Pack Your Own Parachute!

In 2005 our retirement calculators told us we were set for life! I was confident – our brokerage labeled me a knowledgeable investor. We made the decision, and retired.

Three years later, another life lesson – “When you don’t know what you don’t know, you can be in trouble before you know it!” In October, 2008 congress passed the Emergency Economic Stabilization Act, bailing out banks deemed, “too big to fail.”

Banks, using ultra-cheap government money, called in all their CD’s & bonds – leaving seniors and savers holding the bag. Interest rates dropped 66%; all the fancy retirement calculations were no longer valid.

History rhymes…. Speaking about the bank panic of 1919, William Gouge (1796-1863) said, “The bank was saved but the people were ruined.” Retirees had bills to pay, with much less income.

Interest rates have never returned to the 6% Baby Boomers used for retirement calculations. Retirees lost over $4 trillion in interest income – basically profit handed to poorly run banks.

We were scrambling. How do we reinvest our life savings safely, generate enough income to maintain a decent lifestyle, and not constantly worry about money?

Assessment

Our long-term broker also retired. Our new broker primarily focused on earning commissions from stock trades. Actively trading stocks to fund retirement is high risk and not worry free.

We switched to a helpful discount broker – who emphasized he was not compensated by trading commissions. We built a CD ladder which did a terrific job generating income until the bank bailout.

After the bailout, he suggested I attend a workshop presented by the head of their bond department, a man I trusted. A slick, professional presentation about bond portfolios. They proudly claimed “no client has ever lost money!” That resonated with many senior members in the audience.

Not wanting to embarrass the speaker, I saved my question for later. I asked, “what about inflation? He had no answer.

Using (highly manipulated) government inflation reports, an investor with $100,000 would have to average over 2% return just to keep up with inflation – before taxes …. Impossible at the time using CDs and safe investment grade bonds.

Technically, no client ever lost money, they got their principal back, however, at current rates, they lost a tremendous amount of buying power. If all you have to sell is low interest bonds, guaranteed to lose money when you consider inflation, you sell them anyway????

He also suggested using their company’s computer based “wealth planning” tools. We investigated several. Without exception, every computer-based solution was to invest your life savings into their fee-based products. You not only pay trading commissions, but also lifetime fund management fees.

Big Brother Isn’t Helping

The government continues to make things worse. In 2008, our national debt was around $8 trillion. It’s about to hit $40 trillion, a fivefold increase in less than 20 years. Interest rates, as compared to Gross Domestic Product have skyrocketed!

In 8 years, government debt jumped from 60% of GDP to 100%; which many pundits call the point of no return. It becomes a signal that the currency will eventually collapse. It’s now 120%…. Barring a major change, it’s just a matter of time.

I detest politicians. No matter which party is in power, the opposition works against their agenda, doing everything possible to make sure they fail. Politics is more important than working together for the good of America…. Meanwhile the political class is spending our nation into bankruptcy.

If you can’t trust the government, the Fed, Bureau of Labor Statistics, the political class or your broker – who do you trust? Where can you find good advice without fearing conflict of interest?

Moving Forward

I was fortunate. David Galland of Casey Research invited me aboard. I also began writing for MarketWatch, dubbed a “Retirementor.” A wonderful mentor, Chuck Butler, was a terrific help.

I feel the best, most often misunderstood, money advice comes from Warren Buffett:

“Generally speaking, investing in yourself is the best thing you can do. Anything that improves your own talents; nobody can tax it or take it away from you.

They can run up huge deficits and the dollar can become worth far less. You can have all kinds of things happen. But if you’ve got talent yourself, and you’ve maximized your talent, you’ve got a tremendous asset that can return ten-fold.

‘Invest in yourself’ might mean taking a continuing education class or simply spending your time improving your skills. Become a lifelong learner and your life will be wealthier, perhaps in more ways than one.”

Buffett higher education; he discusses success in a much different manner. Ruleoneinvesting.com offers “29 Warren Buffett Quotes on Investing & Success”.

It’s been 18 years since the bailout. I feel Buffett is right; you are responsible for your well-being and must pack your own parachute; protecting yourself from incompetent governance and the unexpected. I’ll elaborate on a few of his ideas, adding experiences from my 18-year journey.

Manage Your Time Better – As a young man I car-pooled with Dave, a wonderful mentor who was a few years from retirement. His lessons were priceless.

One morning I rattled off our TV weekend, he said. “Miller, you’ll never get rich doing that.” What does TV have to do with getting rich? He helped me realize I’d become “Joe six-pack,” with a beer in my hand spending hours watching the “boob tube!”

Make time for Personal Development – Dave explained that successful people balance relaxation with using free time for self-improvement. That was life-changing advice; particularly after the 2008 bailout. I needed to learn how to manage retirement money in a market that didn’t offer safe (inflation beating) fixed income opportunities.

Buffett said, “Someone is sitting in the shade today because someone planted a tree a long time ago.” Many happy, successful retirees are sitting in the shade of their own tree, one they planted when they were younger.

A personal observation…. The education process never ends. While you may have quit your full-time job, you now have another, very important job. You have to make your life savings last for the duration in a fast-changing world. We’re all money managers now!

Retirement is a liberating experience; you have many choices. You will have more free time, balance it between fun stuff and continuing your personal development.

Staying young is not just physical health, keeping your head in the game is a must.

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Do what you Love – When Dave retired, I also made a major career change. I spent the next 35 years as an adult educator, traveling the world. I loved it! When you love your work, it is no longer drudgery.

Encore careers are fun and (sometimes) profitable – Many friends joke about “flunking” retirement. While generating money is a plus, many volunteer or keep working to stay in the game.

I’ve been writing for 16 years, Miller on the Money is free and a labor of love. While the weekly letter costs me money, the knowledge I’ve gained researching and writing has covered those losses many times over. Heck, if George Burns can entertain at age 100, I sure can write that long.

I researched “encore careers.” My personal favorite was a husband and wife, both pilots. Their “encore career” was delivering planes all over the world. They made their delivery, vacationed in many exotic places and flew home at company expense.

The same held true for motor home delivery drivers. They towed their car, brought their spouse, and took their time returning home.

It doesn’t have to be exotic; working part time at Walmart or McDonalds can make a world of difference. Many seniors are enjoying it and still feel productive.

People Make Investing Seem More Difficult Than it Should Be – The brokerage firms, armed with computer programs and spread sheets want it to sound & look complicated.

The first step is accepting the idea managing your nest egg is your job; now you can move forward. A major lesson was understanding the difference between investing and trading. Focus on safe income like dividends and high-quality debt instruments. Owning metals and critical raw material stocks help offset inflation and reduces the stress.

The shocking bank bailouts forced me to learn new skills that can’t be taken away. I began planting new trees in 2008, and they are now bearing fruit.

Learning continues; however, once the process is in place, I have more time for both learning and playing; enjoying fun things life has to offer.

Do-overs should be expected. If you try something and you don’t like it; or you find something you feel you will like better – go for it. Life is to be enjoyed.

Pack your own parachute

No one knows what the future will bring. Will the stock market collapse? Will interest rates ever come close to the projections we counted on in the past? Will civil unrest grip the country?

Packing your own parachute, (while unloading excess baggage) is a life-long commitment to invest in yourself. Buffett is right, no one can take your skills away from you. Those skills will help you survive – and thrive.

Continually investing in yourself and finding fun things you enjoy makes the ride a lot safer and easier. When the collapse arrives, those who prepared will fare much better. Heed the warnings, prepare for the worst, hope for the best, and sleep well knowing you are prepared.

Help keep us online! I love it when readers thank me for “telling it like it is” for providing content they won’t find in the mainstream media. I’ve been sent to Facebook purgatory a few times – they didn’t approve. Free speech isn’t appreciated in all circles. When I started Miller On The Money, I vowed to keep our newsletter FREE! I’ve kept my promise – our weekly letter is an expensive hobby. Donations are our primary source of financial support, and what keeps us going. We don’t peddle your name to anyone. I’ve turned down proposals from advertisers, feeling their offerings were inappropriate for our readers. Readers pitching in to help offset our cost are much appreciated. It’s strictly voluntary – no pressure – no hassle! If you want to help, click the DONATE button below. You do not have to sign up for PayPal to use your credit card. And thank you all!

On The Lighter Side…

Wikipedia tells us:

“Although the exact start of the tradition of championship teams visiting the White House is unknown, the earliest known time it happened was on August 30, 1865. On that day, then president Andrew Johnson welcomed two amateur baseball teams to the White House: the Brooklyn Atlantics and Washington Nationals. The Atlantics visited because they had won the championship the previous season, and the Nationals visited because Johnson was a fan of the team.”

Championship teams visiting the White House has been an American tradition since the mid-1800’s. Why does it, all of a sudden, have to become so political? Athletes can choose not to attend if they wish.

Our American Olympic hockey teams won the gold medal. They represent America, all flavors, shapes, sizes and persuasions – all of us! Let the kids reap the benefits from their efforts and get the recognition they earned. If they choose to visit, or not to do so, they shouldn’t be hassled.

For most of us, sports is entertainment, an avenue to take our mind away from the trials and tribulations of every day life. Damn! Let’s keep it that way.

Quote of the Week…

“Freedom is not defined by safety. Freedom is defined by the ability of citizens to live without government interference. Government cannot create a world without risks, nor would we really wish to live in such a fictional place.

Only a totalitarian society would even claim absolute safety as a worthy ideal because it would require total state control over its citizens’ lives. Liberty has meaning only if we still believe in it when terrible things happen, and a false government security blanket beckons.” —Ron Paul

And Finally…

Life-long friend Tom G. shares some senior musings for our enjoyment:

Senior musings – Tom G.

• My doctor asked if anyone in my family suffered from mental illness. I said, “No, we all seem to enjoy it.
• My bucket list: keep breathing.
• Camping: where you spend a small fortune to live like a homeless person.
• Just once, I want a username and password prompt to say, “Close enough.”
• Being an adult is the dumbest thing I have ever done.
• I’m a multi – tasker. I can listen, ignore and forget all at the same time!
• Retirement to do list: Wake up. Nailed it!
• Went to an antique auction and people were bidding on me.
• People who wonder if the glass is half empty or half full, miss the point. The glass is refillable.
• I don’t have grey hair; I have wisdom highlights.
• Sometimes it takes me all day to get nothing done.
• I don’t trip, I do random gravity checks.
• My heart says chocolate and wine, but my jeans say, please, please, please eat a salad!
• One minute you’re young and fun. The next, you’re turning down the car stereo to see better.
• I’d grow my own food if only I could find bacon seeds.
• Losing weight doesn’t seem to be working for me, so from now on I’m going to concentrate on getting taller.
• My body is a temple; ancient and crumbling.
• Common sense is not a gift. It’s a punishment because you have to deal with everyone else who doesn’t have it.

And my favorite…

• Never laugh at your spouse’s choices. You are one of them.

Until next time…

Dennis Miller

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken

 

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