If you’re checking your investment portfolio every day, you’ll miss the objective entirely — to live a simple, peaceful life, free from the love of money.
WHEN I was struggling to make it through college without starving to death, no one ever offered to buy me dinner. Now that I finally have a few bucks and a refrigerator stocked with goodies, people are falling all over themselves to buy me a steak. All I would have to do is send in my RSVP. I’ve been alerted that space is limited and filling up fast. If I want a place at a good table at the country club nearby, I better call or go online right away.
In addition to a steak with garlic mashed potatoes and asparagus, I’m entitled to a glass of wine and invited to listen to a fascinating presentation from a financial expert who wants to help me plan for retirement. These are the wizards who know all about inflation and expected investment returns, not to mention the magic of variable annuities. They claim to know more about money than you and me, so the basic plan is to hand over everything we’ve saved up and hope they do the right thing.
But retirement planning is not that difficult. I’m going to give you the formula right now, and you won’t need a wine chaser to understand it. Take your retirement fund and divide by 25. Add your Social Security and any pensions you’ve earned, and that’s your annual income from the time you retire at 65 until you’re 90.
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Forget about inflation and the present value of money and potential investment returns, all the things you can’t control. That all washes out in the end. If you make it all the way to 90 and run out of money, God bless you. You just won the kind of life lottery that most of us can only hope for.
But how should I invest my retirement fund? Split it up between low-cost stock index funds and investment-grade bonds. Go 50/50 to be on the safe side or whatever ratio feels right. Just make sure the allocation is in your comfort zone, something that will let you sleep peacefully at night. When the stock market is tanking, the bonds will keep your ship from sinking, and when the bulls are riding herd on Wall Street, you’ll get some of the winnings.
This is still a capitalist society. Even if you’re not a mover and shaker, you can prosper by simply participating. One way to do that is by investing for the long haul, through all the ups and downs. The insatiable greed of corporations and the people they put in power is one of the few things you really can count on. Let them do the work.
When the stock market is booming, you can withdraw a little more from your retirement fund and take a vacation in Europe. When the market is in a tailspin, withdraw a little less and explore your own backyard.
Nobody knows what’s going to happen tomorrow, never mind 25 years from now. All you can do is think for yourself and make some common-sense decisions that give you a good chance to enjoy whatever lies ahead. The people who want to buy you a steak dinner aren’t necessarily any smarter than you or me. They fake themselves out all the time, just like we all do. If you’re checking your investment portfolio every day and getting overstimulated by every blip in the financial markets, you’ll miss the objective entirely — to live a simple, peaceful life, free from the love of money. That’s the real deal.