for the phrase “Let the buyer beware”. What this implies is that the buyer is responsible for examining the condition of an item prior to buying it. Unless specifically stated, as in the case of a guarantee or warranty, once you’ve taken possession of the item, it is yours for better or worse. A similar principal applies when entering into a contract, and partially explains why we often experience “Buyers Remorse” after we’ve signed our John Hancock. Questions arise like, “Did I miss something in the fine print?”, or, “Did the salesman disclose everything about the item?” Perhaps this explains why we have misgivings when it comes to dealing with sales people. Unfortunately, when it comes to financial issues, such as saving for retirement, we often have no choice but to turn to a sales professional for guidance. Or do we?

Ask even the best intentioned Broker, Advisor, or whatever the Financial Professional’s title, “How much should I be saving for retirement?”, and you’ll hear some thing like “As much as you can and as often as you can.” Why is that? Well, the rule of thumb is that, in retirement, you will need sufficient resources to produce 60% to 80% of your annual pre-retirement income. Let’s suppose that you and your spouse currently earn $100,000. That means that if you were to retire tomorrow, you would need an annual income of $60,000 to $80,000. So, where did these percentages come from? Suggesting 60% to 80% assumes that you’ve been diligently saving 10% to 15 % of your paycheck toward retirement. Since you will now be retired, you’ll no longer need to save for retirement. Additionally, part of your income will be replaced by Social Security and, if you’re one of the lucky few, a pension. So far so good, right?

Not so fast! Judging by the average American’s negative savings rate and growing consumer debt, I would argue that many of us spend far more than we earn. Further, as our incomes have risen, we continue to add to our personal debt figuring that if we can “afford” to make the minimum required payments, we’re doing just fine. Meanwhile, many folks are finding themselves on the cusp of retirement, with little or no assets and a pile of debt. Now I don’t know about you, but I don’t think it’s advisable to quit your job and enter into your “Golden Years” with a bunch of payments in tow. Late in the game, many folks are turning to Financial Advisors and other sales professionals, looking for assurances that everything is going to be all right. Fortunately, there is a better way. This blog is dedicated to folks like you who are seeking an alternative solution to the debt and retirement problem.