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Friday, May 30, 2014

Retirement prep

Planning for retirement stresses most people out. Most people don't know how much to save fore retirement. Added to this, they have misconceptions about retirement itself.

With these two ideas in mind, I have two Wall Street Journal articles to recommend.

The first highlights online calculators that help you figure out how much to save for retirement. Let me ruin the plot: there are no magical calculators that tell you everything you need to know. Retirement calculators are all based on assumptions about a future that no one can know with precision. But, the process is worthwhile. Remember Eisenhower's quote: "Plans are nothing; planning is everything." Don't expect the calculators to give you quick and easy answers, but do expect the process to enlighten your understanding and inform your future actions.

The second highlights myths that most hold about retirement. Here, I'll quote Mark Twain, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." Most retire early because they have health problems or get fired--before they are ready to retire. Getting rehired isn't that easy. Buying a second home doesn't work out that well. You will have medical costs that Medicare doesn't cover. You'll probably spend more than you expect in retirement.

Everyone can prepare for retirement and succeed, but few do. Focus on planning instead of a plan, and make sure you aren't deluding yourself about the nature of retirement.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Friday, May 16, 2014

Don't invest with your gut

Most investors use their gut to guide their investing choices. Perhaps that's why so few are prepared for retirement.

MarketWatch had a good article on this subject this past week.

Many investors have unrealistic expectations for future returns. They think they need 10% returns above inflation to reach their goals. But, after inflation, returns over the last 50 years have been 5-6%--half of what investors think they need.

Also, more than half of investors want to generate returns with minimal risk. But, is it possible to generate above average returns with little risk?

Almost 80% of investors say they follow their gut instinct to invest while only 25% say their investment knowledge is strong. If you are using your gut and know it's unknowledgeable, you're in trouble.

Your gut is great for telling you that you are hungry, or ill, or infatuated, but it's not a robust tool for investment decision making.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.