Retirement Investing for the 21st Century

For most of modern human history, retirement investing consisted of socking away a percentage of your paycheck during your working years, buying some blue chips stocks, and living off the dividends during retirement. According to Dennis Miller (not THAT one), author of the book “Retirement Reboot,” the landscape has changed so much in recent years as to be unrecognizable. Join Dennis and Jason Hartman on episode #325 of The Creating Wealth Show as they talk about how to save your nest egg before it’s too late.

The Other Dennis Miller

In case you were wondering, this is NOT the guy who used to be on Saturday Night Live and now hosts a conservatively slanted national radio show. In addition to books, this Dennis Miller also writes the weekly newsletter, Miller’s Money, a publication with over 150,000 subscribers. Miller’s research on retirees and investing keeps him at the forefront of the inflation discussion, a topic Jason regularly revisits.

Fear of a Fixed Income

The problem with the old school approach to retirement investing is that noticeable annual inflation has become a hallmark of the American economy. Inflation devalues currency and investment assets like stocks, bonds, and mutual funds. As Miller points out, unless your nest egg generates returns in excess of yearly inflation, it’s a losing game. It used to be that financial planners would advise retirees to arrange matters so they could live off investment interest and never touch the principal. Unfortunately, an inflationary environment (like the one that has dominated this country since the early 1970’s) erodes the value of the principal.

What can you do? The only answer is to become an active investor. Mr. Miller recently used his newsletter to solicit opinions on inflation. Over 3,000 responded and the results were staggering. The reality is that retirees living off a fixed income know exactly how much the price of basic necessities have gone up. They can not only tell you exactly how much the price went up, they can tell you how much the packaging has downsized and how quality has diminished. This is a real fear faced by retirees. People know that government inflation numbers are not a true reflection of how retirees live their lives.

Inflation Perception and Reality

Jason Hartman has long been one of the lone voices decrying the laughable government statistics that annual inflation in the United States hovers around 3-4%. In his opinion, the number is at least 10% and maybe more. Miller’s survey of retirees seems to bear out that way of thinking. Take a look at the results:

  •          Only 1.6% thought inflation was 1 – 2%
  •          14.2% of readers thought inflation was 3 – 5% for them
  •          34.9% thought inflation was 6 – 8% for them
  •          25.7% thought inflation was 9 – 10% for them
  •          23.6% thought inflation was over 11% for them

Retirement Investing Then and Now

We live in a different world than our grandparents did. Remember the old days when Pop went off to work every morning to log eight hours at a company where he would spend his entire working life? When retirement came around, he got a plaque or watch and went home to enjoy the fruits of his labor. Most companies offered retirement plans and the stock market, driven by value rather than wild speculation, was a safe place to invest. Life was good.

It’s not that way any more! Retirees who try to finance their golden years using the strategy outlined in the previous paragraph are in for a rude financial awakening. First of all, few people work for a single company their entire life. Even more rare is a company that offers the kind of rock solid retirement plan that will get you to the “end.”

Become an Active, Knowledgeable Investor

Jason has been telling people for years that they need to get educated and become a direct investor. That means you shouldn’t trust a money manager or stockbroker to take care of your assets. Even if they’re competent and ethical, there’s no way they care about your money as much as you do.

It’s YOUR retirement, YOUR life, and YOUR responsibility, because YOU will be the one eating dog food from a can or choosing between medicine and food when the money runs out before your time on earth does.  

The bottom line is, like it or not, you’re a money manager now.

Hedging Against Inflation

Your financial education starts today. Right now. We’ve been discussing how inflation is the beast that will decimate your retirement savings if you don’t figure out how to fend him off. One of the first lessons you must internalize is that some assets perform better than others in the face of inflation. As Dennis and Jason discuss, precious metals (gold, silver, etc) work better than Wall Street offerings as a savings vehicle and will allow you to preserve the value of your investments.

Remember this. Anything denominated in dollars will lose value as inflation increases. That includes stocks, bonds, mutual funds, etc. Retirement investing in precious metals at least acts as a hedge against inflation. But as Jason points out, this is a defensive strategy. It’s better than losing but still leaves you treading water. It’s not a good Big Picture strategy.

The Value of Debt

Investors new to the concept of Inflation Induced Debt Destruction often have a hard time wrapping their mind around the idea that the best path to wealth is to go into debt! Of course, the type of debt you assume is a specific kind – a long-term, fixed-rate mortgage tied to a piece of income producing property. For more information on how you can take the fear out of your retirement years and create financial independence through investing, visit . The website is loaded with free information that will put you on the right track quickly.

And for more information about retirement investing or to subscribe to his newsletter, visit Dennis Miller’s website at Flickr | meridican)

More from Jason Hartman:

Grow and Protect Your High Net Worth Portfolio
Rent Collection and Self Management

The Jason Hartman Team