Stock Market Retirement Investment Plan

For a successful retirement investment plan to work in the stock market, some ‘reasonably sure’ assumptions would have to be made:

The retirement investment plan must take into consideration the one prevailing constant in any stock market security – risk and uncertainty. Understanding that risk and uncertainty are the key factors that propels the return on investment in the stock market far beyond the returns of Passbook Savings Accounts, CD’s or Bonds are a start. The plan’s key factor would be to use the risk and uncertainty of a stock market security to its advantage.

The retirement investment plan should be founded on the belief that no one can successfully retire without financial freedom. Therefore, the retirement investment plan’s main role would be to supply you with income during your retirement years, while also taking into consideration the risk of inflation. This should be accomplished without having to touch the principle.

The retirement investment plan would require discipline to accomplish its goal. The goal should be clear and specific, and the discipline necessary to accomplish the goal, just as clear and specific. Also, the retirement plan should not be financially out-of-reach, allowing as little as 100 dollars to begin, with as little as 10 dollars a quarter to continue.

The retirement investment plan’s return on investment should be aimed toward providing income, and the income from the holdings in the plan should accelerate every week of the year, until retirement. This should be the case, no matter what the price of the security at any given time in the market place.

The retirement investment plan should be proven to you. Once proven, you must have the confidence in yourself to carry the plan forward. This do-it-yourself confidence means that the retirement plan’s ROI benefits only you and your family and no one else. A no-fee plan enhances the return on investment, allowing every cent put into the plan to work for you.

Companies owned in the retirement investment plan should have a historical record of raising their dividend every year. Therefore, a future dividend increase for the 10th or the 35th consecutive year in a row can be ‘reasonably sure.’ The guide for the selection of each security is its historical performance of rising dividends every year.

To receive the best return in the retirement investment plan, all companies in the plan would be purchased commission-free. All dividends from the companies would purchase more shares of each company commission-free. Therefore, every cent earned in ever-increasing cash dividends every quarter and any extra cash put into the retirement plan would work toward increasing the cash dividend.

Why bother beginning a retirement plan is best expressed, in my opinion, by a quote by Charles Kettering:

“I expect to spend the rest of my life in the future, so I want to be reasonably sure of what kind of future it’s going to be. That is my reason for planning.”

To read the PREFACE from the book ‘The Stockopoly Plan – Investing for Retirement’ visit http://www.thestockopolyplan.com

You have permission to this article either electronically or in print as long as the author bylines are included, with a live link and the article is not changed in any way. Please provide a courtesy e-mail to charles@thestockopolyplan.com telling where the article was published. (Word Count 501)

Charles M. O’Melia is an individual investor with almost 40 years of experience and passion for the stock market. The author of the book The Stockopoly Plan – Investing for Retirement; published by American-Book Publishing. The book can be purchased at http://www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml

In the past most people never retired. They died. The average life expectancy was much less than it is these days, and there were no financial planners around to help people save up enough to quit work. As recently as the 1960’s, if you did manage to save up enough money to retire, you’d be lucky to live another 5 or 6 years before you kicked the bucket. This made financial planning for retirement a little easier because you really only needed enough income for a few years.

Nowadays, if you retire, chances are you can live forever. Well, it can seem like forever…especially if you haven’t saved up enough money. It is a daunting task, attempting to set aside enough money to supply an income for 25 or 30 years, in the 15, 10 or 5 years you have before you retire. We say this because most people don’t get really serious about their retirement planning until they hit 50…and realize they had wanted to quit work at 55!

This is the standard model that has been followed since we began living long enough to bother with retirement savings. You set aside enough cash to cover things off at some future distant time. You build the nest egg and then hope it lasts, and the financial planning community is right there to help you. And yet this is not how the most successful people in our community do things at all!

Still, most people are busily trading their time for their money. As an employee, you are limited by how much time you can actually devote to your job, and you are limited by how much time you want to devote to your job. Time you give to your workplace is time you don’t get for yourself. It’s similar for self-employed people such as our selves. The more successful we are as financial advisors, the more ‘in demand’ we become, and the less time we have.

Retirement looks pretty good when you’re an employee, or a self-employed person. You’ll have the money coming in, and the time for yourself. The problem is that it is an awful long way off. Is there another way?

The first time Rick read ‘Rich Dad, Poor Dad’, he just got irritated. After all, this was the book that pointed out how he was locked in the self-employed cycle where success leads to less free time. And he likes his free time. However, author Robert Kiyosaki also proposed ‘an out’. It’s called passive income. Passive income is income you have coming in to the household that you don’t really work for anymore. The key is that it is designed to happen in the near future instead of the distant future.

Since reading his books we have begun to change our financial plan. Instead of continuing to organize our finances around future income for a distant ‘retirement’, we are re-orienting things toward near-future passive income and ‘financial freedom’. We have been doing this by purchasing income-producing real estate and by looking to start internet businesses.

The success of our new ‘passive income’ plan remains to be seen, but it is interesting to note how changing our end result from retirement to financial freedom has completely altered the path we’re taking. These two goals are NOT the same. When you build a retirement nest egg you are looking to draw an income from it at some future time. When you are looking to attain financial freedom, you are looking to purchase or create assets which provide you with ‘passive’ income right away.

Should everybody be changing their financial plan? Of course not. For one thing, many people hate the idea of being landlords, and many others don’t have the stomach for business, let alone the technology business. Retirement planning is still needed. RRSP’s, mutual funds, and other longer term savings programs still have their place. There will always be employees and self-employed people who rather like what they do and are quite okay working until their retirement age.

All the same, if you are wondering if there might be a better way to ensure your future financial wellbeing ‘sooner’, perhaps you should pick up a copy of ‘Rich Dad, Poor Dad’… and get irritated. Either way, it will probably turn out better for you than it did in the past.

In the past most people never retired. They died.

Rick Hoogendoorn has been in the financial services business since 1991. Cheri Crause is a certified financial planner in Victoria, BC. .
www.chericrause.com
rick.hoogendoorn@shaw.ca