BECAUSE WE FORGET SO QUICKLY…35 YEARS AGO A FINANCIAL PLANNER ASKED ME HOW MUCH I WOULD EVENTUALLY LIKE TO PULL OUT, ANNUALLY, FROM MY INVESTMENTS, IN ORDER TO FUND MY LIVING EXPENSES DURING RETIREMENT. I HAD READ THAT A 6% ANNUAL WITHDRAWAL WOULD BE HISTORICALLY SUSTAINABLE, SO I SUGGESTED 6%. HE THOUGHT THAT WAS PERFECTLY REASONABLE. SOMEWHERE BETWEEN THEN AND NOW, WE HAVE DOWNGRADED OUR EXPECTATIONS AND WE HAVE NOW NAMED IT THE, “4% RULE” (https://www.investopedia.com/terms/f/four-percent-rule.asp).

OHH, WAIT…4%…how about 3.3%…OR MAYBE 3.0%! (https://www.marketwatch.com/story/the-4-rule-is-being-debated-again-but-heres-what-you-should-do-11636999447). (https://www.barrons.com/articles/retirement-4-percent-rule-downturn-strategy-51642806039). Charles Tadros, M.D. December 21, 2021 Saint Louis, Missouri

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 fundsContinue reading “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.”

DO NOT CONFUSE SAVING MONEY WITH INVESTING MONEY.

Often we assume that saving money is the same as investing money. It is not. Saving money can mean looking for discounts, bargains, or buying in bulk (ie, saving money when compared to typical retail prices). Saving money can also mean to reduce, reuse, recycle and upcycle. Saving money can also mean the setting asideContinue reading “DO NOT CONFUSE SAVING MONEY WITH INVESTING MONEY.”

UNLESS ONE INHERITS MONEY OR RECEIVES A MONETARY GIFT, ALL CURRENT AND FUTURE PERSONAL FINANCES ARE DEPENDENT ON YOUR CURRENT INCOME.

A portion of current income generates cash flow used to pay current bills. A portion of current income is saved to pay for emergencies. A portion of current income is used to pay insurance premiums, which in turn, are used to prevent catastrophic loss of income and wealth. A portion of current income is investedContinue reading “UNLESS ONE INHERITS MONEY OR RECEIVES A MONETARY GIFT, ALL CURRENT AND FUTURE PERSONAL FINANCES ARE DEPENDENT ON YOUR CURRENT INCOME.”

FOR PEOPLE WHO HAVE DIFFICULTIES SAVING AND BUDGETING, IN ORDER TO ACHIEVE NEAR-TERM FINANCIAL GOALS, IT MAY BE BEST TO MAKE YOUR GOALS, AND PROGRESS TOWARDS THOSE GOALS, TANGIBLE / PHYSICAL. USE “BUCKETS” (jars, cans, manila envelopes) AND PUT ACTUAL CASH OR TOKENS INTO EACH OF THEM AS YOU ACCUMULATE DOLLARS TOWARD YOUR GOALS.

Advantages of having a clear, open jar: you can see it fill, you can pull out the money and count it, it disciplines you to not grab money for other purposes, and your children can more easily see, learn, and, understand these necessary lessons. Another advantage is to be able to see the slow accumulationContinue reading “FOR PEOPLE WHO HAVE DIFFICULTIES SAVING AND BUDGETING, IN ORDER TO ACHIEVE NEAR-TERM FINANCIAL GOALS, IT MAY BE BEST TO MAKE YOUR GOALS, AND PROGRESS TOWARDS THOSE GOALS, TANGIBLE / PHYSICAL. USE “BUCKETS” (jars, cans, manila envelopes) AND PUT ACTUAL CASH OR TOKENS INTO EACH OF THEM AS YOU ACCUMULATE DOLLARS TOWARD YOUR GOALS.”