Planning for Retirement Starts in Your 20's by Lewis J. Walker, CFP(R)

Plan for retirement in your twenties? Sure, retirement is decades away but the personal and money habits you form now will govern success in reaching financial independence somewhere north of age 67 or before.

You may be single, recently married, and embarking on a career while handling student debt. If you have children you are juggling family responsibilities with working and other demands, and the concept of retirement is so far beyond you that you have no firm thoughts about what that even means.

Forget “retirement” per se. Odds are retirement will not be like what grandma and grandpa did, not even what your parents may be doing. Redefine “retirement” as financial independence, when you can live life on your own terms with a solid financial foundation and without a paycheck. At what age would you like for that to be?

Life decisions often count more than investment decisions. Take a house. Do you own your house or does the house own you? Too much debt and too much stuff can weigh you down. Renting can make sense if you are building a career and need flexibility as to location. If you can avoid expensive consumer debt (after paying off student loans) so much the better. If you own a house, resolve to have it paid off before your financial independence target date.

Resolve to build a freedom fund...at least one year’s worth of safe money to sustain you or your family for at least a year. That’s “peace of mind” money that allows you to handle a job or career change, a health challenge, or other unexpected event. Too many people are two weeks away from disaster if the paycheck stops.

Divorce can make you poor in a hurry. Marriage is not a “50 year date.” To some, the pledge “for richer or poorer ,through sickness and health, to death do us part,” seems trite and old fashioned. What isn’t old fashioned is the art of compromise and devotion based on appreciation for family and the sacrifices involved. “Richer” and “health” take work while you manage the other things that make for a successful and long-lasting relationship.

Stuff happens, and failure to have adequate property and casualty, umbrella liability, health, disability, and life insurance can make you or your family poor. Basic planning like a will, powers of attorney for assets and health care, is important. Lawyers are expensive, but not using competent counsel can be even more costly.

Find out what you really do well. Maria Forbes, a Norcross, Georgia-based consultant with www.firepowerteams, employs diagnostic counseling tools like Kolbe® and Gallup StrengthsFinder ® to help people make good career decisions. An investment in yourself to enable you to understand your innate strengths and instinctive MO pays strong dividends in career success. Knowing how to articulate your value-proposition can get you in the door in an increasingly competitive job market.

Obviously, an early and disciplined investment process will help you to reach financial goals sooner rather than later. If you are going to start your own business, you have to have considerable sweat equity in the venture as well as your own money before you can expect others to lend you money.

With any goal take advice from Stephen Covey and “begin with the end in mind.” What is the expected outcome? In getting there, what challenges will you face? What is the best alternative for dealing with challenge? What resources are needed to power the best alternative? Where will resources come from?

Don’t get me started on smoking, excessive drinking, and drug use. Marijuana will fry your brain...believe it! As a financial advisor I have seen the wreckage with individuals and families. It isn’t pretty.

Invest in lifelong education. Stay current. What you learned yesterday will be obsolete tomorrow. Always know where the exits are and where the next opportunities will be. Go to meetings. Show up on time. Say “please” and “thank you.” “No problem” is not a great response. Who said my request was a problem?

You may not have to swim with the sharks, but if you go with the flow, you may be up the creek. Bon voyage!

Lewis Walker is President of Walker Capital Management, LLC. Certain advisory services are offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker and Mike Hostetler are registered representatives of SFA which is otherwise unaffiliated with Walker Capital Management, LLC. lewisw@theinvestmentcoach.com

tD