WE HAVE BEEN TOLD DRAMATICALLY INCOMPLETE, IF NOT INCORRECT, INFORMATION ALL THESE YEARS. IN ORDER TO RETIRE COMFORTABLY, WE DO NOT NEED TO SAVE, THEN INVEST, JUST 10-20% OF OUR PRE-TAX INCOME DURING OUR 30-40 YEARS OF EMPLOYMENT. WE REALLY NEED TO SAVE AND INVEST 75% OF OUR INCOME FOR THE FIRST 10 OR 15 YEARS WHEN WE START MAKING MONEY (“Ma, I’m moving back into the basement!). THIS AMOUNT IS INVESTED INTO A PRE-TAX, LOW COST S&P INDEX FUND UNTIL WE RETIRE. I CALL THIS FRONT-LOADING OUR SAVINGS AND INVESTMENTS.

What we actually SAVE, even if our cost of living is much less when we retire, will not be even close to what we need in order to retire for the typical 20-30 years of retirement. We need the additional money brought in by LONG-TERM INVESTMENTS. During our working years, we will be adding funds to these investments. We will not be touching the principal, interest or capital gains for 20, 30, or even 40 years.

Remember, traditionally, 10-20% of our pre-tax income is what we would be saving, and then investing, until 65 years old. However, for each of the last few years before retiring, the contributions to the investments will not make us much return due to the lack of time in our retirement fund(s).

An old assumption is that we would be continuously employed for all of our working years. Many of us will not. For these unemployed or underemployed years, too often, nothing is placed into savings or investments.

An old assumption includes that our salaries will rise every year until we retire. For most of us, this will not be true.

An old assumption is that we will retire at 65 years old. Many of us retire or cut back our income/earnings much earlier than this.

An old assumption is that our costs and other living needs are reduced in retirement. Too often this is incorrect.

An old assumption is that our retirement account(s) will be untouched until retirement. Very often this is not true.

An old assumption is that the more educated we are, the more employable we will be, and the higher income we can achieve. Very often, this is not true.

Often, the more education or training we have had, the more debt we have accumulated, and the longer time we have had producing smaller (or no) incomes until our real careers began. Additionally, during our extended education, and shortly thereafter, we typically become engaged, get married, buy a house, have children, buy a nicer car, and take fancier vacations (ie rapidly rack-up expenses) leading us to have minimal to no savings or investments for many years after our education is complete.

And old assumption is that the more specialized we are in your education or training, the more income we can command. Often this is true until there is a downturn in the economy, or job displacement by technology, or via offshoring of our jobs. Often, the most expensive person to employ is the first to be let go. Additionally, overly qualified people have a hard time convincing future employers to hire them for jobs which require fewer skills than what that potential employee has already attained.

Finally, job loss, after age 50, portends a low probability of ever obtaining a future job with the same status or income.

Charles Tadros, M.D.

December 19, 2021

Saint Louis, Missouri

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