The chorus of cries of angst, agony and anger have crescendoed. Everybody I know, young and old, who has money saved, is in a panic about managing their assets in retirement and building those assets to get into retirement.
When I was in high school, I used to sit around and play with compound interest on my basic calculator. I loved typing in 1.05 x 1.05 x 1.05 x (etc) to see how much money you’d have if you put in one dollar and compounding it at, in this example, 5% per year. I had a friend who figured that if he could save $100,000 get “just” 7% return per year for 35 years, he would be able to retire a millionaire off that simple strategy alone. (1.07 per year x 35 years = 10.6 and 10.6 x $100k = $1,060,000.)
My grandma Susie who died in the early 2000s, God rest her soul, retired in the early 1970s and lived the rest of her life off Social Security and interest on her savings in CDs, Treasuries and interest bearing savings accounts. Just six short years ago, in 2007, you could get a long-term, government-backed CD that would pay you 6% per year in interest.
Millions of Americans worked their butts off for decades, scraping by and saving every dime they could so that they could live a stress-free retirement in what used to be called the “golden years”. If you’d saved and invested in 6-8% interest-bearing securities and you had that aforementioned million dollar nut when you retired, you knew that you could get by on the $60,000 per year in interest plus your SS and Medicare.
These days it’s so much harder and requires much more proactivity on your part than it has for the past two generations of Americans. Since 2007, the Republican/Democrat Regime and its Federal Reserve has lowered rates throughout the economy to nil. And no matter how much money you’ve managed to save over the years, 0% interest on that nut is still $0 income per year for you to live on.
I recognized all of this dynamic setting up four years ago when I started telling my followers to be on the lookout for another big stock market bubble. You now hear people calling it the “risk-on” trade which simply means that people are being forced to risk their hard-earned money on stocks instead of Treasuries and CDs. The question is how much longer can this bubble blow before the cycle turns again.
Here’s one of hundreds of emails in my inbox that accurately reflects the reality for so many Americans who are struggling with these very issues –
“I sort of retired from real estate sales a few years go. Do you have any suggestions where we invest some of a recent pay-off we got from a note we were holding? Some of it will go to pay medical bills, as my husband had a heart attack a few weeks ago and we have a mini med policy with his company that did not pay very much of the surgery or hospital Anyway any suggestions?”
Over the course of the next week, I’ll detail some a few strategies I’ve come up with, none of which are as safe as 6% CDs were back in decades past. These are strategies that I think most people, depending on your age, income, goals, risk-tolerance, family resources, etc can pick and choose from to help build and manage their retirement funds.
That said, I want to be clear that there is no magic formula to making a big fortune in the stock market and in today’s world, there is no way to manage your assets passively. You have to to continue to educate yourself, be critical in your news intake, be strident and contrarian as the markets and economies cycle through the same cycles they always cycle through.