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It’s only natural to have a change of priorities during different times in your life and according to how old you are. In the case of financial needs, for instance, young children have minor monetary concerns. Teenagers, on the other hand, have increased yet manageable needs. Young professionals have complicated and often unnecessary financial issues – better car, better clothes, better vacations. Yuppies, or people who are “upwardly mobile” and career climbers as they are referred to, have a higher propensity to buy because of the initial excitement of real-world adulthood.
Middle-aged people have even more complicated yet defined financial necessities – house payments, college, home repairs. The senior bracket or those nearing retirement have more defined financial requirements. Since most people nearing their retirement age have a unified idea of their needs, they are the ones who are usually targeted by bank and financial institutions to take out loans or reverse mortgages.
A person at the point of retirement age would most likely more concerned about available funds and savings more than anything else. And this is perfectly understandable because leaving the labor force entirely would mean ceasing to receive a paycheck on a regular basis. Some people, after assessing and calculating their bank assets and savings would feel that their money might not be enough to last them through their retirement period. That is precisely why mortgages and loans would be of interest and might benefit this demographic slice of the population. Continue reading Reverse Mortgage Overview
First – let’s be clear. You’re not going to retire rich by investing in Certificates of Deposit (CDs) or money market accounts unless you already have five or ten million dollars. If you have five or ten million dollars, you can afford to put your money in a CD or money market paying 3% and get by living on the interest. Note that you can get by but you are not ever going to get richer. You are already rich. If you want to continue to build wealth, CDs or money market accounts will not get you there. Taking inflation into account, these accounts will not keep you rich either. You need to make over 10% annually, just to stay even, with taxes and inflation.
If you are like me, you never had millions to sock away in CDs or fixed income vehicles. I once owned a closed end fund of municipal bonds from Nuveen. In the tax bracket I was in at the time, the rate of return was over 10% taking into account the effect of not having to pay Federal taxes. It was also fun to talk about my muni bonds at parties, etc. I was out of the stock market for a while and was trying to get a better rate than CDs to park my short term money. Since I have learned about equity investments like stocks and mutual funds, 10% in a muni bond fund no longer appeals to me.
Second – if you are new to investing you need to know how to paper trade. Paper trading was something I learned from Ken Roberts, the author of “The World’s Most Powerful Money Manual & Course”. I bought the course through the mail in the mid eighties, and while I never really understood all of Ken’s teachings, it was where I learned about paper trading. Continue reading Three Easy Investing Rules
S&P 500 Track Record
July 1998 – August 1998 -2%
August 1998 – March 2000 +60%
March 2000 – October 2002 -49%
October 2002 – October 2007 +100%
October 2007 – March 2009 -57%
March 2009 – Present +68%
If you haven’t already, I suggest that you take a look at my article Investing For Retirement Course 101. Take a look at my five basic tenets for investing. Let’s discuss the first one – “I do not Buy and Hold”. There is a reason for that. Can I ask you one question? If you lose ½ of your investment in the market, what return do you have to make to get your original investment back? Did you answer 100%?
Set It and Forget It
Now if you invested in a broad market of stocks like the S&P 500 or maybe a S&P 500 Index back in July 1998 and held that investment until March 2010, what do you suppose you return would have been? I’ll give you a hint. The S&P 500 went up 68% from March 2009 until the present. Need another hint? The S&P 500 went up 100% from October 2002 until October 2007.
So how did you do? We will see how a “set it and forget it” plan works out. Let’s say you invested $100 in the S&P 500 in July 1998. In August 1998 the S&P 500 went down 2%, so your $100 would be worth $98 (2% of $100 = $2 and 100 – 2 = 98). From August 1998 until March 2000 your investment would have gone up 60%. Now your investment would be worth $156.80. Not bad, correct?
From March 2000 through October 2002 your investment in the S&P 500 Index lost 49%. Now your investment has lost $76.83 – that is 49% of $156.80. And your total is $79.97 (156.80 – 76.83). As I stated, you have to make a 100% gain to make up for a 50% loss in your account. So if you lose 49% between March 2000 through October 2002, that’s almost 50%. So for the next period of time, you need to make 100% to get back to where you started at $156.80. So how did the S&P do? Continue reading Should You Buy Stocks and Hold Them?
Two Questions For You
At least once a week, four or five times a month, since I retired in September 2009, I hear the same question, “How can I retire early?” I always respond by asking two questions.
- How old are you?
- How old do you want to be when you retire?
Just Give Me An Age
The answer to question #2 is not, “I can’t afford to retire when I want to.” Tell me an age. Let’s say you are 40 and you want to retire when you are 55. That’s 15 years. But most of the people I talk to are not 40 years old. They are usually 50 and want to retire at 55. If you are 50, can you save $1450 every two weeks to reach your goal of retirement at 55?
Can you Save $35,000 a Year?
If you are 50, you can retire at 55 if you can save enough. Most people can’t save at that rate of $1450 every two weeks. It would take saving about $35,000 a year at a rate of 20% on your investments to get the same amount of money that a 40 year old would have at 55 using only $4,000 a year in a Roth IRA.
But you can only put $4,000 into your Roth until you get to be 55 and when you can put in $5,000, but you want to retire at 55 so that shoots that plan. Also your earnings every year will be taxable, since you are saving $31,000 more each year over what you put in the Roth. So your net result will be less. To offset a 28% tax rate, you’d have to save over $40,000 a year. So the goal of retiring at 55 might be unrealistic. Or maybe not, depending on your savings rate.
Can You Live On Less? Continue reading How Can I Retire Early?
Treasuries Are At 4%
I got a Wall Street Journal Market Alert e-mail today. It said the interest rate for 10 year Treasuries hit 4% for the first time since June. So (yawn) what’s all the fuss? The 10 year Treasury rate is the benchmark for U.S. consumer and corporate borrowing. It means [...]
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