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Plan Your Prosperity: The Only Retirement Guide You'll Ever Need, Starting Now--Whether You're 22, 52 or 82 Hardcover – October 30, 2012
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Q & A with Ken Fisher, Author of Plan Your Prosperity
Maybe nothing. Maybe a lot!
In the book, I cover one of the bigger and more common mistakes investors make: Thinking about time horizon wrong. They often think, "I'm 60 and retiring at 65, therefore my investing time horizon is just five years, which is short so I should play everything very, very safe." The best way to think about time horizon isn't "How old am I?" but "How long must my money work toward my goals?" For many investors, this is the entirety of their lives and that of a spouse which can be a very long time.
While younger folks may know they have long time horizons, those approaching retirement don't necessarily have short ones. A 60-year-old investor could easily live to be 90-30 years! And what if that 60 year old is married to a healthy, active 50-year-old? Now, their investing time horizon could be 40 years or more, if you consider all the life-extending medical advancements that happen over the next 4 decades.What are the biggest pitfalls or traps investors fall into?
As mentioned, one huge pitfall is assuming too short a time horizon. This can lead to another trap-failing to plan for enough growth. Investors often forget the long-term devastating impact inflation can have, or they underestimate how much cash flow they need in later retirement, or a combination of the two. And if they fail to plan for enough growth to outpace inflation and achieve their long-term goals, they may find they must ratchet back their style of living late in life which is brutally tough and tougher to explain to a spouse.
The worst part of failing to plan for enough growth is it may be non-evident for a long time--maybe 10 or 20 years! By then, it is too late to do much about it.
The book covers a bunch of other common pitfalls, like: believing volatility is the only risk that matters, relying on high-dividend stocks only for retirement cash flow, having unrealistic expectations, and more.If you had only one piece of advice to offer investors of all ages, what would it be?
Believe, with your very soul, in capitalism and the power of the profit motive to do good. Profit motive is a powerful source for societal good which has led to life-extending-and-improving innovations like vaccines, better medical procedures, safer cars, faster computers, the entire information age and increased wealth on average. It's also the reason why, long-term, stocks are likeliest to yield superior returns to every other similarly liquid asset class.
Also, never forget the power of compounding returns-a bit of magic most people underestimate, which I cover in the book.What do you say to young investors who are scared to invest in stocks after witnessing years like 2001 and 2008?
Simply, that even huge bear markets like 2001 and 2008 eventually become mere blips after a decade or so of equity like returns. Bull market upside is much huger and much more frequent than bear market downside--eventually.
If you believe in capitalism (you should), you know the long-term superior return of equities includes down periods. Bear markets happen. They will happen again. Some will be bigger than others. But after every bear market comes a bull--and since the Great Depression, every bull market has hit new highs. So as long as you don't panic and make a big move in the depths of a bear market that makes you miss out on a material chunk of the ensuing bull market, a bear market can't hurt you if you have a long time horizon.
Get that in your bones, and you'll do better than most all investors, including most professionals.Is there a "magic formula" when saving for retirement? What are the main variables people need to think about to determine how much they will really need in retirement?
I abhor magic formulas. There's no such thing. Anyone telling you otherwise likely wants to sell you something bad for you.
The book covers the main concepts you should consider when crafting your retirement investing plan--these include careful consideration of your time horizons, return expectations, cash flow needs, your current financial situation and any other circumstances unique to you. The key to successful retirement investing planning is selecting an appropriate benchmark. The book walks you through this process and gives you helpful exercises. But if you want good long-term results, there are no short-cuts to this deliberate process. But the book shows you how.
From the Inside Flap
Think you're too young to start thinking about retirement? Or that "retirement" investing is different from "normal" investing? Think again.
Whether you're in retirement, just getting ready to retire now or in 5, 10 or 40 years, Plan Your Prosperity arms you with information, expert guidance and tools to help you invest smarter your whole life and, yes, plan better for retirement. Bestselling finance author Ken Fisher explains why, for all practical purposes and for most investors, all investing should be done with an eye toward retirementand beyond.
Harmful mythology abounds about retirement investing. Like the adage you should take 100 (or 120) and subtract your age to get your equity allocation and put the rest in bonds or cash. Or you should buy only bonds. Or buy only high-dividend stocks. Or some combination! Or buy equity-indexed annuities or some "guaranteed" income product. All are examples of potentially harmful myths many folks believe to be smart, strategic movesmyths Ken makes short work of in Plan Your Prosperity.
In their place, Ken provides straightforward principles to help you increase the odds you achieve your long-term investing goals, like:
- How to think correctly about investing time horizon
- The difference between income and cash flow
- How to better figure how much cash flow you need and if your portfolio can provide it
- How to figure how much to save each year to achieve retirement goals
- What pitfalls to avoid
- And more . . .
Not another one-size-fits-all retirement planner, Plan Your Prosperity supplies you with a firm foundation in sound investment and retirement planning principles. And it gives you a framework for better understanding your financial needs, setting your financial goals and creating a workable plan for your lifelong prosperity.
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Fisher is a long time Forbes columnist, has his own money management firm, and is a self-made billionaire.Read more