the music, you can start making the choices that will provide a comfortable retirement.
Unfortunately, polls show that over half of Americans believe it is the responsibility of the government or their employer to take care of them in retirement. These folks are in for one rude awakening.
You may indeed get benefits from your employer and the federal government. But neither is likely to provide you with a cushy retirement.
That's up to you. As libertarians have insisted for years, responsibility is the price of freedom.
When you take control and accept full accountability for your own financial welfare, you let go of the idea that it is someone else's obligation to provide for you in retirement. You let go of the idea that your broker or financial planner will ensure your financial independence.
Ultimately, your financial welfare is up to you. You need to plan. You need to save. And you need to manage your money intelligently. These are just the topics I'll cover in the pages ahead.
REEL IT IN …
1 The Gone Fishin’ Portfolio is a powerful and effective yet simple investment system to achieve financial freedom.
2 You can enjoy a high probability of success using this investment approach, one that has garnered recognition from the Nobel Committee and is being used—in similar fashion—by many of the world's biggest institutional investors.
3 The investing deck is fundamentally stacked against you. Brokers and financial advisors work for fees. The national media is dependent on advertisers. Accordingly, the Gone Fishin’ Portfolio is designed for skeptical investors seeking objectivity—the unvarnished truth—about their investments.
4 Don't depend on Uncle Sam for all your retirement income. The federal government has said that the current Social Security system is unsustainable in the long run.
5 Americans are living longer than ever. To live well in retirement, you need your portfolio to last as long as possible, too. That's the objective of the Gone Fishin’ Portfolio.
CHAPTER 2 The First Step on the Road to Financial Freedom
My problem lies with reconciling my gross habits with my net income.
Source: Errol Flynn
Before we explore the Gone Fishin’ strategy, let's acknowledge a fundamental truth. There can be no investment without saving. I'm not talking about saving in terms of setting aside money for short-term goals like a new car or a down payment on a house. By saving, I mean giving up immediate spending in exchange for future income.
Saving for your future means setting aside enough money each month to reach your financial goals. Yes, it's partly about planning. But it's mostly about having the discipline to follow through.
According to a recent Federal Reserve report on the economic well-being of U.S. households, just 36% of nonretired adults believe their retirement saving is on track. A quarter of adults have no retirement savings or pension at all.
A few years ago, a survey by Bankrate.com found that 68% of adults avoid news about the cost of retirement. Why do so many Americans have their heads in the sand? There are various reasons. Some see their parents living fairly well on Social Security and pensions. Others simply lack the discipline to save. In a Fidelity survey, only about a quarter of respondents said they would make a lifestyle change now to save for later.
These folks might want to go back and read Aesop's fable about the ant and the grasshopper. As I stated in the previous chapter, Americans are living longer than ever thanks to healthier lifestyles and modern medicine.
If you're likely to live longer, you need a hardworking investment portfolio (one that can duck into a phone booth and come out with a red cape unfurled). But to truly maximize the size of that portfolio, you'll need to save as much as you reasonably can, as soon as you can, for as long as you can.
Most people know this, of course. They just have trouble doing it.
However, more Americans are saving and investing than the press might lead you to believe. Never at a loss for a sensational story, the national media creates the impression that Americans are spending everything, swimming in debt and saving nothing.
In truth, the personal savings rate in the United States in 2019 was 7.6%, according to Statista, a leading provider of market and consumer data. In June 2020, during the depths of the COVID-19 pandemic, it spiked to 19%.
These figures deal only with personal savings made after taxes. Most working Americans, however, sock away a portion of their paycheck each month in a 401(k). It comes out of their checks pre-tax, not after tax. So the federal government doesn't count that as savings.
If you and your spouse both work, you could be putting as much as $39,000 between you in a qualified retirement plan each year (plus another $13,000 if you're both over 50). Your employer may be providing thousands of dollars in matching funds, too. Yet, according to official government statistics, you've “saved” nothing.
When you get your paycheck, you probably make a mortgage payment. Part of that money goes to pay down the principal, which builds equity. (You may even pay off a little extra from time to time.) But Uncle Sam treats money you put into a mortgage as consumption. So, once again, none of this is “savings” according to official statistics.
If you're contributing to an IRA or 401(k), you're on the right path. If you can save 10% or more of your after-tax income, too, that's even better.
Of course, some Americans aren't funding a 401(k) or doing any other saving. Some don't own homes and, of those who do, many aren't paying down their mortgages. Rather, they've been borrowing against their equity, adding debt.
However, these folks don't represent the national trend. According to the Federal Reserve, U.S. households’ 2019 total net worth—the total value of all assets, including stocks, bonds, bank accounts, houses and retirement funds, after subtracting debt—was over $100 trillion. That's $17.7 trillion higher than it was four years ago. And it's more than 12 times what total net worth was in the United States in 1980. Total American wealth is clearly rising, not falling.
But to join that group whose net worth is rising the fastest, you probably need to save more.
SOMETIMES LESS IS MORE
In The Millionaire Next Door, Thomas Stanley and William Danko reported that most Americans with a net worth of a million dollars or more follow a remarkably similar path. They maximize their earned income, minimize their expenses, live beneath their means and religiously save the difference. It may sound pedestrian, but do this long enough and one day you just may wake up with a seven-figure net worth.
It means making sacrifices, however. As we go through life, we quickly learn that expenses seem to rise to meet the income available. In our wonderful capitalistic society, there is never a shortage of fabulous products and services vying for our attention.
However, it is possible to say no.
Several years ago, I was invited to do a segment about saving and investing on Fox TV in Tampa, Florida. Near the end, the interviewer suddenly popped this question: “What do you say
