Friday, October 9, 2015

Paychecks and Playchecks (Day 11)

Most people seem to have forgotten that the 401(k) plan has mostly replaced the pension plan.  In the not so distant past, people worked for the same company for 20 or 30 or more years, with the reward for loyalty to the company was that at some point they would be able to continue to get a regular paycheck without continuing to work.  That was supposed to what happened with 401(k) plans, but with the employee rather than the employer having control.  But that hasn't been what happened, for various reasons like I wrote about recently (Follow the Money and Don't Die With This).


This is not advice on what insurance product to use, or even whether or not an insurance product is the right tool for the job (I usually think it is, but I'm biased.  Think for yourself too).  All I'm saying is that you need to have a plan so that, unlike a large percentage of people in retirement, you know that you have enough cash flow and liquid money to cover everything.  Even if something goes wrong.  Because it will.  Which means that if you're counting on dividends, rent being paid on time, or other non-guaranteed investments for your paychecks, you need to either change your plan or have a good back up plan


When I say, "enough cash flow and liquid money to cover everything", I don't mean just enough to cover the bills.  I mean enough to cover buying a different car if you need it, to buy someone special a really cool wedding present, to take a trip with friends, etc.  When you were in your 20's (or even if you're there or haven't reached that age yet), did you sit around with your friends and say, "All I want is enough of a paycheck that I can eat  two or three times a day and keep the electricity turned on?"  Of course not.  So why plan your retirement on having just enough to pay the bills.  Don't sell yourself short.  Plan to have enough in your regular checks to both "pay" and "play".

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