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How To Replace Your Paycheck

Updated: Apr 23

How do I replace my paycheck in retirement?

The problem is when you retire and stop working, your paychecks stop too.

If you’re like most Americans, you’ve been working for what feels like your whole life. The government takes the taxes out of your paycheck, and your employer likely takes out money for your 401(k) savings. The rest automatically goes into your account. Then, all your bills come out. And if you’re lucky and diligent, you have money left over to save for your future or maybe have fun with.

In this video we're going to show how to replace your paycheck when you retire so you can stop working but also keep your paychecks still rolling in.

Hello, I am Bradford Ferguson owner and chief investment strategist at Halter Ferguson Financial. We help everyday Americans retire early with more money than they thought possible. So, in this video, we’re going to show you how you can replace your paycheck in retirement.

They don’t teach you this in school. And it sounds like it should be simple. In many ways it is. But the truth is, it’s not easy. But if you take action today on these four steps, you can see where you stand financially. Eliminate your doubt and worry. Because you’re going to set yourself up for decades to come.

So let’s start with step 1....

Step One: Saving the right amount in the right accounts

We know that relying on just Social Security and pension checks will give you a lifetime of poverty in retirement. Compared to what you’re making now it’s a huge pay cut in how you’re living. Unless you like the taste of cat food and ramen noodles, you’re going to need to save a significant amount of money.

So stay with me here, what do I mean by right amount? The truth is, there is no magic number, or one size fits none rule of thumb. For example, the generic advice says that you should save 15% of your income but what we’ve found is, if you’re living a middle-class lifestyle you may only need to save 5%. On the other hand, if you’ve put kids through school, or you’re late to the saving game, you may need to save 25% or more in order to replace your paycheck in retirement. As you can see, it all depends on your specific situation, so you can’t just follow the generic financial advice, because you’re gambling with your life savings.

The right amount is not a percentage. It’s a dollar amount that depends on how far away you are from retirement. How much money you need to live the life you want to live. Where you stand now financially and many other factors.

Another common mistake we see is that you may be saving exclusively in a retirement account such as a 401(k), 403(b), or a 457. The problem with this is these accounts are not the most flexible, and you could be setting yourself up to pay higher taxes in retirement. Who wants to do that? So you gotta save the right amount in the right accounts, and look at your whole situation and to do this, you have to create a comprehensive, date-specific dollar-specific plan for retirement.

That’s right, I just said a four letter “P” word. Plan.

Step Two: Create a date-specific dollar-specific retirement plan

Maybe you don’t know where to start. And creating a plan sounds intimidating. You know you need help with this and want someone to take care of it for you. Don’t keep watching this video UNLESS you want to solve your money worries and get a big picture of your finances.

So what is a date-specific, dollar-specific retirement plan? Well, let me take a deep breath. On a basic level, it answers all the important questions. When is the best time to retire. How much money you’ll spend. Whether you can travel more or get a second home somewhere warm. When to take benefits like Social Security and pensions. Looks at the 20-30 factors such as rising costs, taxes, and out of pocket medical. Calculates the best cash flow, tax, and withdrawal strategies. Accounts for a long life while securing against the unexpected.


So if you don’t have all those answers, if you haven’t looked at all those angles, you don’t have a date-specific dollar-specific plan. If you have questions or concerns about your finances you don’t have a plan. Full disclosure, in our experience, when we’ve created a plan like this for our clients, we’ve found that they’re making costly money mistakes and missing out on valuable opportunities and we seek to correct that.

These mistakes are being made on a monthly and annual basis and cause people to have to work into their 70’s and run out of money in their 80’s. Maybe you’re thinking, I’m not going to live that long, but over half of men who live to 65 make it into their 80’s. And as you know, for women it’s more than that.

So obviously to create a plan that answers all those questions, you need the help of a professional. Though the media wrongly says that you can do your investments on your own, no one in the media says that you could somehow create a plan this complex without specialized and experienced help. It takes hundreds of hours of study and years of experience to know where you're missing out and what exactly you need to be doing.

Step Three: How to handle the biggest checkbook you’ll ever have

Let’s step back for a moment. Imagine your staring at an account, where through saving and investing you managed to build up over ten times your annual salary. Look at all those zeros. That’s a lot of pressure and responsibility. And the really scary thing is, when you retire they give you the checkbook to that account.

We’ve all heard about the lottery winners, and people who have inherited money and the shocking statistic is that a third of the time they blow all of that money in two years. You might be thinking I’m smart, I won’t let that happen to me. But it’s like when you look at your credit card statement and you wonder, how do all those charges add up to thousands of dollars?

You might know what I’m about to say. Obviously, you need to become a disciplined spender once you build up your nest egg. You gotta plan for all your spending such as that new car or that kitchen renovation. If you don’t account for all of it you might find yourself wearing an orange vest at Home Depot and on your feet, instead of reclined at the beach, for six hours a day. Who wants to do that? Not me.

Step Four: Your money needs to GROW to fund the next 30 years

If it were as “easy” as just saving the money, having a plan, and spending responsibly, then your work would be done. I wish that were the case, but it’s not. Because while you spend your account balances down, the Cost of Living only goes up.

As a result, you need your investments to grow in value over the next three decades or more. So the real risk that retirees face isn’t some decline in the stock market, the real risk is not getting enough growth. But when we look at how investors do in the stock market numerous studies have found is that they leave 4% on the table every year. What that means is that over 30 years if all you did was avoid investment mistakes you would have more than 3 times as much money.

So how do these mistakes happen? The answer lies in behavioral science. We’re all human. Hopefully. Maybe there are some robots watching this. You never know with social media. We humans, we use our primal instincts when making investment decisions. For instance, if we’re out in the forest with our family and suddenly we’re nearly surrounded by a forest fire, these primal instincts kick in and we get the heck out of there. The same thing happens when the stock market goes down. People feel their safety is threatened and a tremendous pressure to sell all their stocks, to get away from the perceived danger. In contrast, when a store sells something at 50% off in a fire sale, everyone rushes to buy. With our investments we should be doing the same thing, running to the sale.

As you can sense, this isn’t easy. And as your account balance grows to over a half million dollars, the pressure only builds. While you’re working, you might think “well it’s okay that the stock market’s down because I’m still working. I can just go make more money.” You can no longer tell yourself this once you retire. You can’t just go back and make more money. And would you really want to?

You worked hard to build your money now and you need it to work hard for you. You may think you’re not emotional about your money, but when you’re staring at the forest fire, you will feel the heat. It’s at exactly that time when you need someone to remind you it’s an opportunity not a disaster. Remember, after the fire the forest grows back stronger than ever.

Let’s recap

You need to be a smart saver, have a comprehensive plan, spend it wisely, and invest for growth. You CANNOT skip any of these steps. And you have to do ALL of these well.

The good news is when you get it right, you’ll know it’s going to be okay. You’re going to have enough. You’ll be able to give yourself that paycheck and not have to worry because you’re getting help with this and someone to take care of it for you. So if you want to get all four of these steps right, and give yourself the best possible chance to live your American Dream.

How to Replace Your Paycheck Infographic

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