Investing should allow you to live comfortably in your golden years. You’ve worked hard throughout your life, and your money should work just as hard for you.
So why is it that a staggering number of baby boomers will have to work into their 80s just to make ends meet? That’s what Steve is trying to figure out in this week’s Two-Minute Retirement Solution.
Transcript
Today I am asking you folks for help with a problem – a huge, enormously costly problem for retirees that is literally ruining lives.
For the past 25 years, I have been writing, speaking and pounding the table about how the little guy, the small investor, has to change his money-losing behaviors, or he will never have anything.
Well, the return numbers have finally caught up with us boomers, and it’s worse than even I could have ever imagined.
A full 60% of boomers will not be able to maintain their lifestyles in retirement and will have to work to the age of 80 just to make ends meet.
The little guy has earned less than one-third of what the market has returned for the last two decades. And, according to some very talented pros, most of this dismal underperformance is the result of just two variables.
According to John Bogle, the founder of The Vanguard Group, if you reduce your costs and stop trading based on emotions, you can literally triple your returns.
Reducing your fees is easy: Just do your homework and use a low-cost broker.
The second, ah, not so easy.
Emotional trading is the single most costly reason most of us lose money in our investments. And while there has been a mountain of research about which parts of the brain are responsible for our emotion-driven “buy high and sell low” behavior, I haven’t seen one actionable recommendation that has stopped it or even slowed it.
Emotional selling at a loss is everyone’s Achilles heel, and it only gets worse as we approach and enter retirement.
By then, the fear of losing what we have managed to put away ratchets up to levels one can only describe as hysteric.
And this hysteria results in retreating into low-yielding investments with no risk to principal… and no chance of paying your taxes or inflation.
Talk about compounding a horrible situation: underperformance for 20 years, and now no performance at all.
The best recommendation the money press seems to be able to come up with is to diversify and have a plan. If those were the answers, we’d already be out of this mess. They haven’t done anything to stop the insane buying and selling.
And I am not ashamed to say I am out of ideas on how to help stop it. Nothing I have done seems to have changed anything.
Yes, in case you are wondering, I am at the end of this particular rope.
So, I am asking you, readers and Members, to offer up your ideas to help stop this fear-driven “buying high and selling low.” Add a comment below if something has worked for you.
If we don’t find a workable solution, no amount of good advice or planning will make any difference in our retirements.
So, let me hear from you, no matter how mundane or crazy your idea might seem. It may not triple our returns, but if it helps just one person get control of this destructive behavior, it will have been worth the time.
I am looking forward to your input.