INDUSTRY INSIGHT
YOUR FINANCES
SPONSORED CONTENT
THE
Grasshopper
AND THE
ANTS
This winter reminds me of the Aesop’ s fable about the grasshopper and the ants. One glorious summer day, the grasshopper was in a field singing and playing his fiddle when some ants passed by laboriously carrying a kernel of corn. The grasshopper asked,“ Where are you going and why are you working so hard?” One of the ants replied,“ We’ re taking this food to our anthill so we’ ll have something to eat this winter.” Responded the grasshopper,“ But it’ s such a beautiful day and winter’ s a long way off; why don’ t you stop and play with me?” Another ant said,“ There’ s no time to play today— winter’ s coming soon!” and they kept on working. A few weeks later after a big snowfall, the grasshopper staggered up to the anthill, begging for food. In disbelief the ants asked,“ Were you so busy dancing in the sun that you didn’ t put anything away for winter?”
Many Americans can learn a lesson from this ancient fable. For example, J. P. Morgan prepared some illustrations based on the probability of reaching age 80 and age 90. The study showed that there is a 58 % chance of a 65-year-old male reaching 80; a 69 % chance of a 65-year-old female reaching 80, and an 87 % chance that at least one member of a couple aged 65 will reach the age of 90. Also, statistics showed that there is an 18 % likelihood that a male age 65 will reach the age of 90, a 29 % possibility that a female age 65 will reach the age of 90, and a 41 % chance that at least one member of a couple age 65 will reach 90. Odds of living into your 80s or 90s are pretty darn good these days – that’ s the good news.
Now, here’ s the bad news. The average number of years for savings to last in retirement in the U. S. is only 14, leaving a shortfall of about seven years based on the expected mortality numbers I just shared with you. Other countries are in even worse shape than the U. S. In the U. K., for example, the average retirement savings will last only eight years, leaving the British with a deficit of about 10 years.
Successful investing requires patience, but many investors are often looking for a shortcut to wealth accumulation. They watch the market daily. They wonder why their portfolio is not growing faster or they worry about the value dropping during the inevitable market correction. Sadly, this preoccupation with market valuations leads to big mistakes such as selling when the market drops or buying when the market is at its peak. Sometimes we’ re our own worst enemy.
Sure, you need to invest wisely, but a well-diversified portfolio built around your financial goals and time horizons should do it. We can always count on the market going up and down. That’ s the nature of the beast. But to save the right amount of money for retirement you
need a plan, and the discipline to follow the plan. Why not max out on your 401( k) plan? In 2018, you can defer up to $ 18,500 per year. If you are over age 50, you can defer another $ 6,000 per year. If your income qualifies, why not contribute to a Roth IRA? In 2018, the maximum contribution is $ 5,500 and if you’ re over age 50, you can contribute an additional $ 1,000. Why not open an after-tax investment account and arrange for a systematic withdrawal from your checking account( there’ s no limit on this account). How about cash value life insurance? Those aren’ t good investments, you say. Well, maybe not, but many people have accumulated significant amounts of cash value in these vehicles that can be withdrawn tax-free in retirement, not to mention also providing a tax-free death benefit for your spouse. How about an annuity? Expenses are too high, you say. Maybe so, but many people have accumulated retirement funds this way.
But, you say, I want to enjoy life now. I don’ t want to save for tomorrow— retirement is a long way off... Ah, sounds familiar, grasshopper!
In all seriousness, I am not suggesting that you save everything for tomorrow and never enjoy today. But far too many Americans are saving very little or even nothing at all. I am simply suggesting that you refocus your wealth building. There are many investment alternatives. Some are better than others, but the most important thing is making the commitment to save for tomorrow. If we are being honest with ourselves, we would admit that we could save more for the future. Cutting back on a couple of lattes or having dinner at home more often probably won’ t impact your lifestyle and enjoyment that much. By saving more and investing for the long run, your quality of life will change for the better. You don’ t need to work like an ant, but you don’ t want to live like the grasshopper either.
Cheers.
This Industry Insight was written by Garrett S. Hoge. Garrett S. Hoge, CFP ®, ChFC ®, MS, of H Financial Management, is a private wealth manager based in Southpointe serving the ever-changing financial needs of his clients. Please contact Garrett at H Financial Management, 400 Southpointe Blvd., # 420, Canonsburg, PA 15317, Phone: 724.745.9406, Email: garrett @ hfinancial. net, or via the Web: www. hfinancialmanagement. com.
Securities offered through Triad Advisors, LLC, Member FINRA / SIPC • Advisory Services offered through H Financial Management.
H Financial Management is not affiliated with Triad Advisors, LLC.
PETERS TOWNSHIP ❘ FEBRUARY / MARCH 2018 41