Have you heard about the 5% Club? Don’t worry. It’s not one of these exclusive kinds of clubs. Nearly half of retirees are eligible to join!
What exactly is the 5% Club?
It’s simple really. The 5% Club is made up of Baby Boomers that reject the fear-based financial rhetoric they hear on TV, radio, and the internet. Instead, they are replacing it with some good old-fashioned long-term investment planning.
They’ve invested their retirement in a diversified portfolio of stocks and bonds. They know that historical data supports this decision. And the best part? They’re going to withdraw 5% of their retirement portfolio balance each year and spend it.
They’re spending their retirement money to lead rich, fulfilling lives in retirement. The 5% Club lives and spends without fear, because they have a financial plan they understand and believe in.
Is joining the 5% Club a sound financial decision?
Yes! Why? Because, if between now and the end of your life, a diversified portfolio of stocks and bonds does not return at least an annual average of 5%, it is the first time in modern economic history where it hasn’t.
“But Dave,” you might ask, “can you guarantee this will work?”
No. No, I can’t. Meteorologists can’t actually predict the weather. I can share sound advice based on historical data and my 17 years of experience as a financial advisor specializing in retirement planning.
People have been investing in stocks and bonds for hundreds of years. A diversified portfolio containing thousands of stocks and thousands of bonds have a remarkable track record stretching back into the early 1800’s. Source: Stocks for the Long Run by Professor Jeremy Siegel of the Wharton School of Business.
What if I’m afraid to run out of money?
I don’t blame you. You are not alone in your fear. There’s a somewhat strange situation occurring in this country where retirees are waiting too long to start enjoying their money. They are letting their savings defer for too long. In fact, many people die with more money than they have ever had before in their life.
That’s a fear-based retirement. It comes from the Depression Era mentality of your parents, and the constant panic-inducing updates from the conventional financial media.
You know what they say about money — you can’t take it with you. Your retirement money should be about having an awesome retirement. Spoil the grandkids. Help pay for college. Travel. Start a non-profit or donate to causes you care about.
The 5% Club is full of people who say, “I refuse to worry the rest of my life worrying about running out of money. I am going to spend some time to learn about money management, put together a plan, and start focusing on what I should be focusing on: living an empowered and fulfilling retired life!”
Ready to join the 5% Club?
There are all kinds of great things about the 5% Club:
- It’s simple.
- It’s easy to do.
- It’s free.
All you need to do is follow four steps.
- Once you retire, keep $30,000 in a savings account.
- Invest the rest of your savings in a diversified portfolio of stocks and bonds with at least half of the money in stocks.
- Start withdrawing 5% of your portfolio balance each year.
- Spend the money.
That’s it, you’re a member of the 5% Club. Congratulations!
The 5% Club Rules.
Yes, there are a few rules. Don’t worry — they’re simple, and for your benefit.
There are so many opinions out there and so much noise. I find that a majority of my job is to help you turn out 95% of the noise that is irrelevant (and sometimes harmful to you) and get you to focus on the 5% of information that can make a real difference in your lives.
Here are the rules:
- Remove any stock tracking app you may have from your phone. Looking at a quarterly statement is plenty.
- Don’t watch any 24/7 financial news stations.
- If you see a scary headline on the internet about the economy or the stock market, don’t read it.
- Read my weekly articles, listen to my radio show here and there, and watch some of my short videos. You need to stay on track.
- If, after taking your portfolio withdrawal, you have money left over at the end of the month- spend it.
- Live your life with a new sense of opportunity and creativity.
If you really want to get the whole story, I also have an in-person live class each month in downtown Sarasota. In 90 minutes, I might change the way you view your saving and spending for the rest of your life.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.
The value of fixed-income securities may be affected by changing interest rates and changes in credit ratings of the securities.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Indexes are unmanaged portfolios and individuals cannot invest directly in an index. Actual results will vary.
This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.