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Cash flow Archives - R. Darren Sanford, CPA, CGMA
Nov 042013
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How To Overcome The Obstacles To Retirement

Retirement Unfortunately, the vast majority of people will not have enough money to overcome the obstacles to retirement and they must continue working well into their 70’s. The reasons it is SO hard to save for retirement are the 4 obstacles that are in the way.

inflationThe first obstacle to retirement is inflation. Inflation is the silent income killer. Every one of us can think of multiple examples of inflation, but probably the easiest one to relate to is the price of gasoline. Most of us remember paying less than a dollar a gallon, now it’s $3 or $4 or more, depending on where you live on when you are reading this. But inflation doesn’t just eat into our current income and keep us from saving enough. It also screws up your planning because the cost of living doubles every 10-15 years. Let’s say you think you need $3,000 a month when you retire. Well, because the cost of living will double a couple of times or more, you may really need $6,000 a month when you’re ready to retire and $10,000 or more a month if you retire at 65 and live to be over 80.

The second obstacle to retirement is taxes. Now don’t get me wrong. I’m not a tax evasion kind of guy. I’m just saying that taxes in all their forms eat up over 30% of most people’s income, especially if they have a regular W-2 type of job.


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The third obstacle to retirement is debt. Because taxes reduce the take-home pay of most Americans, they have to go out and borrow what was taken away by Uncle Sam. Let me give you an example. If you make $50,000 a year, you will lose about $18,000 in various taxes and fees, leaving you with $32,000. But, in your mind you feel you have a $50,000 lifestyle, so you borrow the $18,000 on credit cards, car loans, etc., to get back to $50K. But, now, you have to pay back the debt and that reduces your ability to save for retirement.

The fourth obstacle to retirement is less than ideal cash flow decisions. Because inflation, taxes, and debt reduce your cash flow, now you are in a position of making bad decisions. Maybe you pay some bills late and incur late fees and higher interest rates. Maybe you start getting hit with overdraft fees. And what about ATM’s? If you use an ATM that isn’t branded to your bank, you pay a fee to the hosting bank AND your bank. You could be paying up to $6 or more to access that $20. Not too smart.

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So, briefly, what are the 3 things you can do to beat these obstacles to retirement? The first thing you can do is get your money back from the government which was paid primarily in taxes. The IRS website actually says that 114 Million people overpay their taxes during the year and require a refund when they file their taxes. Also, the IRS says that’s a bad plan. You can adjust your withholding by law and get your money put back into your paycheck during the year. Most people can get an extra $40 per week, or $160 a month. Then, you will want to pay down your debts and as each debt disappears, your cash flow continues to increase.

The second strategy is to legally, morally, and ethically reduce your taxes even further by starting some kind of home based business. By having a home based business, you get more tax deductions than you do as an employee. And, paying less taxes while earning a side income increases your cash flow, helps you get out of debt faster, and gives you much more to save for retirement.

The third strategy is to start shifting your income into good investments. You need to get your money working for money instead of you only trading labor for money. Money doesn’t get tired, it doesn’t call in sick, and investment income is usually taxed less than your wages or even your business income.

Overcoming the obstacles to retirement is possible simply by using smart strategies like income shifting. For more details on income shifting, you can find my 3 FREE videos at www.SimpleSteps2Wealth.com.

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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