Most people in the world are living from paycheck to paycheck. In a world, where old age and retirement are inevitable, how do you retire rich?. In this article, we explore some of the challenges of old age and retirement, and deliver to you an absolute way to prepare for old age and retirement in the best possible way ever.
The proportion of older people in the world is expected to increase from 12 per cent in 2015 to 21 per cent in 2050 according to the United Nations.
Despite these expected increase in the proportion of old people in the general population, retirement plans, or pension plans remain meager in the world. Currently, only 68 per cent of the worlds older population receive some sort of pension. However, there is significant regional disparity in this figure.
Percentage of Older People Enjoying Pensions| Retirement Plans.
Adults are retiring with debts now more than ever despite having to work longer, and saving higher for retirements than the previous generation. In 1998, the medium debt among adults remained below $15,000 in 2012 that number has jumped to almost $25,000.
Adults Retiring with Outstanding Debt
Your Savings won't Save You
The truth is, your savings won’t save you, neither nor working hard and taking on extra hours each working week.
Ricky Gervais puts this situation mildly; “The CEO of Nike has amassed a fortune of 5.2 billion dollars. For a female worker in one of his sweatshops in China to earn that, she’d have to work 7 days a week, 8 hours a day, for ten thousand years”
Saving for retirements is one of the worse economic principles handed down to today’s generation. Of course it would take a worker close to 10, 000 years to amass a wealth of billion dollars only if he or she works, but if he or she invests a portion of her salary, it would take only a couple of years.
What’s worse? we are all forced into a race with inflation.
There is inflation all over the world, and in many countries, inflation rates are high above interest rates given by banks. In most cases, the interest rates given on your savings accounts are completely negligible and some banks do not even give interest rates but rather charge you on your savings account.
If you manage to save ten thousand dollars in your bank account, by the end of the year, it would be worth $9760 in the United States, in Nigeria that same money would now be worth $8790. Compound these losses for the next 30 years .
Inflation alone renders your hard work and savings meaningless for retirement! and this is why many people are working harder than ever, longer than ever, saving more than ever and yet still retiring poorer than ever. It is a never ending trap! You get sucked in at an early age, and if you do not wise up, you end up dying in debt.
Avoid the Old Age Poverty Trap
The trap is getting you working harder than ever, longer than ever, saving more than ever, and yet still ending up old and poorer than your parents did. For the first time in history, people are worse off financially than the previous generation.
Those who escape the tentacles of poverty, do not do so by mere wishful thinking. They consider poverty an enemy, and retirement a very important aspect of life. The funny thing is, if you do not figure these secrets out earlier in life, you end up working hard enough to your death without even enjoying retirement.
The facts are evident; the younger aggressive ones die off earlier than the calm and relaxed person. Poverty and hunger remains the number cause of death in the entire universe, hunger kills more than AIDS, tuberculosis and malaria combined but it is not declared a global pandemic, why? the rich do not die of hunger friend, and the rich make the laws!
What leads to hunger? Simply put; Poverty! and yes, despite your high paying job, if you do not wise up, you can die of hunger one day like the 21,000 people dying everyday due to hunger. The world is merciless and brutal than most people think, but while you are here, while you have the opportunity, it is best to prepare adequately to retire rich and enjoy your retirement.
We have established earlier that saving your way to old age and retirement would lead you to more debt and poor retirement experience that is if you are lucky, if you are unlucky, the mere quest for wealth, and aggression would kill you (sad but true). These are laws of economics, and they seem natural to me, you can not work you way out of poverty with your body and muscles, but you can with the help of your brains, by choosing to be a smart fellow, you pave the way to retire rich.
How to get out of poverty and meet old age and retirement with smiles
Old age and retirement awaits us, whether we like it or not, unless we work ourselves to death earlier than the creator imagined for us, but for most of us, poverty and the rat race seem our only choice? wrong!
No matter your job, no matter your business, you have the opportunity to approach old age and retirement with smiles if you take the right steps;
1. Save only to Invest
2. Re-invest till you retire.
3. Invest in tried and tested industries e.g real estate.
Save Only to Invest and Re-invest for Old Age and Retirement
To grow old and retire in peace and joy, it seem to me the only logical choice most people have really is to save money, but not for the purposes of savings as described above. We all know you loose money just by saving it, but this time around our goal is to save enough for the month, and at the end of the month, invest our savings into a good investment plan.
Let’s assume you invest $100 in an investment plan that gives you 30 per cent returns each year on your invested capital, if you continue reinvesting your profits and capital, in 30 years your $100/month would be worth on average a staggering amount of $3,143,994.00. You read that right! Over three (3) million united states dollars. Adjusted for inflation, the real value of your investment would be $880,318.00.
Inflation hurts, no matter how you look at it, over thirty years, you have amassed a wealth of over three (3) dollars by investing only $100 each month, but your $3 million now have a purchasing power of almost a million dollars.
Over the 30 years of your investing for old age and retirement, your total actual investment would add up to $36,000. You have moved $36,000 dollars to this huge amount of over 3 million dollars ($880,318 adjusted for inflation) over this period, while inflation hurt you considerably, it doesn’t hurt as much as Mr. Saver.
Lets look at the opposite, the Mr. Saver!; Like you, he saved $100 each month but failed to invest any of these, they remained in his savings account, suffering from the invisible hands of inflation. over the next 30 years, he has $36,000 in he’s account, i.e ($10,080 when adjusted for inflation).
The inflation rate used for the calculations above is 2.4% per year corresponding to the inflation rate of the United States for the year 2018. If you live in a high inflation country like Ghana or Nigeria, you are even worse off if your entire retirement strategy is to save.
Over the 30 years of his savings, he has rather lost close to 2/3rd of the amount he saved due to inflation, this is a painful fact that all of us must deal with on a daily basis. There is no hope for the saver out of this race, no matter how risky an investment seem to you, over the long period, it seems the only risk here is not investing and taking chances at wealth creation.
The only purpose to save in all of history, is to invest and invest a percentage of your money each month! period. This knowledge has been passed on for generations, even from ancient Babylon, the richest man in Babylon always made sure to save not less than 10% of his income for investment that would give him more income.
Once you get this cycle right, wealth is a never ending cycle for you, and you can retire in old age, happy and fulfilled.
For most people, getting a good investment plan to invest their savings remain a big hurdle and often, geographical locations continue to limit their ability to invest in high value businesses world wide. In this internet age, Dorla has made it easier for you to invest and make great returns from anywhere in the world. You can join us, and earn from the comfort of your home, anywhere you are in the world.
Real Estate is one sure way you can prepare for your retirement. Having a few rental properties available helps to reduce the burden that old age often impose on individuals who retire without adequate preparation.
Fortunately in the developed world, you can start buying rental properties, if you have good enough credit ratings, your bank would be willing to lend you up to 90% of the value of the property, you only need to make a 10% down payment.
This means, you are able to buy a million dollar house by making a $100,000 down payment, the bank loans you the remaining $900,000 at a very low interest rate. You then rent this property to tenants who’s monthly payments go to pay your bank loans plus live you an extra as profits.
Lets break this down a bit;
House Value – 1 million dollars
Your down payment – $100,000
Your Loan – $900,000
Now you have a house, but you also have a loan of $900,000 of which your bank would begin making deductions from your account on a monthly basis.
Bank Monthly Deductions – E.g. $10,000
You Rent it Out – E.g. $12, 000
In our hypothetical example above, each month your tenants pay you $12,000, your bank deducts $10,000. You earn $2,000.
What’s better? With time, the value of the home increases, and so does the rent, which means you can earn more by charging more rent, or you can sell the property at a higher price and make more money.
Unfortunately, in Africa, it is hard to find a bank who would give you a loan at a rate lower than 5% as is done in developed countries, making the strategy above pretty hard for you to implement if you live in Africa.
Things to Note While Investing
Invest In Legitimate Funds
Legitimate fundsoften have structures in places, well resourced staffs and in depth knowledge of the market that a single individual might struggle with.Their funds are often diversified and produce returns year on year, thus these types of funds gives you an opportunity to earn passively while focusing on your day job. You do not need to worry about making returns from these types of funds, they worry on your behalf, allocate funds on your behalf and send you reports when you need them.
For the average person, these types of funds are the most suitable as they take the hustle out of investing for you and make investing a happy and a process which you can enjoy from the comfort of your home.
Invest Long Term
According to Warren Buffett, the best time to hold an investment is forever. The temptation to sell or cash out comes for everybody, even the best of us. It is disheartening for most people, when they see their portfolio down a couple percentage points, it is advisable to avoid looking at your portfolio every single day but rather allow the market to perform over a long period of time.
The market has it’s ups and downs but in the long round, the market performs remarkably well, thus if you invest in a stock or business or fund for a long period, the assurance of making profits doubles, compares to someone who jumps in and out of markets for quick bucks.
Research show’s that even when you buy into a market or fund at it’s worse possible moment, over a long period of time, you are able to make substantial profit from this very market which you otherwise thought was bad.
Relax, let your patience pay off.