Stop Complicating Your Retirement Finances

Co-produced with Treading Softly

Have you ever seen a child throwing an epic temper tantrum? I mean full-force body on the ground, red-faced, screaming, and carrying on tantrum. Often the trigger is something extremely simple like they wanted something they were denied from having.

We, as adults and on-lookers, might find this tantrum to in many regards be ridiculous. We just think the child should “pull it together” and figure it out. To the child, it’s earth-shattering that they didn’t get the toy they wanted. They don’t have bills they’re worried about paying. They don’t have to think about deciding what the next meal for the family will be. They don’t have the stresses of work, relationships, or finances.

Life for most children is way less complex than adults. We have more to manage, more to juggle, and more to keep track of. Worse, we have a tendency to make things more complicated over time. Governments slowly grow in size. The tax code gets more complicated and convoluted. Regulations get more erroneous as they overlap and pile on top of one another. We seem to take the simplest things and turn them into massive “Rube Goldberg” machines that make them overly complicated.

We Make Rube Goldberg Machines of Our Finances

We do this all over our lives in unfathomable ways. When we look at finances, the simplest answer is that to pay our bills we must have income to do so.

Money comes in from income, money goes out to pay bills.

We work diligently for hours each week earning this income. We then use it to pay our bills for the month and spend whatever is left on our luxuries and pleasures. Then we repeat the cycle.

Simple as that.

Yet as we age, and plan for retirement, we suddenly feel this process needs to be more convoluted. Instead of earning income and having it flow into our accounts on a regular basis, we replace it with a multi-step process.

We buy things we hope will rise in value. We hold them for a period of time. We sell them to someone else to get our money back, and hopefully a gain. Then we use that to pay our bills.

We’ve taken the single step of income in and replaced it with more steps and injected even more uncertainty. What if something which we thought was a cheap price was actually expensive? What if over time we realize we can’t sell our stocks for more? What if the market crashes and takes a decade to recover? Your bills aren’t going to wait.

Is this really how we want to spend our golden years? Delicately dancing around more uncertainty to pay our bills with the ever-looming risk of messing up and returning to the workforce?

When you have to decide when to sell your investments to unlock your potential gains, you now have the added stress of timing the market. When you invest in stocks simply for capital gains, all your eggs are in one basket for those types of returns. This means you have a high-risk scenario. If your share prices don’t rise, you have nothing to show for your efforts.

Others will trade in options, trying to glean more capital gains from the market. This also can layer in another level of complexity, requiring the price of the investment to go the right direction and adding a timer. Even if you are right about where the price will move, it’s worthless if it moves after the expiration date! The risk is greater and the educational learning curve can be steep and costly.

That all being said, some are extremely successful in their complicated endeavors, but for most, they will see frustration and irritation. Many have been left wondering if it must really be “this hard” to secure a stable and steady retirement income. You didn’t retire to have a new career!

There must be something simpler you and I can do. Thankfully there is.

We Need To Return To Simple

What so many of us need to do is a return to simplicity.

Money comes in from income, money goes out to pay bills.

This is why we’re income investors. Consider this, I sent my money to work. It brings home a paycheck, and that money goes out to the bills. The same as when I had a day job, except instead of me working, my money does the working part! My wife and I have the spending part covered.

This return to simplicity allows us to have less stress and less convoluted plans. You shouldn’t and don’t need to wait until retirement to achieve this level of simplicity. The earlier you start putting your money to work building an income stream the better.

I actually encourage you to do it as soon as possible for a few reasons. One major one is that you get an instant report card on your retirement income stream. By seeing your dividends pour in, you can get that report card. By the time you retire, you will know exactly how much income your money is producing and can plan accordingly.

Second you can judiciously reinvest your income and grow your income stream one dividend at a time. The power of compounding works wonders when you have the ability to reinvest 100% of your dividends. Once you retire, reinvesting 100% won’t be an option.

I don’t mind sending my hard-earned dollars off to work to earn me more. As you build a portfolio of 40-plus dividend investments, you will find that you are collecting dividends several days every single month.

Cut and Streamline Your Debt

When it comes to bills, as a child we had none! Now as adults we have insurance, mortgage, credit cards, power, cell phones, Internet, and the list goes on! Some bills are unavoidable. If you want to drive, you must have insurance. If you want a home, often you will be forced to have insurance as well.

For many of us, we have plenty of additional debt or expenses that can be streamlined. Some of us may need to consider a consolidation loan to merge multiple smaller loans into one payment and one loan, this way its only one bill to pay, instead of many. Any high-rate debt needs to be eliminated as quickly as possible. Focus on eliminating any unnecessary debt.

Investors and retirees will disagree if a mortgage or no mortgage is better for themselves. This is something you need to decide for your peace of mind and comfort level. It can be said that there’s little better feeling than completely owning your own home and having no mortgage payment due on it.

Personally, I like things as simple as possible, fewer bills to pay, less debt to owe. It’s ideal to retire debt free with your “essential” expenses being as minimal as possible. This helps keep things easy!

Rinse and Repeat

Have you ever looked at instructions on a shampoo bottle? They often suggest rinsing and repeating. It never says how many times, fortunately, that is a problem I don’t have to deal with anymore!

For our financial future, we need to occasionally revisit the simplification process, rinse and repeat as needed to ensure we’re not seeing the slow creep of over-complication making its way back into our process. How often? Well, like a shampoo maker I’ll leave that up to you!

One reason High Dividend Opportunities members love our Income Method is that it is a straightforward no-nonsense approach to the market, investing, and retirement. We harken back to days past for how wealth was really created, from its origin point and we built it up from there. The goal is to see money coming in to cover the money going out.

Dividends are a form of recurring income. Just like your paycheck, you get a predictable amount each month. Recurring money flowing in, so you can meet those recurring expenses.

With your finances simplified and taken care of, you can start worrying about the bigger issues like: What hobby to try out next? Will you have brunch or breakfast and lunch? Who has to pick the next TV show to binge watch?

Soon you’ll start to understand why the child throws a tantrum over something so many see as trivial and foolish – you’ll be freed of so many of the worries and issues weighing down on the shoulders of others. It’s that what so many of us want for our retirements? Less stress? Less problems? More financial freedom? You can achieve it.