Setting Retirement Goals

Posted by   admin on    June 3, 2004

Do You Think You Know What Your Life Will Be Like When You Retire? I'm Willing to Bet You're Wrong

Even if you work long and hard enough to afford the standard vision of a "perfect" retirement, you will almost certainly be bored by it. You may not want to believe me, but tell me this: How many business people have you known who retired, found themselves bored, and went back to work?

Maybe you will be the exception. Maybe you can walk away from a lifetime of creative, challenging work and be happy to idle away the rest of your life.

As mentioned in our prior newsletters, we strive to provide articles on various aspects of wealth management to assist your understanding of why planning for the present and for your future has importance. Yes, we also promote our services; yet, you will find that we always seek to present thought provoking topics that are relevant to our wide audience.

Planning for a successful retirement may truly be one of the most challenging endeavors to be expected during your life time. If this is so, why is it that so many people reach that point of life so unprepared? The ability to gear yourself down to a simpler and more tranquil pace will take a great deal more effort than you probably realize; and, affording your desired lifestyle will be the second major challenge at retirement and things will probably be different than you imagine. 

In this letter, we will discuss some practical retirement planning considerations to point you in the right direction and, as always, we will finish with an update on our investment activities.

Think You Know What Your Life Will Be Like When You Retire? I'm Willing to Bet You're Wrong

On my last vacation, I met a man who had retired when he was 39  he was 45 when we met. Immediately after selling his multimillion-dollar business, he decided to "kick back" and dabble in writing and painting for a while. As it turned out, dabbling wasn't in my bones, he advised. Within a few months of walking away from his career, he had a full-time executive assistant and a large personal office to handle the volume of activities he was creating. Soon, it dawned on him - he was just as busy as he had ever been. And he had as many challenges, frustrations, rewards, and disappointments. The big difference was that he wasn't getting paid for it!

You may be able to gear yourself down to a simpler and more tranquil pace. But it will take a great deal more effort than you probably realize. And, when considering the question of having enough money, you will face the second big reason your retirement will probably be different than you imagine. Because living the fantasy lifestyle is expensive.

Even if you find a relatively cheap place to live, playing golf or tennis all-day and dining at fine restaurants costs a lot of money. That kind of living could easily cost you, pre-tax, between $150,000 and $250,000 per year in todays dollars.

What would it take to have that kind of money? Let's look at the math.

Assuming your retirement fund can earn 9% a year (which is about equal to the long-term stock-market return), with reinvestment of a portion to compensate for the effects of inflation, you'd need between $2.5 million and $4.2 million in liquid assets. That's not counting the value of assets that you use, such as your house, your furniture, your collectibles, etc. If you go for a safer yield, let's say U.S. Treasuries, your retirement fund would have to be at least 50% more than that amount. To have between $2.5 and $4.2 million, liquid, you would probably need to acquire a net worth of about twice that - all else being equal.

Not too many people are worth between $5.0 million and $8.4 million when they retire. Yet, many, many fantasize about a retirement lifestyle that requires that kind of net worth.

If your current financial situation is meager, don't despair. Because accumulating wealth is just another goal . . . like learning to ski or play the piano. And, with proper planning, you can definitely do it.

In the meantime, there are ways to bring the target a little closer. The best way - by far - is to find a retirement paradise that is less expensive than where you live now. If you can enjoy living in some other part of the world, more often than not, you can get that great retirement lifestyle for less money.

The Secret to Enjoying a Great Retirement

To understand what I'm about to say, you have to understand this: Happiness in life comes not from idleness but from working. Not working at a job you hate, but working at a task you love.

Happiness comes when you are busy doing something you care about . . . such as teaching, taking care of your children, painting, fixing a faulty switch, or writing a helpful memo. When you are doing something you care about, and paying attention to IT (not YOU), happiness surprises you.

The secret to a great retirement is to figure out how to get paid for doing work you would gladly do for free - and to be able to do that work when and where you want to.

Name your dream . . . pick your price.

Maybe you want to be a writer. Maybe your secret passion is food. Maybe you've always wanted to get back into astronomy or archeology or gardening. Somewhere in your past is a buried profession - something you've long ago given up on. What if you could renew that dream?

The Internet has opened up a world of possibilities for "retirees." I recently saw a news story about a guy who trades cigarette lighters online. This happens to be something he always wanted to do and planned to do once he stopped working. But by taking advantage of eBay and all the other Internet auction sites, he is already making more than $30,000 a year doing it just on weekends. Trading cigarette lighters! And, if you look hard, Im sure youll find plenty of other examples.

Start your retirement planning right now. Ask yourself the three Big Questions:

  1. "What work would I really enjoy doing?"
  2. "Who would be the best person to do it with?"
  3. "Where would I most want to do it?"


You may not be able to find a partner or relocate right away, but you can definitely start working on mastering the skills you're going to need for your new line of work.

Don't tell yourself you're too old to make a big change now. During his retirement, Henry Flagler became the central figure in taking on the development of an entire state. Upon retiring to Florida, he built a railroad from Jacksonville to Key West, created three major cities and built world-class hotels. Do I need to go on?

Let Me Help You Get Started On Your Hour-a-Day Fast Track to Success

What does it take to be successful? There is a very simple, tried and proven method that will work for just about anyone . . . and in a remarkably short time.

Study something - anything that is of interest to you - for one hour a day in the same way that a university student would study one of his courses.

This is a concept that was popularized by Earl Nightingale a half-century ago and then largely forgotten. But, as Nightingale discovered, daily study is a trait of almost all successful individuals. And it quickly pays off. Because after just six months of concentrated, one-hour-a-day study, you can understand the basics of almost any topic.

Sound simple? It is. That's the beauty of it, and one of the reasons this technique can change lives . . . the lives of directionless teenagers . . . of people stuck in mid-career ruts . . . and of those in their golden years who feel sidelined by society and need some extra cash.

What might you study in order to be able to achieve the freedom you want and the revenue to enjoy it? The obvious answer is something you are passionate about. It not only makes the learning fun but also assures that your new career will be emotionally as well as financially satisfying.

Happy with the company you're already working for? There is no surer way to move up the corporate ladder than by learning more about the industry you're in. After just a month or two of daily study, you'll be demonstrating your fast-growing knowledge on the job -- and attracting the attention of your superiors.

While you may not be able to become a brain surgeon by studying one hour a day for six months, there many careers for which that minimal effort will get you well on your way. How long, for example, would it take for you to become a really competent video editor? To learn how to build a great skateboard? To learn the critical principles of design for websites?

Regardless of what you choose to study, don't procrastinate. If you don't learn something new today, you will just be one day older and not one bit smarter tomorrow.

ELF Capital Management Investment Performance Update

During this past month, the various global broad market sectors we follow continued to demonstrate abnormal trading patterns. Despite this, most have managed to end on a positive note. And, so have we. As well, our portfolio clients should have noticed that we began repositioning holdings this month to a more defensive stance in preparation for rising interest rates. With cash balances well above average in many accounts, we will be looking to put that money to work during the month of June.

For the month ended May 31, 2004, our one-month performance is up 0.47%, our three-month return is down 4.66% and our one-year return is up 8.11%.

For disclosure purposes, past performance is not necessarily indicative of future results and ELF Capital Management LLC (ELF), formerly Hoffman White & Kaelber Financial Services LLC, cannot guarantee the success of its services. There is a chance that investments managed by ELF may lose a substantial amount of their initial value.

ELF is an independent discretionary investment management firm established in February 2003. ELF manages a strategic allocation of primarily exchange-traded index funds (ETFs), and may invest in other carefully selected securities. ELF may also employ hedging techniques, through the use of short positions and options. ELF manages individual portfolio accounts for both individual and business clients.

The ELF ETF Strategy returns presented herein represents a composite of actual results from all client portfolios managed by ELF. Currently, it is the only composite presented by ELF and separate client account portfolio positions are substantially similar, except as may be modified for retirement plan accounts and accounts with net equity of $60,000 or less. There is no minimum account size for inclusion into ELFs ETF Strategy composite and accounts with net equity of $60,000 or less have a tendency to downwardly skew the combined results.

The performance data presented herein includes the reinvestment of dividends and capital gains; as well, ELFs ETF Strategy composite returns are presented after deducting actual management fees, transaction costs or other expenses, if any. ELF charges an annual investment management fee as follows: 1.25% on the first $250,000; 1.00% on the next $750,000; 0.95% on the next $4,000,000; and, 0.75% thereafter.

Copyright 2004 ELF Capital Management, LLC. All rights reserved.