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| Source: BrainlessTales.com |
I think that the word for that is "retirement," although I do not plan to ever truly "fully retire." I want to supplement my theoretical future pension with other forms of income, for instance advertising revenues and royalty payments for writing things like this.
I read like a madman, having devoured five books over the past three weeks. I would not mind writing book reviews or outlining my favorite six to ten things in a book that someone else like me writes, for a fee of course. Maybe do a short podcast about the books.
Anyway, the point of this post is to share with you things that I learned from a financial adviser named Ed Slott.
One of the hundreds of books that I purchased and read last year, and one of the three that I reread recently was Slott's Stay Rich for LIFE! Growing & Protecting Your Money in Turbulent Times.
Two comments on the title and how it pertains to you and me.
First, it is always "Turbulent Times." Ever since I moved out of my parents' home and began supporting myself at the age of twenty-three back in 1993 it has been turbulent times.
While growing up throughout the seventies and eighties as my parents worked hard and raised me and my two younger siblings, it was "Turbulent Times" for them.
When my grandparents weathered the Great Depression and World War 2, it was "Turbulent Times."
There is always the threat of international conflict. Trump seems to be moving toward greater conflict with North Korea and possibly Russia. He is possibly creating a trade war that the U.S. is sure to lose with China. Times are Turbulent.
I graduated college in a minor recession in the early nineties, when my friends and I took jobs at places like Blockbuster Video, shoe stores and as customer service agents with our newly minted bachelor's degrees from UW and U of I. Nobody was hiring new college grads despite us Gen Xers thinking we knew it all at the time, much like the millennials think now.
There was a tech bubble that burst around 2001 and a massive Recession with a capital R from about 2008 through 2011 or 2012. For millions of people, it remains a recession today as their jobs have been outsourced overseas or replaced by robots or soon to be replaced by robots. Some of them are employed, but only as temps or contract workers or in the sharing economy.
Middle aged guys are prime targets to be replaced by eager young tech-savvy millennials who would work for half of the price of us. They would work about half as well, to boot.
Let me ask you, when isn't it "Turbulent times"?
Second, I cannot Stay Rich because I never have been. I would like to "Stay Rich for Life," but never having been considered rich and never having felt like I am rich or considered rich by American standards, I am not sure that I can. If you compared my family's middle class suburban lifestyle to a third world family or a refugee family or even my own predecessors three generations back, they would consider us rich.
But for all intents and purposes, by 2018 American standards, I am not rich thus cannot Stay Rich for LIFE!
Here are some good points brought up by Slott in the book that can apply to you and me although we are not rich.
Where Slott uses the word "rich" I may use the word "solvent" or another substitute. According to Wise Geek, being financially solvent means being able to pay all financial obligations in a timely manner and still have liquid spending capital left over.
Being solvent generally represents a certain level of financial freedom and being able to meet all financial obligations while still having money left over is a state that most people aspire to regardless of career or current economic status.
Take Inventory
Whether you are twenty-seven or forty-seven like me, the first step toward staying solvent for life is to take an inventory of yourself - who you are, where you are and what you want to accomplish.
Slott advocates writing your thoughts and ideas, much like I do in this blog and in several idea notebooks that I keep. By the way, I began keeping such a notebook long before I read the advice to do so by several pundits.
Writing your goals down is a powerful tool because it helps you to focus and be specific, which is a great start toward accomplishing any goal.
Take Small, Consistent Steps
I like this advice. Slott writes that every action you take toward achieving your investing and retirement goals, however minimal that action may seem at the time, produces a big payoff.
I can attest to this, as the $300, $400 and $500 payments that I made to my two children's college accounts added up to quite a bit over the years. Considering increases in the value of the investments, the reinvested dividends, and my automatic contributions to their accounts, those payments have now added up to nearly $200,000 combined. Not too shabby.
The mistake that I may have made, depending on your perspective, is not sending enough and, in some cases, not sending anything to my or my wife's Roth IRA accounts.
I am working toward building those funds up now, "paying myself first" from every paycheck before paying my mountain of bills.
I now take the small, consistent steps that Slott advocates, having sent $200 just this payday morning to my IRA and I mailed a $250 check to my wife's.
Y.O.Y.O. Economy
Slott must have written this for me, besides my never having been Rich. He has you imagine that it is 2040, you have just turned seventy years old and your account has grown to a sizable sum.
As it so happens, I was born around Thanksgiving in 1970 and would be turning seventy years old around that time of year in 2040 if I remain alive, which I hope to.
He writes that, of course, you will be collecting only half the benefit amount that our baby boomer parents and their parents did from Social Security.
But, hey, half a loaf is better than none, right?
The bottom line is that at the very moment when you and I need most of the cash that we have diligently saved over the years, our nest eggs will be sucked dry by huge expenses.
Then Slott goes on to crush my dreams, writing that making retirement, buying that second home or paying for our children's or grandchildren's educations will become an impossible dream.
The precariousness of our financial structure as a result of huge national and State deficits, multi-billion dollar bailouts like the auto and banking industries have been the recipients of, skyrocketing health care costs, coupled with the insecurity of employer-sponsored pension plans have made it abundantly clear that if you and I want to live decently and remain solvent for life, than we must rely on ourselves.
There will be no bailouts for your retirement or mine.
That is why I hope that the $650 that I am investing in our IRAs this month will grow to $1,500 or more in the 2030's, and that might just be enough to cover some medication that we need at that time.
Save More Now
Slott writes that we are currently in our accumulation phase. This is because we still have years to recoup any losses and rebuild our wealth although the closer I get to fifty years of age, the less I feel that way.
During what he terms the first half of the game while we are working hard and saving, we can weather more storms than we can during the distribution phase because our focus in the accumulation phase is on saving consistently.
Slott's book, and most of the financial books that I have read, would actually benefit a much younger person than myself and middle-aged readers. Those who start saving earlier in their lives will automatically have a lot more leeway and choices open to them than someone who starts saving in their forties.
Mr. Roth
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| The late Delaware Senator, William Roth Source: C-Span |
I explained that it was simply named after a dude named Roth, but that the type of IRA that he created takes the after-tax money that you invest and allows it to grow tax-free for years, creating a wealth-generating machine that will take care of you and your loved ones during your golden years.
Contributions to a Roth IRA can also be withdrawn at any time, for any reason, 100% tax and penalty free.
I often mention contributing to my wife's and my Roth IRAs, assuming that those who read this know what I am talking about and have one of their own.
Slott writes something that I could not agree with more, that the biggest mistake you can make with a Roth account is not contributing to one.
If you are reading this and are in your twenties or thirties and do not have a Roth IRA, do yourself a big favor and open one up. I opened one for my wife with Vanguard and mine is with T. Rowe Price. Enough preaching to you. There are millions of blogs out there that will preach to you if you want that.
If you are really looking forward to purchasing a new big-screen TV or the newest iPhone and have a "spending gene" rather than a "saving gene," please heed this advice and send the equivalent amount of money to your IRA instead. You will thank yourself years from now.
Heck, perhaps you'll use the funds to purchase an iPhone 25 or whatever newer, better version comes along years from now.
AARP
I started reading articles on the AARP website and began subscribing to their newsletters two years ago while I was still forty-five years old.
My wife would see me reading an AARP publication and ask why. I'm not a retired mensch, I'm in my prime working and earning years. I replied that they provide good information about investing and many other interesting articles. Plus, I want to be a retired mensch some day, or at least my own version of retired, which would be a combination of writing and hustling gigs.
The AARP site is a wealth of information, and I enjoy reading about walkable, safe communities with many amenities since they frequently review various places to retire.
Even if I am never actually able to fully "retire," I at least enjoy reading about it.
I often summarize and elaborate upon investing advice that I have read in other places on this blog, but I have acquired a wealth of knowledge on the topic from having read about it in hundreds of sources over the years, and AARP is a good one.
I feel like I know a lot about investing and money-related issues, but there is always more to learn. AARP is one of the three websites that Slott recommends and the only one of the three that I use.
The Only Constant Is...
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My own policy is that You Are Your Own Best Advisor. I am not going to claim to be as knowledgeable about investing as he is, or any of the other authors that I read. I do know that I can read and comprehend anything as well as they can, if not better and in a broader array of topics, so if I want to learn about something, say deferred annuities, I will read up on it or ask one of my friends in the financial field.
What I will definitely engage a professional in is in estate planning, which I have not done. I still feel the need to build up more of an estate before I contemplate preserving it.
Slott writes that a financial plan used to be valid for twenty years. Now it doesn't last twenty minutes. Market volatility, tax law changes, economic conditions and family situations are constantly changing.
We must anticipate changes and create plans that are fluid and flexible enough to accommodate them.
Remember that when you and I come up with a plan, it is not a one-time thing that we can just forget about.
Remember this tried and true expression about the best-laid plans:
| Source: Quotefancy.com |
In the final chapter of Stay Rich for LIFE! , Slott employs an analogy that I like as a sports fan. He cites the philosophy that the score at halftime is irrelevant; give me the score at the end of the game and I will tell you who won.
Slott likens your post-accumulation years to the second half of the financial game and writes that it is all about keeping as much as you can of your unspent wealth from disappearing into the clutches of the IRS at the time when you need those assets the most.
Too many people quit at halftime and walk off the field thinking that they have the money game licked. Meanwhile, the IRS comes out to play in the third and fourth quarters with no opposition, and it winds up winning the game.
I am not going to launch into tax-sheltered ways of preserving your estate. There are thousands of books, blogs, newsletters, magazines and websites where you can read up on that.
This post was meant as a way to get you and me to think about these issues a little bit more, like ways to remain at least solvent for life if not rich.
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