By Kyle Olson
Experts have said that in order to secure a wealthy lifestyle in retirement you must invest in stocks, bonds, and other increasingly unconventional investments.
However, a new study has shed light on the subject and discovered holes in that logic.
The Center for Research at Boston College concluded that the traditional and newly unconventional trends in retirement investing throughout the investing industry have become obsolete because of one detail they had previously not considered; the amount investor has.
The study goes on to show that there are three, much more important factors that subsequently don’t require a brokerage account.
How long you work, controlling spending, and leveraging the value of your home are all one investor needs to maximize the possibility of wealth in retirement and achieve the illustrious lifestyle that most of us crave, according to the Wall Street Journal.
For more and more seniors, the lifestyle they thought they were going to have, now may not be possible because of credit card debt, outstanding medical bills, and just living beyond their means and many are forced to file bankruptcy .
The Numbers Don’t Lie
According to the research done at Boston College, 74% of households would fall short of their income needs by age 62, and 47% of households would fall short at age 67 when individuals make no changes to their savings and investment strategies and can The study also takes in to account when the individuals become eligible for social security benefits.
Next, the research asked the question; what would happen if investors were able to invest all of their portfolio in no-risk stocks, which earned 6.5% a year after inflation?
The study showed that even after this consistent and risk less investment strategy, 44% would still fall short of their retirement income goals by age 67.
Experts warn that no stocks are completely risk free and that most investors prepare for retirement with a mix portfolio of stocks and bonds.
The study also showed that few investors have the volume of wealth in order to turn a significant return on their retirement savings. The way the system is set up at the moment doesn’t maximize the investor’s portfolio returns.
The Right Way?
Empty nesters, or parents who have grown children that have moved out of the house, have a tendency to spend more after their children leave or after their mortgage is paid off in full.
The study shows that if they were to cut spending by a measly 5% meant that 40% would fall short of their income goal in retirement instead of the 46% that would if they continued their spending habits.
Also, experts say that working longer allows for more time to save, shortens the time savings are needed in life, and enables to retiree to claim more social security when needed.
Lastly, the research showed that tapping your home’s equity is a viable way to prepare for retirement. But foreclosure in recent years took a significant hit on the value of most homes.
Houses are generally a person’s biggest asset but with the help of a reverse mortgage, the people falling short on retirement income at age 67 dropped to 36%.
There are many ways in which you can maximize your lifestyle after retirement. Many experts say that finding the right one and continually staying diligent about monitoring those instruments is vital to prosperity after retirement.