InvestED: Ep. 29- What’s Your Plan For Retirement?

By 2030, nearly all baby boomers will have passed retirement age, but how many of them are actually prepared to retire comfortably? We discuss the most common ways people save their money for retirement, how different generations have different views of saving, and how much you’ll need to save to retire in the future. This conversation gets a little heated when we get into the details of how much it actually takes to retire and that inflation is taking money from you.

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In Episode 29 You Will Learn

  1. What Warren Buffett plans on doing with his money when he dies.
  2. Where most people are putting their retirement savings and why it may not be the safest option.
  3. The average accumulated savings of people retiring today.
  4. How much money you should be saving per month – and where you should be putting it – in order to retire comfortably.
  5. Why the rate of reverse mortgages is going to start going down.
  6. How inflation means you can actually be LOSING money by investing in a T-Bill.
  7. Why the education we get through our school system is not relevant to the world we live in today.
  8. The power of compounded rates of return.
  9. How to see how much you need for retirement by using my Early Retirement Calculator.

Links From This Episode

Show Notes: Retirement Calculations

We discuss inflation and the power of compound interest. I attached the calculations that I do in the picture below, so you can see the difference getting a 15% return makes. You can see in the picture that having the same investment capital of $61,000, the difference your rate of return makes on how much you end up with and how many years you have to live on.

You can find out exactly what YOUR number is here by using my Early Retirement Calculator.

Just enter your email, download the spreadsheet and enter your own numbers to discover exactly what you need in retirement.

 

Screen Shot 2015-10-27 at 11.15.23 AM

 

About Phil & Danielle – Phil Town is an investment advisor, hedge fund manager, two-time NY Times best-selling author, ex-Grand Canyon river guide, and a former Lieutenant in the US Army Special Forces. Danielle Town is an attorney specializing in emerging corporation law. She has her Master of Laws Degree from the University of Colorado, her J.D. from NYU, and her M.A. from Oxford. Danielle plays the counter balance to Phil in this father-daughter duo podcast. Danielle asks all of the questions that everyone wants to ask about investing.

  • David Dixon

    Just in response to the email about saving $500 per month for 15 years, earning 15% per year, to live on $50,000 per year at retirement: I have struggled this year to do this. I have actually lost about 25% of what I have invested and also have dipped into the IRA to payoff some bills which continue to mount. I am lost at this point because I am not following the Rules and I know that. So I am disappointed and frustrated with investing and feel like I should just bank the remaining IRA funds into a low-yield mutual fund because I don’t now what the hell I’m doing. FIT smoked me this year. That is one example and I know this is not a Rule 1 company since it is a “startup”. My investments in UNP, CAT, and GPRO lost me quite a bit as well. Again, not Rule 1 investing as Mr. Town showed us during the Sept 2014 symposium in ATL. So, I guess investing is not as easy as it is made out to be.

  • Garrett Woolley

    In 1971 U.S. President Nixon took our country off the Gold Standard for all international trades.

    Later, Alan Greenspan would become our Fed Chairman and after he retired, Ben Bernanke who was subsequently replaced by current Chairwoman Janet Yellen.

    Under Greenspan’s leadership the Fed printed trillions of dollars…TRILLIONS.

    In 1966, Alan Greenspan, then under the wing of Ayn Rand, author of the controversial book Atlas Shrugged, published an article on the gold standard. His article appeared in the reprinted it in “Capitalism: The Unknown Ideal.”

    Greenspan’s article was titled, “Gold and Economic Freedom.”

    Here’s what Mr. Greenspan had to say about Gold and Fiat money. Did the central bankers by off Mr. Greenspan for glory, power and prestige? Or was Mr. Greenspan wrong in 1966…you decide: Here’s what he said:

    ————
    In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
    This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

    Alan Greenspan – 1966

    ———-
    Who speaks the truth today on Money?

    No one.

    From another article I read, “Because the elites – economists… businessmen… academics… policymakers – are paid not to see it. And if they do catch a glimpse of it by mistake, they keep their mouths shut.

    Like Alan Greenspan, it is all very well to understand how things really worked. But you wouldn’t want to give up money, power, or status for it.

    The Huffington Post explains how the cronies bought the economics profession:

    The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni, and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession…

    One critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll – and the rest have been in the past…

    A Fed spokeswoman says that exact figures for the number of economists contracted with weren’t available. But, she says, the Federal Reserve spent $389.2 million in 2008 on “monetary and economic policy,” money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009. That’s a lot of money for a relatively small number of economists.

    But the Huffington Post misses the really big story…

    The feds have bought off the entire intellectual, financial, business, and academic establishment.

    How?

    With easy money.”

    To Your Wealth!
    Garrett

    • Bradlewski

      Hey Garrett.
      Good read as usual, I suspect our RULER economist, Stephan will be adding to this.

      Many folks agree that Nixon was correct to take us off the Gold standard. Also, many disagree on what to do about it. Either way. That’s A lot of money.

      Here is a link to the national debt clock:
      http://www.usadebtclock.com/

      I was just reading Carl Ican’s letter to congress about ongoing tax inversions. He starts off with the pending Pfizer and Allergan merger which will relocate to Ireland.
      http://carlicahn.com/congress_must_act_now/

      Cheers

      • Michael McIlhinney

        My gold expert tells me that Volcker said going off the gold standard was to be temporary as is evidenced by Nixon’s speechwhich used the word “temporary” …then Miton Friedman and the Fed intervened

        • Michael McIlhinney

          I also found it interesting that all business school stopped teaching gold as a currency back in the 70s. the majority of the bright business minds today really had no education in the use of gold as a currency or a store of value

  • Garrett Woolley

    Rulers,

    August and September we saw some exciting 10%+ drops in the market. And we know that markets don’t drop or go up every day. They stair-step one way or the other.

    In our court system, we are innocent until proven guilty. That’s not true for Mr. Market.

    Mr. Market is guilty until proven innocent.

    What I mean by that is Mr. Market needs to prove to us that this is a Bull Market. Until that happens, he’s guilty of a bear market.

    I trade my wife’s 401K based on “the tools” and finally after several years, we got our final “Get Out” signal on September 1st. Most or all 401K’s will have a mutual fund that mirrors the S&P 500. Buffett says just do this for the rest of your life and you can retire rich – buy a piece of the best 500 companies in America.

    True that Mr. Buffett. Had I done that instead of everything else I invested in over the years, I’d be very wealthy today rather than playing catch up after losing more than $800,000 to $1 million or so. But hey…life goes on. And we are doing fine thank the good Lord.

    I digress…but here’s the thing. When do I “Get In” on my wife’s 401K again?

    Well, history showed and I posted that these dips have a very, very high probability of recovering in the short-term. And we can see that has certainly been the case with the S&P 500’s 1,867 low on Aug 25th to today’s 2,076.

    But our tools for our Macro view in our 401K investing obligate us to wait. (and if you don’t know, your 401K is probably like my wife’s- once you get out of the S&P 500, you can’t get back in until after 30 days.)

    I’ve back-tested using “the tools” vs using only the 200 day MA. Both work out fine for the most part. Enough to keep me sane at night.

    Here’s what I want to see before we go “all in” my wife’s 401K – Remember, Mr. Market is guilty of a bear market until proven innocent!

    1) The S&P 500 needs to break above its 200-day moving average.

    2) The 200-day moving average needs to turn higher (can’t be flat…I need an uptrend..it looks like it might happen)

    3) The S&P 500 needs to close above the 2,131 level…that’s a point higher than previous high

    4) The above criteria will probably correlate with “The Tools” giving a “Get In” confirmation. But I’m comfortable getting in if “The Tools” say “get in” first.

    Here’s SOME of why I’m concerned….if we look at some of the larger indicators of the overall economy, we see that things are bad but there is evidence that it’s improving off the lows from our Aug/Sept sell-off.

    1) Emerging-market stocks (EEF)…bounced off low on Aug 24th

    2) Dow Jones Transports (DJT)…bounced off low on Aug 24th

    3) High-Yield Corporate Bond Market ((HYG)…bounced off low on Oct 2nd

    4) Oil and Gas stocks (FRAK) bounced off low on Sept 28th.

    US Stocks aren’t going to rebound until these issues are resolved. They are the drag on Mr. Market.

    Which of these is the greatest drag on Mr. Market? Well, an argument could be made that it’s HYG – the high-yield corporate bond market.

    Famous investor Carl Icahn made a presentation about the problems in this area. You can see the video at http://www.carlichan.com called Danger Ahead.

    Shortly after Mr. Icahn’s video, HYG tanked to its lowest in two years. It has since recovered and may even make a high for the year…but the problems still remain.

    High Yield Bonds are not discussed in Phil’s books, so here’s a quickie on what they are:

    These bonds are corporate debt. This debt is rated lower than other debt that is called “investment grade.” High Yield debt is debt that is going to be harder to make payments when times are tough. So if the economy staggers, these corporations could easily default on this debt. Since this is more risky, the investor is provided a higher interest rate than the corporations that have investment grade debt.

    But here’s the rub…today investors aren’t getting paid fairly for that amount of risk right now. The spread between Investment Grade Bond yields and Junk Bond Yields is the lowest in history.

    In 2010, Icahn says we had $1 Trillion in high yield bonds. Today he says we have $2.2 Trillion.

    Ichan says eventually this problem will arise…just like it did following the dot-com and housing busts. And high-yield bond investors are going to get hurt.

    Now, supposedly we are not in a recession. Yet the HYG is still down for the year. That doesn’t make sense.

    Digging deeper we learn that 297 U.S. corporations have seen their bonds downgraded.

    Spoiler Alert: That’s the most downgrades in a year since the financial crisis of 2008-2009. We still have two more months to go. And the 12-month default rate on high-yield corporate debt has doubled this year. This strongly suggests we are well into the next major debt-default cycle.

    During the 2007-2008 financial crisis, WE..the american taxpayer…bailed out corporations without being asked by our government. The debt-default-cycle was cut short…we bailed them out.

    Now if you’re an options trader, then think of this as rolling out your trade…we taxpayers just bought corporations that loaded up on this credit more time to default later.

    Sooner or later…probably sooner…these issues have to come to pass. And what’s the Fed going to do? Print more money and go to negative interest rates perhaps…other countries have.

    My suggestion is that we need to watch “The Tools” and those other economic indicators I posted. Add them to a separate “Watch List” on your ThinkorSwim paper-trading account like I did so you can quickly see where the trends are happening.

    I call this “Watch List” my “US Economy” and it has the following in it:

    $SPX (S&P 500)
    $INDU (Dow Jones)
    $RUT (Russell 2000)
    EEF (Emerging Markets)
    DJT (Dow Jones Transportation)
    HYG (High Yield Corporate Bond Market)
    FRAK (Oil and Gas Stocks)
    SLV (Silver)
    GLD (Gold)
    $VIX (Volatility or “Fear Index”)

    Remember, Mr. Market is guilty until proven innocent. Things appear to be improving…but we (my wife and I…not you…I don’t know what your goals are so this is my disclaimer!) …we need to wait before we go “all in” in the 401K.

    To Your Wealth!
    Garrett

    • Jonathan Payne

      Garrett,
      I’ve been following Phil for the past 4 years or so and have been to a few of his seminars. I’m currently enrolled in Phil’s options course and finished the transformational investing course a while back. We too follow “the tools” for getting in and out of my corporate 401k, while trading our individual stock accounts using Rule 1 guidelines and short term strategies. All that to say…that was one of the best posts I’ve read on this site and others. There is so much packed into that post. Thanks for continuing to take the time to chime in and be transparent on your thoughts on this market and some particular stocks of interest.

      I very much echo your sentiments and fully appreciate your point of view. To YOUR wealth.

      Jonathan

      • Garrett Woolley

        Hey Jonathan!
        Thank you for the kind words! Your encouragement keeps me going to share insight on the blog if I know someone out there is getting something from it!
        I’m a lifetime student of Rule #1 and always learning something. There’s a ton of stuff in my head that I’ve been wanting to share but the truth is we did a double move in June. We sold our home in Maryland and moved to Florida and Montana. We can’t believe how fast the time has gone by….we’ve been so busy with work, setting up the new home(s) and downright exploring/playing in Montana on our days off. It’s been a lifelong dream of mine(ours) to live in the mountains and we finally did it. We took time to just celebrate and appreciate our summer and fall.
        In fact, this morning I emailed Phil and told him now that fall is coming to an end, I’d be contributing much more frequently on the blog.
        So thanks for taking a moment to post. And obviously, you’re working real hard at learning and making that investment in yourself. When we’re in the Florida home, I’ll probably catch a flight up to Atlanta and if you’re ever going to attend another of Phil’s seminars, shout it out on the blog and hopefully I can get myself up there and meet some of our fellow bloggers.
        To Your Wealth!
        Garrett

    • Kevin P

      Great post. Thanks for the info.

      One question, I was able to add all of the above to a watch list but could not find the EEF ticker? Is there a different symbol?

      Thanks

      Kevin

      • Garrett Woolley

        Ahh..Thank you Kevin – apparently you are the only one who tried to create that list I suggested! My typo…NOT EEF…Try EEM for Emerging Markets. I edited the post to reflect EEM.

        To Your Wealth!
        Garrett

  • Christian

    Hi Rulers,
    any thoughts why Pabrai is not buying more Zinc at current (low) Prices?
    I mailed him, but he does not discuss any trades.

    • Garrett Woolley

      Christian/Rulers,

      our (me, my friends…) general consensus is that his portfolio probably owns the max amount he can under his rules. Maybe…

      This was interesting….

      One of my Ruler buddies emailed Pabrai and asked if she could attend his annual investors conference. The office replied back and she’s been invited to attend…I thought that was pretty cool.

      To Your Wealth!

      Garrett

  • Michael McIlhinney

    Cramer bring Gildan back into focus due to downgrades vs. upgrades at the same time. I no longer own it but would love another event to get back in. Of note was that Walmart is hurting so GIL might take a hit too. Let’s hope so.
    http://www.cnbc.com/2015/10/27/