Buy, Hold, and Sell!. Moraif Ken
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Название: Buy, Hold, and Sell!
Автор: Moraif Ken
Издательство: John Wiley & Sons Limited
Жанр: Зарубежная образовательная литература
isbn: 9781118951507
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What do you think the chances are that we will have a bear market between now and the rest of your life?
I believe it is practically a certainty there will be another one, and buy-hold guarantees that you will take a loss when it comes.
Chapter 2
60 Is the New 40
What Does That Mean for Your Investments?
A while back, I was flying home from a financial planning conference, and the man sitting next to me on the plane was reading a newspaper. I could tell something he was reading was really bothering him. Curiosity eventually got the best of me, and I asked, “Excuse me, but what is it that's bothering you so much?”
“Well, look what it says here,” he said, showing me the paper's headline. “It says, ‘Life expectancy to reach 120.’”
“So what's wrong with that?”
“What's wrong with that!?” he said. “Can you imagine your 90-year-old son moving back in with you? Oh my gosh, he still hasn't gotten a job!”
How Long Will You Live?
A hundred and twenty years old may seem like a stretch, but the fact is that people are living a lot longer today than they ever did before. According to the Social Security Administration, males born in 2007 can expect to live to 75, while women born in the same year will live to 80 on average. Now, take a look at the chart in Figure 2.1.
Figure 2.1 Social Security Population Projections, 1997
In 1900, neither men nor women were expected to live past 50 years old! In a little more than one century, we've gained 25 years or more.
It gets more interesting. Most life expectancy charts look at how long you'll live from birth, but there are also statistics on how long you'll live if you're older. In 1950, a 65-year-old was expected to live to be 77 years old. By 2009, it was estimated that a 65-year-old would live to see 84. Think about it; in 1950 the average 65-year-old would live 12 more years. The average 65-year-old today will live nearly 20 years. That's a substantial difference.
Remember, these are averages. You could live longer. Life expectancies are determined by averages. For example, researchers look at a thousand 65-year-olds, and when they find the age where 500 are living and 500 are dead, that's the crossover point – the life expectancy. If you're still alive at that age, you're in the 50th percentile. But what if you take especially good care of yourself or have really good genes? You'd likely be in a higher percentile, and could live years longer.
Over the next few years it is very likely that scientists and doctors will develop cures for the main killers we face today. It looks more and more like cancer and heart disease will suffer the fate of diseases like polio and tuberculosis. Good riddance! When these advances are made, life expectancy will rise again. It's highly possible that you will live more years in retirement than the number of years you worked to accumulate the money that you will retire on!
What Does a Long Life Mean for Retirement?
Living longer means you'll have more time to enjoy retirement, right? More time to golf, play with the grandkids, just enjoy life. Unless it means you have to delay retirement, to work longer in order to make sure you have enough money to live out those extra years.
In 1995, Gallup consultants found that most Americans expected to retire at 60. But now, according to a 2011 Gallup poll, only 28 percent plan to retire before they're 65.
Source: Randy Glasbergen.
When I was young I thought that money was the most important thing in life; now that I am old I know that it is.
There could be a few reasons behind this trend. People born in 1937 or prior to that year could claim full Social Security benefits at age 65. People born after that have to wait until 66 or 67. That might be one reason. The Society of Actuaries reports that people are nervous about inflation's effect on their retirement – that could be another reason. Yet another reason might be that the majority of workers don't receive pensions anymore. Since most companies have shifted from providing defined-benefit pension plans to offering defined contribution plans, the average worker is now in charge of investing his retirement money. Will those investments generate enough income for the number of years that people are now expected to live? All of those concerns certainly contribute to the delayed retirement phenomena, but I don't think any of them are the main reason behind the shift.
The 2011 Gallup poll found that for the first time ever, more Americans were afraid of outliving their savings than were comfortable with their ability to retire. More than half of workers between the ages of 50 and 64 feared they wouldn't be able to maintain their current standard of living once they retired.
They may be right to be scared. In October 2008, the Congressional Budget Office reported that Americans had lost roughly $2 trillion in retirement savings over 15 months.
I think that's probably the biggest reason behind American's fear of running out of money. They lost their shirts in 2008. Losing half your money in just one year will make you very nervous about the future.
The Longevity-Retirement-Investment Equation
I want to help you avoid the pitfalls that claimed those retirement dollars in 2008. I want you to live long and prosper. In order to do that, I think it's important you understand the longevity–retirement–investment equation.
Live long and prosper.
If you retired back in 1950 at the age of 65, you could expect to live another 12 years. If you were only going to live 12 years, you wouldn't worry so much about taxes, inflation, and bear markets. Sure, you wouldn't want to experience them, but at the same time you could pretty much put all of your money in a box in the backyard, take out what you need to live on every month, and it would most likely last 12 years.
But in today's world, you've got to make your money last for 19 years or more. You do have to worry about inflation, taxes, and bear markets. And you have to recognize that longevity is one of the biggest enemies to your financial well-being. If you live a long time, your money has to last a lot longer. If you live into your 90s, the more heavy lifting your investments need to do to support your lifestyle. You're asking a lot more from your money.
The longer you live, the more likely you are to have health-care costs, too (see Figure 2.2). It doesn't matter how well you take care of yourself, it's just the price of longevity. In fact, the Center for Retirement Research at Boston College found that people who are healthy and live a long life spend more on health care than unhealthy people who die younger. Maintenance is more costly than junking the car.
Figure 2.2 Mean Remaining Lifetime Health-Care Costs by Age and Health Status, 2009 Dollars
Note: Costs are for households turning 65 in 2009. Increases СКАЧАТЬ