By Ben Stein and Phil DeMuth
Money is an astonishingly powerful mind changer. Lots of it — or at least enough of it — makes you happy, while a shortage makes you miserable. There's some magic to having enough that's as basic as the need to take in water and oxygen. The "mojo" of having more than enough, of having an amount necessary to be comfortable, is intoxicating.
Just think about how you feel when you open a brokerage statement that says your investments have been doing well, and compare that with how you feel when it says they've been doing poorly. Imagine what it means to open an envelope and find a check instead of a bill.
Years ago, one of your authors, Ben Stein, got a call asking him to do a commercial for which he was to be paid what seemed like a lordly sum. He had lunch with a friend right after he took the call, and his friend asked if he'd had a face-lift. "No," Ben replied, "I just got offered a lot of money to do something pleasant and easy."
"Money," she said sagely, "can make you look younger. Or," she added ruefully (because she was short of money), "it can age you."
We, your authors, are just ordinary people like you. We worry about money all the time, and whether we have enough of it. As we get older, we're concerned about whether we've invested wisely. (We often haven't, but we're getting better with age ... we hope.) Most of all, we think about whether we'll have enough to live comfortably when we're too old and infirm — or just too worn-out—to work, and whether the people we love will have enough. We've seen magnificent examples of retirement preparedness — especially in our parents, all of whom died far too young — but we've also seen disasters among people we're very close to.
This has prompted very serious study on our part to save ourselves and others. We want to begin our salvation at home, but we'd like to spare as many people as possible sleepless nights and torment. We love this country more than words can say, and we're devoted to our fellow American citizens, as well as those of the UK, Canada, and all good countries. We want to offer some help based on our own terrible experiences and terrifying observations, as well as what we've seen that works. That help is within these pages. If you read and learn from it, your chances for a successful retirement will rise markedly.
As you make your way through this book, please bear in mind an admonition from a famous 12-step program: "No one among us has been able to maintain anywhere near perfect adherence to these principles." Like the organizations that save lives from alcohol and drugs, this program is meant to be suggestive and to provoke thought. The closer you can come to doing the actions we suggest after thinking it over, the better off you'll be.
We've seen the future, and it scares us; we've seen the past, in our parents' prudent behavior, and it was inspiring. One of your authors (yep, Ben Stein again) especially saw spectacular results in his parents' lives from the regular purchase of carefully selected variable annuities (VAs) in stocks. If we harp on regular purchases and on VAs, it's because we've seen that they work miracles when carefully chosen and well understood. If you notice our emphasis on diversification, you can rest assured that we've also seen that practice achieve wonderful success. Above all, if we can teach you that a little self-discipline from a young age can transform your future by allowing the passage of time and compound interest to do the heavy lifting, we will have justified the few shekels you spent on this book.
Please take care not to torture yourself as you read if you've been way off course so far. Believe us, we've made every mistake possible. But each day starts a new wave of possibility, and we hope that you can ride that wave into a glorious, golden sunset. If you have any problems with the math and research here, e-mail Phil DeMuth. He did all the hard work for this volume (and if Phil finds that he has made any dumb mistakes, he'll post corrections on our Website, www.stein-demuth.com). If you want someone to come over and babysit your German shorthaired pointer, e-mail Ben.
The 21 Basic Rules of Retirement
1. Maximize your abilities through self-discipline and the ability to get along with others.
2. Start saving early. If it doesn't hurt, you're probably not saving enough.
3. Never spend more than you earn.
4. Max out all your retirement plans every year.
5. Get and stay married to a sensible person.
6. Buy your home.
7. Plan far ahead for your retirement, and then stick to your program.
8. Make a plan with a reliable financial adviser. Don't be afraid to ask for advice.
9. Save your hindquarters, not your face — that is, make savings and financial stability more important than showing off or looking cool.
10. Adopt a straightforward investment philosophy that takes advantage of the historical benefits of investing in common stocks but balances it with bonds in a judicious mixture.
11. Don't swing for the fences. You'll get into good retirement shape with singles and walks — in other words, don't try for something brilliant. Just stay even with the market and you'll do great.
12. Always have a reserve of cash on hand so that you don't have to dig deeply into your stock-and-bond savings.
13. At the earliest possible stage of life, learn to enjoy yourself in some other way than impoverishing yourself or beggaring your retirement plan.
14. Acquire work skills that are in demand so that you'll consistently be employed and won't need to use up your savings while unemployed.
15. If you're starting a business, make someone else put up the money while you put up the sweat.
16. Consider the tax implications of everything you do.
17. Planning for your retirement is more important than offering a lavish life to your children. They're young and strong and can fend for themselves.
18. Know in your heart that you'll be fine if you err by having too much savings — not if you have too little.
19. Be able to say no to people who ask for money, even if they have the same last name as you.
20. Make sure your plan allows for flexibility if economic times and styles change, but don't follow fads or trends.
21. Keep in mind that, no matter what, you don't want to be old, weak, ill, and poor.
Copyright © 2005 by Ben Stein and Phil DeMuth. Published by: New Beginnings Press, Carlsbad, California. All rights reserved.