This is a topic that the politically correct world would never bring up. But I'm politically incorrect, so here goes. You can also skip all my je ne sais blah and get to the moral of the story in the last few paragraphs...
In addition to my Harry Winston nightmares, I also had nightmares about leaving my family behind whilst I was carrying my Hermes Kelly handbag. This has been a recurring nightmare for me for some time. I've had similar dreams in the past, even before I actually went out and technically purchased a Hermes Kelly. I know I have to do something about this financial guilt whilst at the same time not compromising my own financial future.
My financial vulnerability started when my Dad's business collapsed. It changed him as a person and I doubt he ever really recovered. Looking back, I grew up in an environment where failure was acceptable. My Dad has lost a fortune at least three times and I have been afraid on some level of doing something similar. So, when I entered the workforce, I found myself suddenly entering a world where success was the norm. It was exhilarating yet a bit frightening. According to me, everything needed to be perfect and failure was not an option. As my income grew, I found myself shouldering a lot of the financial responsibility in my family and finally, I had to say enough is enough recently.
2009 is the first year I actually focused on my own financial goals for a change. In an ideal world, we wouldn't have to choose between money or family. But if it isn't money or family, sometimes the battle could be between what you want vs. what your family wants you to want. So, I think it's practically one and the same.
Anyway, I think most people in the Gen X and Gen Y demographic wouldn't need to think about this since so many are luckily trust fund babies. For the unfortunate few, myself included, who do have to think about this, Gen X and Gen Y could be the next Sandwich Generation. We could, at one point, find ourselves suddenly trying to shoulder the responsibility of raising a family and then at some point trying to care for our parents as well.
Bummer, to say the least. And here I was thinking I could retire in a few years due to my beautiful Le Grand Plan. But alas, out comes Obama from left field and the US equities markets are once again temporarily out of service.
To get back to this very serious topic of becoming the next Sandwich Generation, I haven't actually come up with a solution yet. However, I was thinking annuities could be one option. It wouldn't be an ideal solution, but perhaps it could be worth exploring. Another thing to seriously consider is long term care insurance.
Some more reading:
Prepare yourself now to help care for parents later
Monthly Checks for Life: 5 Rules for Immediate Annuities
Income for Life: 7 Best Annuities
From what I can see, $0.5 million in savings will only yield a very mediocre lifestyle for a couple in retirement.
Ever since I officially got Age 30 stamped on my forehead, I've been feeling a lot more pressure with regard to establishing and developing my financial security. Considering that I'd like to go for the Early Retirement option as well, I now have at least 70 years of financial responsibility on my shoulders due to the need to reverse 30 years of fiscal irresponsibility as well as 40 years of retirement income to be built up. That's a lot to achieve in a very short amount of time.
Whilst I look forward to the day that I will no longer be able to contribute to my Roth IRA as that would mean that my salary has skyrocketed, I am still taking every advantage of it whilst the option is still available to me. And why shouldn't I? It's obviously got a lot of perks.
Looking back, I've committed some IRA mistakes I wish I hadn't made, including:
1. starting too late. I was only able to contribute to tax years 2007, 2008, and 2009 so far. I should have done it sooner.
2. imperfect asset allocation. In hindsight, I should have allocated more Roth IRA funds to low beta / high dividend stocks. Additionally, I should have placed some of my bond purchases in my Roth IRA rather than my regular brokerage account. In the future, when I perfect my forex trading strategy, I might also consider allocating a good amount of capital to a Roth IRA forex account.
3. not trading enough. I am a firm believer that the buy and hold strategy should not be applicable to an IRA account. Even with a low beta / high dividend strategy, I believe there are times when it makes total sense to rebalance the portfolio by cashing in on some investments and waiting for another buy opportunity.
4. not including CDs, Municipal Bonds, and Treasuries in my asset allocation. Though the yields are usually lower on CDs, Municipal Bonds, and Treasuries, due to the tax benefits, these asset classes could make a lot of sense in a Roth IRA at certain points in time. However, current fixed income yields at this point aren't at the irresistible levels they once were earlier on in the year. We're now looking at less than 7% yields on long term bonds, which to me isn't sufficient ROI - especially on corporate bonds, considering the higher default risks.
5. placing a junk bond in a Roth IRA. When I first started out in junk bond investing, I thought I did the right thing by placing Ambac bonds in my Roth IRA. Whilst I was able to collect some tax-free interest on this bond, due to Ambac's failure to pay interest on this bond issue, the cash is now not only idle, but I wouldn't be able to write it off as a loss and take a tax deduction on it. This is because it is much more difficult to take tax deductions on IRA accounts.
It might be wishful thinking, but I wish the government would get rid of social security for Gen X & Y and just enable us to contribute unlimited amounts of money to our Roth IRAs.
My stock portfolio was down 4.4% yesterday, which made me happy I didn't have a bigger portfolio. At the same time, when you've only got that little, it could get a bit unnerving. To retire young and rich - or to retire at all? That is the question.And what is considered affluent nowadays, especially when 2.245 million households in the US have annual household incomes of over $250,000. This probably means that the multi-multi-millionaire is the new millionaire. The standards are higher, so we've got to think bigger than ever before. People here in Belgium tend to really like the saying: "There's nothing we can do about it" and have a totally "C'est la vie" kind of mentality. I suppose approaching life with that attitude is OK once in a while. We can't be a diva about everything. But I really believe that we've got to rise above the recession attitude and start looking more optimistically at the future. Even if there's a market pullback, we've more than likely seen the worst of the recession. The good news is that for people 35 and under, the economic crisis is a great shopping opportunity - both in and out of the stock market. And if we play this right, we can not only retire - but retire young and rich!Am I wearing rose-coloured glasses? I don't know. All I know is they're Chanel.
