Section 6.3

Fundamentals of Market Investing by Adam J. McKee

Values and Goals

Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act.  There is no other route to success.

-Pablo Picasso

America is in trouble.  I’m sure that you’ve heard that social security doesn’t have enough money to keep going.  My personal belief is that retirees are too important politically to do away with it, but Congress may have no choice but to leave the benefit flat, and raise the age at which people can retire.  They will also have to raise taxes.  As with most things federal, it will be too little too late.  We have to accept inconvenient truth that we must rethink and reposition the entire notion of retirement.

We have to deemphasize early retirement as a symbol of financial success while simultaneously encouraging people to work longer for their own benefit.  What is the cause of this?  We are all living longer.  When social security was started, it was estimated that you’d only need it for around a decade before you died.  Using today’s standards, many people will be retired for about the same amount of time that they worked.

We need to realize quickly that America faces a nationwide crisis brought on by some 50 million at-risk middle-class families, many of which do not have sufficient assets, preparation, support systems, or protections to finance their retirement years.  Most of us use the ostrich investment strategy; we stick our head in the sand and hope the issue will just go away.  I’m sorry, my friend, but it will not go away.  If you don’t act now, your golden years will not be so golden.

One thing you need to consider about retirement income is whether you think social security will go away entirely, will stay flat and have a much-reduced buying power when you reach retirement age, or keep growing at the rate of inflation.  I believe that this is a clear situation where you should “plan for the worst and hope for the best.”  If you plan on social security going away, then you will be that much better off if it is still around in the future.

How Much Will My Social Security Be?

If you want the Social Security Administration’s best estimate of how much you’ll get as a retirement benefit, you can easily find out by setting up an online account.  Your statement will tell you what you will receive if you retire early at age 62, if you wait until full retirement age (67), or if you wait for the maximum at age 70.  To set up or check your account, point your browser here: and look for the “My Social Security” link.

A June 2015 Government Accountability Office analysis found that that average Americans between the ages of 55 and 64 have accrued about $104,000 in retirement savings.  Sound like a lot?  Not when you realize that amount would result in a $310 monthly payment if your money were invested in a lifetime annuity.

If you set your goals ridiculously high and it’s a failure, you will fail above everyone else’s success.

-James Cameron

You may have heard that you need from 10 to 12 times your current income to retire.  To my way of thinking, that’s a naive way of approaching things.  That amount is likely to stave off eating Alpo, but if you beat the mean lifespan, then you’ll eventually be eating Alpo.  That probably hasn’t been a good number since 1965.  Another common “rule of thumb” is to hit a certain mark, say $1.5 Million.

One method that makes more sense is to examine your current lifestyle and determine how much money it takes to achieve that standard of living.  This, of course, will reflect your lifestyle choices now and how those choices evolve over time.  If you are in your twenties, this is a daunting task.  If you are in your forties and already have children thinking about going to college, you are likely pretty set in your lifestyle.

If you do not have a budget and don’t know what you are spending on what, then you need to go back to the first book in this series and read the information on budgeting.

In his latest book, Money: Master the Game, Tony Robbins breaks down retirement savings results into several categories.  In essence, these categories move from just barely getting by to living the life of your dreams.  Mr. Robbins does a great job of making this idea come alive, but he isn’t the only investment guru out there that suggests dividing your money into pools by priority.  In The Intelligent Asset Allocator, William Bernstein suggests that you build two distinct portfolios.  One is designed to provide you with a comfortable retirement by replacing the income that you are no longer bringing home for work, and the other is for luxuries and legacies.

Bernstein (in his preface) says that our first portfolio should be designed to match our real living expenses, and thus calls it the liability-matching portfolio (LMP).  He suggests that the only investments safe enough for this purpose are inflation-adjusted annuities and a TIPS ladder with maturity dates matching your living expense needs.  Both of these have problems, but you have from now until retirement to decide what exactly to do.

The most important issue that you will want to consider early on is how big you need this fund to be at retirement.  This is a difficult question to answer, but it is usually done in terms of years that you’ll need income from your investments.  A conservative number is twenty-five years.  To get an idea of the amount of money that you will need each year, you need to go through the budgeting process and understand how much money you are spending every month now.

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Last Updated: 6/25/2018

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