In this episode of Getting Money Right we’re continuing our conversation on investing for retirement.   We want to equip you with modern philosophies for investing and show you where to start. This series will give you the confidence to go out and make some retirement investing decisions and teach you what it takes to become a millionaire.



A majority of actively managed mutual funds fail to beat broad indexes, like the S&P 500. We know that some hedge fund and mutual managers will beat the overall market, we just don’t know which ones it will be. We don’t know who the next Warren Buffet or Philip Fischer will be.


“My advice to my trustee couldn't be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”


  • The four percent rule is a rule of thumb used to determine the amount of funds to withdraw from a retirement account each year.

  • This rule is used to calculate a steady stream of income to the retiree from their investment, while also keeping an account balance that allows funds to be withdrawn for a number of years.

  • The 4% rate is considered a "safe" rate, with the withdrawals consisting primarily of interest and dividends meaning, you won’t lose the balance of your investment, because you’re only taking out the amount it’s growing each year.

  • The four percent rule was created using historical data on stock and bond returns over the 50-year period from 1926 to 1976.

  • Prior to the early 1990s, 5% was generally considered a safe amount for retirees to withdraw each year.

  • William Bengen (financial advisor) - skeptical of whether this amount was sufficient, in 1994, conducted an exhaustive study of historical returns, focusing heavily on the severe market downturns of the 1930s and early 1970s.

  • He concluded that even during weak markets, no historical case existed in which a 4% annual withdrawal exhausted a retirement portfolio in less than 33 years.

  • What does that look like in actual income?

  • To have at $75,000 yearly income you’ll need to have saved $1.875 million.


Now that you’ve learned about Mutual Funds & Index Funds, would you like to know where to buy them?

  • First go to your company 401(k) or 403(b) if you work for a non-profit, or TSP (Thrift Savings Plan) for government employees.

    • If they do a match, start there.

    • Review mutual funds - Google “where can I buy mutual funds?”

  • Or go to these brokerages

    • Vanguard

    • Charles Schwab

    • Fidelity

    • TD Ameritrade

    • Search Mutual Fund Lists.


  • 10-year track record or more

  • Average 9%-11% or more

  • Minimal fees / expense ratio

    • 0.25% = low

    • 0.75% = medium

    • 1.25% = high

Don’t get sold, get educated.


  • Life expectancies as of 2011

    • Men 76

    • Women 81

  • People are starting business later in life.

    • Great potential for significant income.

  • Lowering lifestyle

    • 60’s-70’s usually means less expenses.

      • Feeding less people.

        • Less car insurance.

      • House is paid off.

      • Less water & electricity when kids move out.

      • Downsize (apartment or townhouse).

        • Lower taxes.

        • Lower energy consumption.

        • Less maintenance.

      • Move to a cheaper state - low or no income tax states.

      • Lower property tax states.

      • Property taxes frozen.

    • 40’s-50’s are highest income years.

      • Save more aggressively.

      • Try to add a catch-up amount when buying mutual funds.

  • Next week: Additional types of investing (more hands-on vs passive investing)