February 18, 2016


Dear Friends,

My team and I are in the process of updating what I call “my best advice,” that is, The Ultimate Buy and Hold Strategy, Fine Tuning Your Asset Allocations, and Retirement Distributions. For the Ultimate Buy and Hold Strategy’s (through 2015) article, podcast and new table, click here.

As my readers and listeners know, my passion is to provide free information to help you make the best investment decisions to maximize your savings for retirement. The point is to have the financial freedom to enjoy your whole life and, hopefully, plan for the care of loved ones and contribute to what is important to you.

As many people are living longer than in the past, this raises the questions of not only sufficient finances but quality of life. While we may like to avoid thinking about old age and elderly care, it is a reality many of us – if we are lucky enough to get old – will face for our selves and family. I came across this article about Dr. Bill Thomas who is doing his part to change the way we view old age. His message addresses the “third” phase of life beyond adulthood, which he believes can be as rich as either of the phases that came before. I thought you might enjoy reading this and consider alternatives to what it means to “grow old.”

In opening up the conversation about growing old, I hope you will take the time to discuss your finances and wishes with those closest to you. We never know when we’ll take our last breath and it would be a shame to not have been clear about our intentions. A wonderful way to communicate this might be in the form of a letter to be delivered to loved ones after our passing. In my strategy for “How to Turn $3,000 into $50 million,” you can read “A Very Special Letter I Hope You Will Write to Your Child or Grandchild” which may inspire you to write your own.

In a recent Q&A at Scutify.com, I answered a numbered of questions. You can read them allhere. The one below addresses many aspects of the investing and retirement distribution processes.

To your success,



Q: What should I do with hundreds of thousands of dollars in cash?


I’m 58 and plan on retiring within a year. After maxing out my 401(k) and Roth contributions for years, I’ve accumulated hundreds of thousands of dollars in cash and would like your recommendation on what to do with it. I plan on funding the first 6 to 7 years of my retirement with it, and I’m hesitant to put it in equities. Half of it is sitting in a ladder of CDs.

A: Yours is the most difficult of all the questions I have received this session. I was once an investment advisor but today, at age 72, I am only a teacher trying to reach investors who are open to finding a better way to invest their money. The problem with trying to educate everybody is that such general advice is rarely right for each individual.  So when I respond to your request for advice, you can be assured that I am an expert on investing.  That’s the good news! The bad news is I am not an expert on you. And you are the most important consideration in the process of putting together the best retirement portfolio. Your question suggests a very cautious attitude about where you invest your money and little risk tolerance. Of course, I could be wrong.

If I am right, my challenge is to help you find a mechanical way to make good investment decisions now, and in the future. By mechanical I mean finding a way to make investment decisions that don’t require dealing with the sometimes emotionally painful gyrations of the market.

I have no idea how much money you have to draw from your investments in retirement. I have no idea whether you have “enough” or more than enough to meet your future financial needs, including your desire to leave something to others. I think the free chapter on “Moving to action: 12 numbers to change your life“, from my book “Financial Fitness Forever,” will be helpful as a start.

Let me share how I approached using my own portfolio to fund our retirement. The first week of each year my wife and I take out 5% of the year-end balance from the previous year. If the market made some money the previous year, we get to take out more. If the market didn’t do well we will take out less.  Whatever the amount, that’s the money we have to live on for the year.

The balance of our investments is basically 50/50 stocks and bonds spread amongst 12 funds. At 5% a year the 50% in bonds will support 10 years of distributions. That’s in theory, as our portfolio is rebalanced about once a year. That means there are years we are moving money from bonds to equities (after a stock market decline) and years we are moving money from equities to bonds (after a profitable year in the stock market). By the way, the 5% for the year is moved into a short-term bond fund for monthly distributions.

When I was an advisor I had many clients who were not comfortable with my “one year at a time” discipline. They wanted more of a cushion from the vagaries of the stock market. In some cases the accounts were set up to hold one year of cash needs in a money market fund, with another year of cash needs in a short-term bond fund, and then the balance in a portfolio that could be anywhere from 30% to 60% in equities.

While I’m not in a position to give you personal advice, I recommend you read a series of articles and listen to several podcasts that should help. One huge decision we all make (by choice or chance) is how much in stocks and how much in bonds. For many years I have updated a table that has helped thousands of people make the stock/bond balance decision. Please check out my Fine Tuning Your Asset Allocation page that includes an article, podcast and the Fine Tuning Table.

The next major step is to decide where to invest the equity portion. There is nothing wrong with simply using the Vanguard Total Stock Market Index. What I have done with my own portfolio is use a group of equity funds that are built, as a group, to produce higher returns without additional risk. If you wish to understand why I have chosen those equity funds please read, “The Ultimate Buy and Hold Portfolio.”

Finally, how you access your money in retirement is a huge decision.  It will determine how much you have to spend, as well as how much you leave to children and charities. For many years I have produced tables that show investors the outcome of using fixed distributions for those who have not over saved, as well as tables reflecting variable or flexible distributions for those who have over saved. As you will discover, to have over saved offers many more choices. Here is the link to those articles, podcasts and tables.

There are many decisions in the process, but the final one that seems to make a big difference is whether you do it all yourself or get professional help.  My wife and I use an advisor because we don’t want to spend our life thinking about our investments. There is a price for that peace of mind. I am a frugal person, so I understand that paying someone to do something you believe you can do yourself seems like a waste of money. If you want to compromise between doing it yourself and having someone who takes care of everything, you can work with a firm that offers hourly advice. I suggest you check out Garrett Planning Network for hourly advice. I do not recommend you use them for fee-based management, but I do recommend them for hourly help. For more on how to choose an advisor, read “Get Smart or Get Screwed: How To Select The Best and Get The Most From Your Financial Advisor,” also available as a free download at my website.

I hope some of this information is helpful. I feel blessed to have my own investments managed in a way that I don’t worry about them. I hope you find the same peace of mind.


The 10 toughest investment decisions
In 1999 and early 2000, when the stock market was going gangbusters under the leadership of technology stocks, many investors believed double-digit returns were a given.  More




       Like us on Facebook   Follow us on Twitter   View our profile on LinkedIn