Stay Solvent for Life

Advice for permanently turbulent times

As a middle-aged Gen X man, not a day passes that I do not consider my financial future.

I am the primary breadwinner for my family and have been for decades, but I also want to be able to slow down from my intense and stressful workload at some point in the future.

I think that the word for that is “retirement,” although I do not plan to ever truly “fully retire.” I want to supplement my future pension with other streams of income, whatever those may be.

I read voraciously, having devoured five books over the past three weeks. So the point of this particular story is to share some things that I learned from a financial adviser named Ed Slott.

Haven’t heard of Big Ed Slott?

I had not either, but he is a guru when it comes to Individual Retirement Accounts as evidenced by his many books, TV appearances, and website, www.irahelp.com.

One of the hundreds of books that I purchased and read over the past few years and one that I reread recently was Slott’s Stay Rich for LIFE! Growing & Protecting Your Money in Turbulent Times.

Two comments on the title and how it pertains to you and me.

First, it is always “Turbulent Times.” Ever since I moved out of my parents’ home and began supporting myself at the age of twenty-three as a rookie probation officer back in 1994 it has been turbulent times.

While growing up throughout the seventies and eighties as my parents worked hard and raised me and my two younger siblings, it was “Turbulent Times” for them.

When my grandparents weathered the Great Depression and World War 2, it was “Turbulent Times.” Do you think it was turbulent for my maternal grandmother’s aunt and two cousins who were rounded up by the Nazis, never to be seen or heard from again?

There is always the threat of international conflict. During the last Presidential tenure, Trump seemed to be moving toward greater conflict with North Korea and possibly Russia. We are coming up on two years since Vladimir Putin’s invasion of Ukraine. The Israel/Palestine conflict has consumed the news lately and has spawned so much hate and division. There is a migrant crisis.

Times are Turbulent.

I graduated college during a minor recession in the early nineties when my friends and I took jobs at places like Blockbuster Video, shoe stores, and as customer service agents with our newly minted bachelor’s degrees from Big Ten universities.

Nobody was hiring new college grads despite us Gen Xers thinking we knew it all at the time, much like millennials and Gen Zers think now.

There was a tech bubble that burst around 2001 and a massive Recession with a capital R from about 2008 through 2011 or 2012.

For millions of people, it remains a recession today as their jobs have been outsourced overseas or replaced by artificial intelligence or are soon to be. Most of them remain employed, but only as temps or contract workers or in the sharing economy.

Middle-aged guys are prime targets to be replaced by eager young tech-savvy workers who would work for half of the price of us. They would work about half as well, to boot.

Let me ask you — when isn’t it “Turbulent times”?

Second, I cannot Stay Rich because I never have been. I would like to “Stay Rich for Life,” but never have felt like I am or considered rich by American standards, I am not sure that I can.

If you compared my family’s middle-class suburban lifestyle to a third-world family or a refugee family or even my own predecessors three generations back, they would consider us rich.

But for all intents and purposes, by current American standards, I am not rich and thus cannot Stay Rich for LIFE!

Nonetheless, there are some good points brought up by Slott in the book that can apply to you and me although we may not be rich.

Where Slott uses the word “rich” I prefer to use the word “solvent.” According to Wise Geek, being financially solvent means being able to pay all financial obligations in a timely manner and still have liquid spending capital left over.

Being solvent generally represents a certain level of financial freedom and being able to meet all financial obligations while still having money left over is a state that most people aspire to regardless of career or current economic status.

Take Inventory

Whether you are twenty-three or fifty-three like me, the first step toward staying solvent for life is to take an inventory of yourself — who you are, where you are, and what you want to accomplish.

Slott advocates writing your thoughts and ideas, much like I do on this platform and in several idea notebooks that I keep. By the way, I began keeping such a notebook long before I read the advice to do so by several pundits.

Writing your goals down is a powerful tool because it helps you to focus and be specific, which is a great start toward accomplishing any goal.

Take Small, Consistent Steps

I like this advice. Slott writes that every action you take toward achieving your investing and retirement goals, however minimal that action may seem at the time, produces a big payoff.

I can attest to this, as the $300, $400, and $500 payments that I made to my two children’s college accounts added up quite a bit over the years.

Considering increases in the value of the investments, the reinvested dividends, and my automatic contributions to their accounts, those payments eventually exceeded $200,000 combined. Not too shabby!

The mistake that I made, depending on your perspective, is not sending enough and, in some cases, not sending anything to my or my wife’s Roth IRA accounts.

I am working toward building those funds up now, “paying myself first” from every paycheck before paying my mountain of bills.

I now take the small, consistent steps that Slott advocates, automatically investing $1,000 per month into my IRA and mailing a check for $500 every month on my wife’s behalf.

Y.O.Y.O. Economy

Slott must have written this for me, besides my never having been Rich. He has you imagine that it is 2040, you have just turned seventy years old and your account has grown to a sizable sum.

As it so happens, I was born just prior to Thanksgiving in 1970 and would be turning seventy years old around that time of year in 2040 should I remain among the living.

He writes that, of course, you will be collecting only half the benefit amount that our baby boomer parents and their parents did from Social Security.

But, hey, half a loaf is better than none, right?

The bottom line is that at the very moment when you and I need most of the cash that we have diligently saved over the years, our nest eggs will be sucked dry by huge expenses.

Slott goes on to crush my dreams, writing that making retirement, buying that second home, or paying for our children’s or grandchildren’s educations will become an impossible dream.

The precariousness of our financial structure as a result of huge national and State deficits, multi-billion-dollar bailouts like the auto and banking industries have been the recipients of, skyrocketing health care costs, coupled with the insecurity of employer-sponsored pension plans have made it abundantly clear that if you and I want to live decently and remain solvent for life then we must rely on ourselves.

There will be no bailouts for your retirement or mine.

That is why I hope that the $1,000 that I am investing in our IRAs this month will grow to $2,000 or more in the 2030s, and that might just be enough to cover some medication that we need at that time.

Save More Now

Slott writes that we are currently in our accumulation phase. This is because we still have years to recoup any losses and rebuild our wealth although the more years that I get past fifty years of age, the less I feel that way.

During what he terms the first half of the game while we are working hard and saving, we can weather more storms than we can during the distribution phase because our focus in the accumulation phase is on saving consistently.

Slott’s book, and most of the financial books that I have read, would actually benefit a much younger person than myself and middle-aged readers. Those who start saving earlier in their lives will automatically have a lot more leeway and choices open to them than someone who starts saving in their forties.

Mr. Roth

About twenty years ago, I was advising my new brother-in-law to open a Roth IRA. I explained how it works, and he turned to my sister and told her that they were going to “call this guy Roth” about opening an IRA.

I explained that it was simply named after a dude named Roth, but that the type of IRA that he created takes the after-tax money that you invest and allows it to grow tax-free for years, creating a wealth-generating machine that will take care of you and your loved ones during your golden years. Contributions to a Roth IRA can also be withdrawn at any time, for any reason, 100% tax and penalty-free.

I often mention contributing to my wife’s and my Roth IRAs, assuming that those who read this know what I am talking about and have one of their own.

Slott writes something that I could not agree with more, that the biggest mistake you can make with a Roth account is not contributing to one.

If you are reading this and are in your twenties or thirties and do not yet have a Roth IRA, do yourself a big favor and open one up.

Enough preaching. There are millions of blogs out there that will preach to you if you want that.

If you are really looking forward to purchasing a new big-screen TV or the newest iPhone and have a “spending gene” rather than a “saving gene,” please heed this advice and send the equivalent amount of money to your IRA instead. You will thank yourself years from now.

Heck, perhaps you’ll use the funds to purchase an iPhone 25 or whatever newer, better version comes along years from now.

AARP

I began reading articles on the AARP website and subscribing to their newsletters years ago when I was forty-five years old.

My wife would see me reading an AARP publication and ask why.

I’m not a retiree — I’m in my prime working and earning years.

I replied that they provide good information about investing and many other interesting articles.

Furthermore, I want to be a retiree someday, or at least my own version of retired, which would be a combination of writing and hustling gigs. Dog walking and sitting are high on my list.

The AARP site is a wealth of information, and I enjoy reading about walkable, safe communities with many amenities since they frequently review various places to retire.

Even if I am never actually able to fully “retire,” I at least enjoy reading about it.

I feel as if I know a lot about investing and personal finance issues, but there is always more to learn. AARP is one of the three websites that Slott recommends and the only one of the three that I use.

The Only Constant Is…

Slott is a professional investment advisor but I am not. He spends much of his book urging the reader to engage the services of a professional (perhaps him?) to guide and assist with your financial plan.

My own policy is that You Are Your Own Best Advisor.

I will not claim to be as knowledgeable about investing as he is, or any of the many other authors that I read.

I do know that I can read and comprehend anything as well as they can, if not better, and in a broader array of topics, so if I want to learn about something, say deferred annuities, I will read up on it or ask one of my friends in the financial field. I urge you to do the same.

What I will definitely engage a professional in is estate planning, which I have not yet done. I still feel the need to build up more of an estate before I contemplate preserving it.

Slott writes that a financial plan used to be valid for twenty years. Now it doesn’t last twenty minutes. Market volatility, tax law changes, economic conditions, and family situations are constantly changing.

We must anticipate changes and create plans that are fluid and flexible enough to accommodate them.

Remember that when you and I come up with a plan, it is not a one-time thing that we can just forget about.

Remember this tried and true expression about the best-laid plans:

Halftime Score

In the final chapter of Stay Rich for LIFE! , Slott employs an analogy that I like as a sports fan. He cites the philosophy that the score at halftime is irrelevant; give me the score at the end of the game and I will tell you who won.

Slott likens your post-accumulation years to the second half of the financial game and writes that it is all about keeping as much as you can of your unspent wealth from disappearing into the clutches of the IRS at the time when you need those assets the most.

Too many people quit at halftime and walk off the field thinking that they have the money game licked. Meanwhile, the IRS comes out to play in the third and fourth quarters with no opposition, and it winds up winning the game.

I am not going to launch into a long discussion about tax-sheltered ways of preserving your estate. There are thousands if not millions of books, blogs, newsletters, magazines, and websites where you can read up on that.

This story is meant as a way to get you and me to think about these issues a little bit more, like ways to remain at least solvent for life if not rich.

Big Ed Slott and Yours Truly agree — we want you and I to end up with “More, More, More — more money for you to enjoy now, more for your retirement, and more for your loved ones. And more of it tax-free.”