Thoughts on 'Seven Rules for Investing in Retirement'

by: Roger Nusbaum

A blogger named Alex Trias had an interesting post the other day about how to invest during retirement. The article gave a detailed portfolio concept in terms of generating income that readers may find of some use. I don't agree with everything but there is plenty of utility to the article and I would also add that people also need to be more open to non-market components to their retirement solution.

Of more interest to me was one of the comments from a reader who called himself Factation and his Seven Rules For Investing In Retirement--although the rules seemed broader than that.

1) Eliminate all debt. Debt is slavery. I've never thought of debt as slavery but obviously am on board with getting out from under. We paid off our mortgage on our Prescott cabin years ago and other than our brief foray into Hilo have been debt free for a while. No debt gives a very big margin for error in terms of dealing with the unexpected.

2) Peace of mind fund. Social Security plus three years of cash or cash equivalency's to live on. Estimate your prospective requirements. I'm not sure how much cash one should keep. We have more than three years worth but our fixed expenses are very low. How much cash do you feel you need in order to ride out something difficult? Whatever your answer, that should be what you have or should be what you are working to accumulate.

3) Invest only in high quality, dividend producing stocks, and only sell if the investment fails to meet requirements. Do not trade. I view this one differently. If you believe in having a diversified portfolio then you would have stocks with varying types of attributes. Yes it may make sense to favor some particular part of the market but owning only one type of investment assumes more risk than I think most people would realize.

4) Only withdraw necessary minimum from tax deferred accounts. I can't argue with that but I would say that getting some help on the best way to pay yourself is a good idea.

5) Own the residence or residences you live in, debt free. From a numbers standpoint, paying off the mortgage with a lump sum was a bad idea but those waters have muddied in the last few years. I have always felt that this was really a sleep factor issue. We paid our place off when I was 38 (the original note was only $57,000) and it does make for peace of mind.

6) Live frugally, and you will have peace of mind and hopefully, good health. I am all for living below your means but good health requires vigorous exercise and while we're at it, elimination of soda. Living below your means could lower stress over money issues too which could also contribute to good health.

7) Do not be envious of any one, or anything else. This is not something I think about or write about so I don't really have anything to add here.

A bigger picture concept to tie all this together might be a quote from our friend Bill here in Walker that I have referenced here many times before; you can figure it out now or you can figure it out later but you'll be much happier if you can figure it out now.

Good stuff Factation, thank you.