The latest blog from Bert Whitehead, M.B.A., J.D. and Charles “Chip” Simon, CFP® is worth reading. In “Our ‘New’ Investment Reality” they ask how financial planning changes if we have a lower return over the next 20 years. They write:

There is no easy way out of this if the economic duress continues and is exacerbated by public resistance to austerity. As a result, it becomes imperative that we teach our children these important basics to survive in the new reality:
1) Each family must produce more than they consume.
2) Our futures depend on saving at least 10% of our earnings through our lifetime to support us in old age.
3) Future citizens will have to recognize that life expectancy will determine their retirement age.

Now you might be nodding your head and saying ‘ain’t it awful!’ with like-minded friends. But if you present these three points to your grandparents they are likely to look at you and say “DUH!” Wasn’t it commonplace for families to lead productive lives? Wasn’t it known that living below your means rather than beyond your means was bound to put you on a better financial firmament? And weren’t pensions originally keyed to life expectancies? (Yes, even in the late 1800s in Bismarck’s Germany)

The point is that the important changes have to be ‘endogenous’ and start with the factors we control in our lives. We can’t really wait for our lives to be dictated by ‘exogenous’ changes, whether they be Republican, Democrat, policy-based, Supreme Court sanctioned or anything else beyond our immediate control.

I always enjoy Bert Whitehead’s internal locus of control, that is, the belief that for the most part the factors that determine your success are within your control. We normally suggest that families save at least 15% of their earnings throughout their lifetime to support themselves in old age. Squirreling away money while you can is important. This helps financial freedom arrive all that much earlier. And we do recommend staying active and continuing pursue meaningful work if possible beyond age 65.