Editor: Crass Cash

http://finance.yahoo.com/news/heres-why-people-crazy-even-195511534.html

Are you an "overearner"?  I'd never heard this word before I read the above article, but it's definitely interesting.  I fall into that category and it even baffles me.  I technically have more money than I need to live for the rest of my life and also I earn more than I know I need.  Reading the above it sounds irrational, but it's not.  

Everybody is different and there are certain circumstances in my life that have caused me to have certain financial insecurities regardless of how logical or illogical they may seem.  

Why does Warren Buffett still go to work or Larry Page, Donald Trump, or Sam Zell for that matter?  Well these cases are fairly easy to understand.  It's not that they're workaholics, it's more that they just really love what they do.  Deal making brings them happiness, as crazy as that may seem to you.  But what about the rest of us?

What about those of us who could leave, but don't because of some other reason.  For me it's due to watching people run out of money and having to live their remaining years in poverty surviving only thanks to the kindness of strangers.  Seeing this at a young age had a deep and profound impact on me.  

Others may do it for their children and future generations.  Working hard day in and day out to accumulate more in order to leave a legacy for their offspring.  This I think can be particularly dangerous.  As Warren Buffett has said, "I want to leave my kids enough money so that they can do anything, but not so much so that they don't have to do anything."  

This is a deeply personal question that everybody needs to answer for themselves.  Do you have enough money to retire and you hate your job?  Do you love your job?  Do you not know what you would do if you quit work?  

Life changes and I've seen people who love their job hate it a month later.  The important part that I think everybody needs to take away from this is that you should be able to walk away if you need/want to.  Get to a "position of fuck you" and have the ability to walk away, even if you don't have the desire.  

Editor: Crass Cash

http://www.thestreet.com/story/13187068/1/saving-for-retirement-could-soon-become-even-more-painless.html?puc=yahoo&cm_ven=YAHOO


I first read this book a number of years and I totally agreed with it in regards to this circumstance.  Congress is looking to make it mandatory for people to be automatically signed up into their employer's retirement plan.  This is good because countless studies have shown that the participation rate flips vs when they have to do it on their own.  It goes from 1/3 to a 2/3 participation rate.  

I'm glad to see that Congress is working on this in a bipartisan way to help the American people.  You should still be able to opt out of it, but at the very least it gets people talking about investing and retirement.  

Editor: Crass Cash

Not sure what these camels have to do with 1% but it's funny. 

If you follow retirement planning at all there's a great debate over the withdrawal rate of 3% and 4%.  It's only 1%, what's the big fucking deal??

Well as it turns out a lot.  The standard withdrawal rate of 4% of your assets each year was the standard for financial planners for decades.  If you have $1,000,000 in investable assets you could withdrawal $40,000 each year for the rest of your life and you'd be fine.  This theoretically would protect you from inflation and market volatility.  However, this is no longer suitable.  

Two things have changed.  First, interest rates aren't what they used to be.  You're no longer getting 4-6% on your 10 year treasuries, you're getting 2% and the bond market is in a bubble.  Savings accounts are paying next to nothing.  The parked money is just losing ground to inflation, which is still running at around at least 2%. Secondly, if you want to retire before the age of 65 you face a lot more uncertainty.  You'll go through more bear markets, possibly more kids, etc.  More time equals more uncertainty.  It's a fact of life.  As a result you need to be more conservative.  

This is why you need to be in the 3% category in my opinion.  So how much of a difference does it make?  Well if you want to live off of that same $40,000 above and you withdrawal 3% instead of the 4% you're going to need to have $1,333,333 in investable assets instead of the $1,000,000.  That's over a 33% increase!  

The good news is that you are almost guaranteed (at least in test simulations) of not running out of money regardless of how long you live.  The reason being is because you're not touching the principle and pretty much just living off of the interest.  Both the principle and interest should increase over time to match inflation.  That 1% could be the difference between being broke or flush in your old age.