Editor: Crass Cash

If you're ignorant of investing, but you know you need to retire at some point.  Then Target Date Retirement Funds do the thinking for you.  How do they work?

Well let's look at a scenario.  You're 45 and you know that you want to retire at 65.  So you have twenty more years to work and save.  These funds won't give the amount that you need to have now and also to save in the future, that needs to be figured out by you and your financial planner.  

Instead what these funds do is slowly and automatically move your money away from stocks and into bonds.  By the time you retire at 65, the general rule of thumb is that you need to have 65% of your money in bonds, some in cash and the rest in the stock market.  Each fund probably has a different ratio but generally it'll be better than how most people do it.  Which is to throw money blindly at the stock market and see what happens.  

These funds will have dates associated with them like '2050' for those who plan to retire in 2050.  If you're 35 now and plan to retire at 65, then your retirement date fund will be 2044.  If you can't find one with your date then just pick the closest year.  Be very very leery of cost.  Go with the lowest operating cost funds.  Most are going to be investing in about the same things so over time the returns will be very similar. 

If you hate mutual funds and you want to do it yourself than you can.  It's quite simple.  Just keep whatever age you are in bonds as a percentage of your entire portfolio.  So if you're 50 years old than 50% of your retirement funds should be in bonds.  If you're 40, than 40% should be.  When you turn 60, you probably should keep 5% in cash, 60% in bonds, and the rest in an index fund.  Reallocate your funds at the same time each year.  It doesn't matter when. 

This approach won't maximize your return, but it will come as close as possible to guaranteeing that you have funds for your retirement will a reasonable amount of risk.  Don't be like these poor bastards who had everything in their retirement accounts all in stocks and then wake up to a crashed stock market without a pot to piss in! 

It happens every stock market crash.  Don't let it happen to you!  

Editor: Crass Cash

It's not a coincidence that as countries become more affluent, as a result more expensive, the birth rate has a tendency to decline.  I'll use my own family as an example.  My grandfather was one of 14 kids.  He then had 4 children.  My mom had 3 children.  And so far of those 3 children there is only one grandchild.  

Other thanks have changed.  My grandfather grew up on a farm.  Then he became a butcher.  My mother worked in a service job as do all of the children.  

In nature when the food source runs out the population dies off and then gives the rest a chance to breed and make more.  Then the population grows too large and the cycle repeats itself.  We're now seeing this large cycle with the industrialized countries.  It has become so expensive to raise children that many people aren't' having them.  The population is beginning to drop, with Japan being the worst.  The States are the one example but this is due to an immigration influx.    

So here it is. If you're struggling to get by and feed yourself and your family.  QUIT HAVING FUCKING KIDS!  I find it pathetic that I even need to bring this up, but I've seen it over and over again.   IF YOU CAN'T FEED'EM, DON'T BREED'EM!  I'm may be a jerk, but they're being irresponsible. 

Editor: Crass Cash

Forbes released its new wealthiest families in America article this year.  There are interesting and not so interesting things about it.  The first misconception that billionaires inherit all their money is false.  66% of them are first generation billionaires.  Secondly, these families can be very wealthy, but it often gets diluted among family members as the family grows.  As a result rarely do these financial dynasties last.  They usually diminish after 3 generations.  There are no Vanderbilts, Greenes, or Astors on the list.  Only 2 families have made it 6 generations. 

This happens for multiple reasons now.  Usually it's due to the poor spending habits of the subsequent generations who didn't have to make it.  There are plenty of sayings to explain this.  "From shirtsleeves to shirtsleeves in 3 generations."  "The first generation makes it, the second generation spends it, the third generation makes it back."  You can find these phrases around the world, whether it be England, India, Japan, or Africa it involves human nature more so than money.  

So how does one avoid this and insure a financial dynasty for generations to come?  Well it involves math, law, and education.  Let's get started!

1. The first thing that you need to do it make the money.  This sounds simple and it actually is if you learn to live below your means.  Your goal should be to strive to save 50% of your after tax income.  The good news is that you don't have to do it immediately or in one generation.  Actually the slower you do it the more likely it's going to last.  It's like losing weight.  The people that go on crash diets always end up gaining the weight back.  Those lose the weight slowly through lifestyle changes end up keeping it off.  Compare this to the people in the book The Millionaire Next Door and lottery winners.  Lottery winners are almost always in the poor house within a decade.  

2. Let the wealth grow via compounding interest. The money that you save should be put to use to maximize your return.  This won't make much of a difference at first, but will make a huge difference decades later.  Let's say you live in a two income household making a combined income of $70,000 per year with 2 kids.  This puts you in the middle class.  You're able to save $25,000 a year from that $70k and you invest it wisely making an after inflation adjusted return of 7%.  This is by no means extraordinary, actually it's very average.  If you start doing this at the age of 25 and retire at the age of 65, you will have built a nest egg of $5,000,000 that can then grow and be passed onto your heirs.  If your children continue to do the same thing as you, then they will have a net worth of $28,668,879 in today's dollars.  What about the third generation?  If they continue than they will have a net worth of $157,179,635.  If you're able to keep this going for another 3 generations you're looking at around $25 billion.  That's $25,000,000,000!  

3. Keep the tax man from taking it. Unless all of your heirs become estate lawyers and tax CPA's you're going to need to get their help.  Setting up these large amounts of money into trusts help keep the fortunes intact and reduce your taxes at the same time.  By giving away control of the money you can avoid a lot of taxes.  This creates a philosophical problem though as we'll talk about later. 

4. How do you keep future generations from blowing it like a kilo of cocaine?  So now you've made the money and then sheltered it from the tax man, thus preserving as much as you can.  Education and lifestyle is the key.  Teach them from a young age how to control spending habits and also to keep track of their money.  I had a checking account when I was in 1st grade.  The more you learn as a child the more you can learn as you grow older.  

5. Teach your children that they're simply the stewards of the family fortune rather than the owners.  Never touch the principle!  Only spend a small fraction of the yearly income that that principle generates.  


Now it's a big "if" as to whether you should even do this at all.  That's the topic for a separate discussion.  In the mean time, don't feel bad about saving money...