You Might Never Retire, So Here’s a Better Saving and Investing Strategy
Presenting a five-pillar approach to having more money than you need — forever
People who complain suck.
Because the retirement industry consists of a gaggle of complainers, they have projected this behavior on investors they claim haven’t done enough to save for retirement.
This has created a vicious cycle.
The retirement industry laments people’s apparent inability to save and invest enough to achieve their outdated notion of a traditional work till you’re 65, golf, then die retirement.
In response, large swaths of the population render themselves hapless failures, doomed to rely on Social Security to barely get by when they’re too old and feeble to swing an ax at the coal mine. If you’re younger, you face a similar fate. You’ll just push a pen at a 9-to-5 job with a 401(k) the experts claim isn’t going to cut it for the $1,000,000-plus you allegedly require for retirement.
The retirement industry barely pays lip service to the changing nature of work and subsequent strategic shifts they should be crafting and advocating when they reference the retirement crisis they love to chide.
We’ve discussed this before — the idea that the experts continue to restate the problem without looking in the mirror. They fail to present solutions. Many of them lack the capacity or will to do so because they’re only able to view the world through the antiquated lens they know.
It worked for them; why can’t you make it for you?
Don’t follow old people — particularly baby boomers — into the dark. They’ll leave you high, dry, bitter, pessimistic, hopeless, cynical, and jaded.
In this article, there’s no complaining. Only empowering and visioning.
Consider my five-pillar approach to not outliving your money (such a negative presentation of the situation that we have — sadly — come to accept), but to having more money than you need — every single day, forever.
Redefining lifestyle
John Mackey, the CEO of Whole Foods, took a lot of crap for his not-so-recent comments about health care:
I mean, honestly, we talk about health care. The best solution is not to need health care…
The best solution is to change the way people eat, the way they live, the lifestyle, and diet… There’s no reason why people shouldn’t be healthy and have a longer health span. A bunch of drugs is not going to solve the problem.
I actually listened to that entire interview on the Freakonomics podcast the week it aired in early November 2020. Interestingly, Mackey’s comments didn’t make news until the first week of January 2021. Somebody, somewhere, took notice — and exception — and made the story go viral.
When I heard the comments “live,” I barely flinched. Almost everything Mackey said on the podcast made perfect sense, including the healthcare part.
Granted, he was slightly insensitive to people stricken with unexpected disease through no fault of their own, those already in ill health, and the millions who suffer at the hands of an inequitable society. We don’t all have multiple Whole Foods a stone’s throw away from where we dwell. And, even if we do, access — on the ground — isn’t exactly equal. While Whole Foods might not be “Whole Paycheck” anymore, it still ain’t cheap.
Nevertheless, Mackey’s heart and mind was in the right place. If you listen to the entire interview, you hear thoughtful insight from an optimist. If I’m going to listen to a baby boomer, Mackey places high on my list.
If you want to live a life that doesn’t focus on retirement, you must focus on health. Shit happens, which makes the superstitious part of me cringe when I lead this conversation, but, by and large, we have much more control over our health today than we did just a few years ago. And definitely decades ago.
I don’t have to go into a whole fitness and health rant. You live in the same world as I do. You face the same or similar choices.
Roughly five years ago, I was approaching 200 pounds. Today, I’m about to dip below 150 pounds. I used to eat an entire pizza by myself. Today, I occasionally treat myself to a couple of slices. I used to sit at a desk and work 12–to-16 hour days. Today, I walk as much, if not more, than I work.
I’m hardly special. I’m just not a complainer. I saw (see) the writing on the wall. I want (need) to make things work. My fate will not be unhealthy with $1,000,000 in the bank if I have any control whatsoever over the situation. I’ll happily opt for healthy with way less than $1,000,000.
Redefining work
If you’re going to redefine lifestyle with your sights set on middle age and beyond, you probably gotta redefine work.
If you’re sitting behind a desk all day, stressing over meaningless crap, STOP! Find a way out. There’s always a way out. Don’t skate for the easy way out, which, in this conversation, tends to be complaining followed by a sense of hopelessness and inaction.
I turn to Elliott Smith to help encapsulate this dynamic:
You’ll take advantage ‘till you think you’re being used ’Cause without an enemy your anger gets confused And I got stuck on a side you know I never chose But it’s all about taking the easy way out for you, I suppose
Sure, he’s talking about a relationship gone sour there. However, you can interpret song lyrics any way you like. That’s part of their beauty and usefulness.
The second line especially makes sense here. When we feel stuck, we get angry. Instead of looking within ourselves, we look for an enemy. A place to direct our anger. We take the heat off of ourselves. If only the other person or party or world changed, we could change along with it. We take the easy way out.
If work sucks and/or isn’t providing the amount of money you need or would like to have, get the fuck out.
Everyone has a skill. Everyone knows how to do something well, or well enough. Everyone can learn how to do something they’re passionate about well, or well enough. Lots of people know how to do something as well, if not better than most people.
Find that something and pursue it.
You’ll reduce stress. You’ll ultimately make more money. You’ll create the physical and mental longevity you require to be in a position to not concern yourself with fear and anxiety over the (in)ability to work for as long as you want or need to.
None of this is guaranteed. None of it’s easy. It can be downright scary. But, in this new world we live in, you gotta do it. It’ll be easier if you’re twenty. Harder if you’re forty. Less realistic if you’re fifty, though not impossible. But you gotta make the push, particularly if you’re unable to successfully pursue the traditional trajectory to “retirement.”
One of the people I love most in this world co-owns a bar in Los Angeles. He’s in a tough spot right now. However, he’s still as optimistic, resourceful, and entrepreneurial as ever. He developed a passion for the health benefits of mushrooms. With a push from the pandemic, he’s starting a company fueled by this passion.
I look at my girlfriend and marvel at the incredible business she has co-created.
In a tough city to do what she does, she crushes the game. She does this because she doesn’t complain. She adapts. And she understands the reason why people come to her. Of course, they require the services she provides, but she understands she’s among thousands of people in Los Angeles who do what she does.
She understands that she’s in the hospitality business as much as she’s in her core business.
Redefining work doesn’t have to mean you run out and freelance as a content creator or whatever. This will not work for everyone. It means you look at what you do — or the things you think you might be able to do — and take them to the next practical and theoretical level. You thoughtfully consider and reconsider what you do at a higher level.
It’s at this juncture where you’re able to control your situation and future rather than letting your situation and future control you.
Anticipating cash flow
Over the last couple of days, I deposited $2,850 into my brokerage account. For many people, this isn’t a ton of money. However, for most of us running in similar worlds, it’s a decent chunk of change.
I put a dent in my emergency fund to do this because I saw some opportunities in the stock market. I only feel confident making this move because I have become skilled at anticipating my cash flow. I have only become skilled at anticipating my cash flow because several years ago, I went all-in on redefining work.
We’re barely into the month, but I know exactly how February and March will likely look from a cash flow standpoint. This allows me to make my cash work for me — today— alongside the confidence I can easily replenish my emergency fund over the next couple of months.
When you work a 9-to-5 job with a fixed salary — and have no time for a meaningful side hustle or freelance work — it’s difficult to anticipate cash flow. Your number tends to be the same every two weeks or each month. You can’t deviate from the script or ratchet your earnings up or down. It’s difficult to call an audible when you know you’re making $2,578 every two weeks on monthly expenses of, say, $3,500.
If you can anticipate cash flow in the short-term, you can absolutely do likewise with a view on the long-term.
Allocating income
Once you have a solid view of your cash flow, you can begin to effectively allocate it for both near-term needs and wants and long-term goals and desires.
Here’s the long and short of it from a recent Making of a Millionaire article:
To be financially flexible, you need pots of money.
One pot of money to consistently satisfy your monthly living expenses for 1.5 to 2 months (subsistence fund). One pot of money to cover reduced or a total loss of income for 3 to 6 months (emergency fund). Other pots of money to pay for discretionary needs and wants (a new apartment or continuing education fund). And another pot of money to fund the aforementioned starts, stops, and restarts (transition fund).
Ideally, you have as low a cost of living as possible, ample cash flow, and the discipline and desire to focus on your finances and eschew expensive habits (e.g., eating out at restaurants) in favor of frugality (e.g., park hangs and excessively long walks). You find satisfaction in mastering income allocation — that is ensuring you’re on the path to keeping all of your funds fully stocked. And, once they are, maintaining them at the necessary level and taking the next step.
That next step being — diverting all of the money you have left over at the end of the month to a portfolio of dividend-paying stocks (investment fund). The goal isn’t to traditionally retire on the back of this fund, but generate enough dividend income to live off of, in part or whole, at some point further on up the road.
This is where strategy enters the picture.
What do I need money for? When do I need it? How do I allocate it (pace it) so I stay on track?
You’ll answer these questions differently than I will. You’ll ask different follow-up questions of yourself. You’ll employ strategies that work for you. However, we have one thing in common. We’re not going to fail at the save $500 for the next 40 years at an 8% return, then retire game.
Smart investing
Not to get too deep into the investing weeds, but I was looking at my dividend stock portfolio the other day. I calculated that it’s only yielding about 3.5%.
Dividend yield is essentially the amount of income you can expect to receive from your position in a stock or an entire portfolio of dividend stocks. So, 3.5% on a $500,000 portfolio yields $17,500 in annual income.
I (like to think) I have time on my side, so I’m in the process of increasing my yield. I’ll do this by focusing on building positions in my higher-yield holdings and, maybe, adding another relatively high-yield stock or two. I want to generate a better than 5% yield from my portfolio. Maybe even closer to 7–8%. It’s entirely possible. It just requires attention, some work, and a little strategic savvy.
Here again, you might approach this from a completely different strategic perspective than I do. But we still have one thing in common. We’re looking at how we make what we have going for us — and what we can have going for us — optimally function in conjunction with lifestyle, work, cash flow, and income allocation. If we’re not going to have some magic number such as $1 million, how can we ensure our investments help satisfy the obligations and cravings of our future selves?
I got specific here without getting super-specific.
I took this approach with intention. Because you’re really not going to execute at a practical level the way I do/will. This isn’t possible. We lead different lives. We have different skills and preferences. We’re different flavors of pragmatic and emotional. No one personal financial strategy fits two people. I’m convinced of this.
Picture it on a spectrum. It works for me to save $1.00. The next person needs $1.01. And so on. Small but meaningful differences, primarily because in most facets of our overall approaches, these small — and some big — differences exist. As we total these differences, they add up.
My job isn’t to tell you what to do or even how to do it — at least not in specifics.
My job is two-fold:
- To help guide myself as I figure things out.
- To use my thought processes to be positive and help empower people to push back on the inherent negativity in the prevailing mainstream discussions about money.
I hope I’ve done my job.
This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
