Friday, October 14, 2005

RETIRE RICH - The Baby Boomer's Guide to a Secure Future

If you are middle-aged, then you are a baby-boomer. I believe that is a term that refers to those who were born between 1946-1965. If your future looks hazy right now, maybe you should sit down and read a few chapters of this book.

RETIRE Rich - The Baby Boomer's Guide to a Secure Future by Bambi Holzer,
Publisher: John Wiley & Sons, 222 pages, Price: RM71.10
Many of us want to retire rich. And there is an overwhelming number of
us who desperately want to be rich before we retire. Realistically, few
among us wage earners get to climb to the top of the totem pole and become
members of the club of professionals who are wealthy years before they
call it a day.
So, in a way, Retire Rich comes in handy as it is supposed to knock some
sense into most of us who are hardcore dreamers as opposed to being
diehard doers. Bambi Holzer specifically targeted her book at baby boomers
- those born between 1946 and 1964.
People whose ages range between 34 and 52 are supposed to be planning
their retirement NOW! A retirement plan of substance should be implemented
early so as to reap maximum benefits. It is very much like opting for an
insurance policy. The younger you are when you take up an insurance
policy, the more you will benefit from it.
A word of caution here. This book lists numerous plans which may not be
familiar to many of us. Holzer mentions plans such as the Keogh, 401(k)
and the Individual Retirement Accounts (IRA). These are American
creations. In Malaysia, their equivalents are probably the Employee
Provident Fund (EPF), Socso and the Government Pension Scheme.
The book, however, has its plus points. It serves to encourage those who
have slipped past the half-century mark that the best is yet to come. It
carries an impressive list of superachievers who did their best work in
their sixties. These people include famous people like Picasso, Carl Jung,
Bob Hope, Colonel Sanders and Charles Darwin.
Picasso completed some of his best works at the age of 73. Carl Jung
wrote The Psychology of Transference at 70. Bob Hope entertained US
soldiers in the Persian Gulf at the age of 87. Colonel Sanders founded
Kentucky Fried Chicken at 66 and Charles Darwin finished his masterpiece
The Theory of Evolution at 62.
What all this means is that there is still plenty of hope for all of us.
To begin with, Holzer reminds us to imagine the perfect retirement life
and work towards that vision. Then, it is time to ask the question: how
much do we really need to retire on? That depends on your future needs and
retirement plan. If you are planning to own three bungalows in three of
your favourite states, then obviously you need more than the usual
In the words of Holzer, `The term "retirement" assumes that the wages
you currently earn to support yourself and your family will no longer be
available, either because you have chosen to stop working at your primary
occupation or because circumstances beyond your control have forced you to
stop working. The purpose of retirement planning, then, is to arrange to
have other sources of income to replace those lost wages and to ensure
that the income is sufficient to meet your needs for as long as you live.'
Sounds simple enough. However, there are a few sand traps you have to be
careful of. One, inflation. Two, taxes. Holzer suggests a few nifty ways
of avoiding these after-retirement blues. One of them is reviewing your
retirement plan annually. In this way, you are constantly keeping one step
ahead of all socio-economic surprises.
Retire Rich also explains in detail schemes for self-employed
individuals. For the entrepreneurs, it is recommended that they think of
profit-sharing plans, money purchase plans, target benefit plans, defined
benefit plans and cross-tested profit-sharing plans.
Retire Rich is divided into four parts. Part Three has great
significance because it covers investing. In this category, the nitty-
gritty of how to make your retirement fund grow are spelled out. It
teaches the uninformed persons ways to ascertain the type of risks, the
degree of risk and the method of 'putting it all together'.
Next, it explains thoroughly the concept of stocks, bonds, mutual funds
and asset allocation. On a personal basis, Part Three came as a
revelation. For the other members of the public who I boldly assume have
limited knowledge of the issues at hand, learning by heart what these all
entail will only hold you in good stead in future.
On bonds, the question is, `are bonds safer than stocks?'. Holzer says,
`Bonds have traditionally been considered safer than stocks. But whether
this is true or not depends on what you mean by "safe". It also depends on
what you intend to do with your bond after you buy it. If there's a chance
you will need to sell it prior to maturity, bonds are not safe at all;
there have been periods in the past when economic stability and rapidly
moving interest rates have caused bond prices to be more volatile than
`If you plan to hold the bond to maturity, you do not need to worry
about interest-rate changes and price fluctuations, but you do need to
worry about the loss of purchasing power over the 20 years or so that you
hold the bond.'
If the reader is like the rest of us lesser beings whose knowledge of
mutual funds is very close to zilch, then the chapter on mutual funds must
be considered mandatory reading. It sheds stadium-powered lights on a
subject that has become an investment of choice for some because it
provides the individual with a chance to own shares in a diversified
portfolio of stocks and bonds for a comparatively small sum of money.
In the whole tool box of retire-rich implements, one of the most
important is probably asset allocation. This process is a `disciplined
method of deciding where to put your money. With a prearranged plan that
tells you how much to put in stocks, how much to put in bonds and how much
to keep in cash, you are less likely to agonise over your investment
decisions and then panic when the markets dish up new surprises'.
The three main aims of asset allocation are:
* minimising the investor's fear,
* helping to make sense of the market, and
* helping to maintain confidence in the individual's position.
Holzer's investment strategies for baby boomers, and even those who do
not belong to the boomers group, are food for thought simply because sound
advice cannot be ignored.
Consider the logic of investing for the long term. Since long term means
the end of what can be a long professional career, it begs careful
accounting of all factors. It also means close scrutiny of matters that
are expected to affect a person's long-term investments. Of course, it
does not mean not taking risks. Risks should be taken but not thoughtless
ventures. The focus should be an unwavering focus on the future.
If all the above rules are followed to the letter, the chances of a
successful investment plan are increased manifold.
This guide to a more secure future is definitely not an action-packed
novel, nor is it a techno-thriller of Tom Clancy's standard. On its own
terms, it will determine, to a large extent, in the end whether you can
afford to buy books to read after you retire or fulfil that dream holiday
you have been thinking about all your life.
As a very intelligent retired person once advised: `Begin planning your
retirement the first day you start work.' The remark is a gem of an
advice. I now wish to pass it on. Holzer's book will fill in the gaps.

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