Retirement can be a time of joy, but it can also be a time of challenge. Not only does your lifestyle change, but so does your source of income. Retirees who successfully live off of their retirement savings and investments share a few traits:

• They started saving early and continuously put money away. They considered their options and developed a plan.
• They used accounts with tax-advantaged status.
• They never let the short-term fluctuations of the market deter them.
• They determined a sensible portfolio allocation and stuck with it.

How much retirees need to save for retirement depends on two essential elements:

• You must know how much you need, and
• You must know when you will need it.

There are several variables you will need to determine when planning for retirement:

• The number of years you will spend in retirement,
• The number of years until you retire,
• Your total current savings,
• Your desired annual income in retirement, and
• The investment returns you expect on your savings.

For most individuals, there are four basic retirement income sources: Social Security, employer-sponsored defined-benefit plans (pensions), defined-contribution plans (e.g., 401(k) plans) and personal savings.

The first retirement income source for most working individuals (and their spouses) is Social Security, which began during the late 1930s as a supplement to one’s savings. It has since grown to represent, for many people, a sizeable part of retirement income.  Benefits come in the form of monthly payments, based on your final years’ salary and number of working years.

Employer-sponsored defined-benefit retirement plans—commonly called “pension” plans—are being offered by fewer employers now, but are still a key source of retirement income for many people. Benefits received under these plans are in the form of monthly payments, based on the employee’s years of service and final years’ salary. Monthly retirement benefits from defined-benefit plans may be paid either directly by the company, or from annuities purchased by the company.

The more common employer-sponsored retirement plan is the defined-contribution plan. Better known by their tax code designations, such as 401(k) and 403(b), these plans specify an amount the employer will contribute to employee savings. Under these plans, employees invest pretax money in various investment alternatives chosen by the employer. Employers are not required to match an employee’s contribution, although many do match part or all of what an employee puts into the plan.

Individual retirement accounts (IRA) give more flexibility on how savings are invested. These accounts allow a person to invest without incurring capital gains and dividend taxes, as long as the tax rules are not violated. A traditional IRA is funded with pretax dollars; withdrawals are taxed at ordinary income rates, however. A Roth IRA is funded with after tax dollars; withdrawals are not taxed. Roth IRA contributions can be made as long as modified adjusted gross income does not exceed certain thresholds. Starting in the year a person turns age 70½, withdrawals must be made in accordance with the required minimum distribution (RMD) rules.

There are two other often overlooked sources of retirement savings.

• Your home. You could sell your house and use the difference between the sales proceeds and the cost of your new home; up to $500,000 of gain for married couples filing joint returns can be excluded from taxes.
• The cash value of a life insurance policy.

• First, develop an investment plan for all of your investable assets, based on your own needs and tolerance for risk.
• There are two important concepts regarding time and money. The first is the power of compounding. When money is invested, it produces earnings that can then be reinvested, so that you receive earnings on your earnings in addition to the earnings on your original investment. This added boost is the power of compounding, and the longer the money is invested, the more powerful are its effects.  The second important concept concerns the value of a dollar today versus tomorrow. Over time, inflation erodes the worth of money, so that a given amount buys less in the future than it can today. When you are planning for the future, you need to put dollars on an equal purchasing-power footing and the dollar amounts will always be stated in terms of today’s dollar equivalent.
• A commitment of at least 50% – 80% in stocks will most likely be needed in any portfolio to provide growth and prevent loss in real terms of the value of your portfolio. However, the stock portfolio must be adequately diversified and include some commitment to the stocks of smaller firms, as well as international stocks.
• Downside risk is a good way to judge risk tolerance, but keep in mind that some downside risk must be tolerated to allow a growth component in your portfolio.
• Bonds provide income but no growth component. They also produce some downside risk. This downside risk can be reduced by keeping maturities on the shorter end (five to seven years) of the spectrum.
• Cash should be used to provide enough liquidity so that you are not forced to sell investments at inopportune times.  Cash can also be used to moderate the downside risk introduced by a large stock component.
• Try to shelter investments with the highest returns in tax-deferred retirement accounts, such as IRAs, Roth IRAs and 401(k).  Taxes in tax-deferred accounts are deferred until the assets are withdrawn, at which time they are taxed as income at ordinary income tax rates. In the case of investments with capital gains, the advantage of the lower capital gains tax rate is lost if the asset is placed in a tax-deferred account.
• Investments with lower returns should be relegated to the taxable portion of your portfolio.
• Investments with built-in shelters, such as municipal bonds, and short-term liquid investments that are set aside for emergencies should never be placed in a tax-deferred retirement account.

Source:  Profitable Retirement Planning, American Association of Individual Investors (AAII), https://www.aaii.com/o/profitableretirementplanning?a=member

In the real world, socialism harms and weakens the economies and opportunities of countries that have implemented it. And, declining economies inevitably hurt the citizens in them. Socialism destroys incentive, opportunity, freedom. Historically, socialism has harmed the people it claims to help the most.

Socialism, historically, has been a disproven economic theory which advocates that the means of production, distribution, and exchange should be controlled, owned or regulated by the government. Socialism is, in theory, based on equality, which in itself is a false-hood. In fact, no-one in a society is truly equal and there will always be “haves and have nots” and unequal distribution of wealth, even in supposedly socialist countries.

In theory under socialism, workers and the poor are no longer exploited because they own the means of production. Profits are spread equitably among all citizens according to their individual contribution. But the cooperative system also provides for those who can’t work. It meets their basic needs for the good of the whole society.

In theory, a Socialist system should eliminate poverty. It provides equal access to health care and education. No one is discriminated against.  Everyone works at what one is best at and what one enjoys. If society needs jobs to be done that no one wants, it offers higher compensation to make it worthwhile

Some people, in a society, can do jobs others physically can’t, and vice versa. That is why socialism, “which its goal is to have collective living and working arrangements, equal distribution of wealth, and equality of power”, doesn’t work. It kills the economy, creates governmental dependency, and lowers the quality of living.

A growing number of Democrats and their constituents are beginning to embrace Socialism since they view capitalism as unjust and unfair. They cite the growing unequal distribution of assets and concentration of wealth in the hands of a few individuals. Many Americans apparently do not believe that they have a path to success and prosperity in the current business cycle, and they’re angry with capitalism and the wealthy. And, that anger is being fanned by candidates leading the charge to vilify the wealthy and punish them through more progressive tax policies, including the implementation of a wealth tax.

Many American adults, both the young disenchanted and the older disenfranchised adults, believe that capitalism is failing and not lifting the economic boats of a majority of its citizens. They believe that it is only benefiting the wealthiest Americans. Theses young and old American adults are beginning to listen to socialist leaning politicians and embrace the philosophy and beliefs of socialism.

“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery”.— Winston Churchill

Americans only have to look in its own Western Hemisphere backyard to witness firsthand the failures of socialism. The failed economies of Cuba and Venezuela stand as glaring examples of socialism failures. In both countries, socialism proved once again that its core is the “…inherent virtue is the equal sharing of misery”. They stand as reminders just like the economies of the former Soviet Union and East Germany, and the pre-capitalist economy of People’s Republic of China of last century.

Winston Churchill said: “No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.”

Capitalism is a lot like democracy, it’s the worst form of economic system except all those other economic systems that have been tried from time to time, according to John Hope Bryant on CNBC Morning Squawk.

“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” -Winston Churchill

Former Prime Minister Churchill further stated that “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” In socialist countries, government officials exercise control of the means of productions and take ownership or embezzled most of their society’s wealth. 

In 2019 America, the country must find someway for all Americans, not just the wealthy and political elite, to share in the nation’s prosperity brought about by capitalist economy.