Imagine if I handed you a $50 bill to go grab a soda, and you came back to me with only $5 in change. That would seem outrageous, wouldn’t it?
Well, we all laughed when Doc Brown did exactly that with Marty McFly in Back to The Future II when they had just arrived in the year 2015 from 1985.
We all got the joke. Prices go up over time, even for sodas.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
We’re only weeks away from the exact date, Oct. 21, 2015, when Doc and Marty traveled forward in time. So let’s pause to ponder what our own futures will look like 30 years from now. The cost of living will continue to go up, hopefully not at that extreme rate, but what can we do now to prepare ourselves financially?
Those reaching retirement age now (Baby Boomers born between 1946 and 1964) have enjoyed some corporate perks over the last 30 years that aren’t as common among the GenX and GenY workers today.
When Marty went 30 years back in time to 1955 in the first Back To The Future movie, many residents of Hill Valley (the fictitious town from the movie trilogy) likely had access to a pension (also known as a defined-benefit plan) from their employers. Upon retirement, a monthly income would be paid out for the rest of their lives. That amount varied according to their years of service and levels of annual income while working, but nonetheless it was something that they could count on and they could budget against in their future spending.
Nowadays, pensions are mostly gone, unless you have had a career as a teacher or government worker. So my generation and future generations must look to build multiple income streams in retirement that could include the following:
Dividend-paying stocks: Adding dividend-paying stocks, or funds, to your portfolio is a simple way to bring in additional income. Many companies have a long track record of returning a portion of their profits to their shareholders on a quarterly or annual basis. Make sure if you are trying to keep the distributions as cash that you are not reinvesting the dividends, as sometimes that is the default choice at purchase.
A part-time job: A part-time job might not just offer income, but may be something you want to do after leaving your full-time career. Perhaps you always wanted to teach and just never had the time? Or if there is an age gap between you and your partner, you might fill in some of that time before they retire, too.
Rental properties: When the kids have left the house and you feel like scaling down your home, instead of selling it, you could rent it out. If your old home is in a desirable neighborhood, the rental income could be greater than your new housing costs over time.
Fixed or deferred annuities: Annuities can be designed in multiple ways, but for the purposes of this conversation, think of them like a pension replacement (for those that don’t have one). You can convert some of your savings now into a future income stream that you cannot outlive. Another example here is essentially how Social Security was designed to work.
In order to determine which combination of income streams will work for you, begin with an analysis of your predicted spending in retirement. Working with a financial professional, they can plug this data into planning software programs to predict cash-flow scenarios with different estimates of annual inflation.
If there are shortfalls, now is the time to see how some of these income strategies will affect your plan. You also might find out if you can continue to enjoy your twice-weekly double espresso in the year 2045--when it costs $100.
Kevin Kaplan is a partner at Silicon Hills Wealth Management in Austin, Texas. He is passionate about photography, travel, pizza and live music.
-
I claimed Social Security six months ago at 62, but my checks are too small. What are my options?We asked financial experts for advice.
-
This Is How Much You'll Have to Pay to Share Streaming ServicesIt now costs more to share streaming services with family members who don't live with the account holder. Here's what Netflix, Amazon, Hulu and Disney+ charge.
-
Five Retirement Planning Traps You Can't Afford to Fall Into, From a Wealth AdviserTo help ensure you reach your savings goals and enjoy financial security in your golden years, be aware of these common pitfalls. The key is to be proactive, informed and flexible.
-
Your 401(k) Can Now Include Alternative Assets, But Should It? A Financial Adviser Weighs InMany employer-sponsored plans offer limited investment options, which can stunt growth. But participants considering alternatives might need some sound advice to get the most from their accounts.
-
Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very LikelyConventional wisdom dictates that you save in a 401(k) now and pay taxes later, but turning that rule on its head could leave you far better off. A financial planner explains why.
-
More Retirees Are Renting: Should You? A Financial Adviser Weighs InIn some ways, renting is cheaper, more flexible and easier, but unless you understand the implications for your taxes and health costs, it might not be for you.
-
Where There's a Will, There's a Way Your Assets Will Be Distributed as You WishYour will is the backbone of a strong, adaptable estate plan that ensures what you leave behind goes to your selected beneficiaries. Without a will, state laws determine who gets your assets.
-
I'm a Financial Adviser: This Is What You're Really Losing if You Cut Back on Your 401(k) ContributionsMissing out on the benefits of the employer match and compounding growth could force you to work longer and lower your standard of living in retirement. Here are some alternative options.
-
Preferred Bank Stocks: The Investment Retirees (and Others) May Be Missing Out OnMost large banks issue preferred stocks that pay out fixed dividends, often with higher yields than bonds. Should you make room for them in your portfolio?
-
The Spendthrift Trap: Here's One Way to Protect Your Legacy From an Irresponsible HeirA spendthrift clause in an estate plan can protect an inheritance from a financially irresponsible child's debts and poor decisions.
