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I’ve Made a Huge Mistake

I’ve Made a Huge Mistake

You’ve screwed up:

  • You’re drowning in debt.
  • You haven’t saved for retirement.
  • You’ve chopped yourself to bits in the stock market.

“Too late now, I’m screwed.”

You are NOT screwed. There is a way out. The only way you are screwed is if you are at retirement age already—then it is kind of too late.

But if there is any time on the clock at all, you can fix this. You can make it right.

I know many people who got to age 50 and didn’t have a dime saved for retirement. And then they staged the greatest comeback of all time, and retired comfortably.

You can do it. But there is only one solution for this. There are no shortcuts. There are no ways around it. You have to do it.

The answer is:

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Austerity is defined as “conditions characterized by severity, sternness, or asceticism.”

“Asceticism” is an even better word. If you want to retire comfortably, you will have to live like an ascetic. By choice. Or else you will be in your 80s, living like an ascetic, not by choice.

As I’ve said before, I know people who have partied it up well into middle age, then said, “oh crap, I don’t have anything saved for retirement.”

This is super common. The people who start at age 23 (like me) are actually not very common. In 1997, I was buying issues of Money magazine out of the bookstore and picking out mutual funds.

Most people screw around into their 30s and 40s and don’t figure it out until they are already well behind schedule. Some people don’t figure it out until their 50s.

So what does this austerity look like?

You will have to start saving 50% or more of your paycheck every year.

Sound bad? Hey look—if you started when you were 23, you could get by with saving 10-20% of your paycheck. Now you have to double up to catch up.

But the point here is that it can be done. So many people get to this point and they just say “screw it” and give up, and figure they’ll live off social security, or that their kids will take care of them. That is not a very good plan.

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I know someone currently in this position. His mom ran out of resources in her late 70s and the kids have to pitch in to bail her out. It is embarrassing and awkward for everyone—especially because it was preventable.

Look on the bright side. Saving money can be fun, too. I derive satisfaction out of socking money away. Most of the time, investing is fun. It has been pretty easy the last 10 years.

Let me insert a PSA here for taking Social Security later, rather than earlier. 50% of the population takes Social Security at age 62. Only 2% takes it at age 70. Your monthly checks are literally twice as big if you wait until age 70. Plus, you will have worked an extra 8 years, so you’ll have more money kicking around.

62 is not very old. You can, and should, keep working.

Being poor sucks. But there are few things worse than being completely destitute in old age. That was the whole motivation for Social Security, which has turned out not to be enough. This is real! People suffer!

Time to get serious.


My conviction in this asset
is at a 10-year high

Find out what I'm talking about here »


It Fixes Everything

Austerity fixes all your problems:

  • If you’re drowning in debt, you’ll be able to pay off your debt
  • If you haven’t saved anything, you’ll be able to put something away
  • If you’ve screwed up your investments, you can make up for the shortfall

This is probably the first issue of The 10th Man where I transition from public intellectual to motivational speaker. Quoting Rob Schneider from The Waterboy, “You can do it.” I have seen it done.

When properly motivated, people are capable of saving and investing. Almost nobody is motivated to do it at age 23. Pretty much everyone, at some point in their life, will end up in catch-up mode.

When I said there are no shortcuts, there are no shortcuts. If you reach for more risk in the stock market, there is a very good chance that you will only compound your error.

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If you make $100,000 a year, you can save $50,000 of it.1

If you start at age 45 or 50, you can make up for lost time with a little bit of compounding. You obviously won’t do as well as if you had started earlier, but it’s better than doing nothing.

I spend more money than I used to, but I have spent most of my life in some state of austerity.

Austerity has enabled me to do a few really good things:

  • Survive my firm’s bankruptcy and loss of restricted stock.
  • Start a business in the middle of the financial crisis.
  • Buy real estate at really opportune times without a lot of leverage.

Wouldn’t it be nice to deal from a position of strength, rather than a position of weakness?

Yes, yes it would.

Dealing from a Position of Strength

As I said earlier, people are capable of saving and investing when properly motivated. I sincerely hope that this issue has helped you look at your situation a bit differently, whether you’re 23 or 43 or 63.

And if you already have the austerity thing taken care of, and want to take care of the “investing” part of the equation a bit more… great!

In that case, you might want to take a look at what I’m excited about right now. We’re close to the start of the uptrend in an asset class and I haven’t been this bullish about it since 2009—but it’s a bit of an embarrassing trade.

If you’re interested, check this out.
1 Half the people reading this said “no you can’t.” Actually, yes you can.


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April 1, 2019, 11:48 p.m.

There is no hope. People are smoking weird stuff.

I shared similar advice to a friend who is in debt but her family (H+2Kids) condition has improved from almost bankrupt to serviceable debt level. The family was about to go on a binge buying spree when I, worried about it all, volunteered the advice.

She said “I believe in thinking in terms of abundance than in terms of limitation.” Never again my friend. Though I wish you success. It is necessary to share this.

Patricia Woodruff
March 26, 2019, 11:09 a.m.

Your have one direction in your retirement advice, Jared, and it is a good one.  A memory came to me this morning regarding my dad, who worked as an engineer from the late 40s until retiring in the 80s.  He was in high school during the depression and of course his folks saved, since at that time there was no social security. Grandad was lucky enough to work for PG&E all those years and at least had a job. 

My dad always saved 50% of his income.  He never talked about it nor advised his kids other than to help us open savings accounts when we were 7 or 8.  I only learned after I’d left home but even with 6 kids he saved 50%.  he lived in the same (big) house for 50 years.  He insisted we kids do all the maintenance on the house and I can tell you some of it was pretty shoddy, but he never paid a gardener nor house painter, and we did end up with versatile skills.

Dad invested in the stock market and eventually in some hedge funds during their hay day.  he left us kids with over 8 million split 5 ways.  He helped us buy homes within the federal gift limits. 

It simply never occurred to him that one could safely depend on anyone else for the living expenses or inevitable emergencies of life.  it never occurred to me to do other than follow his example, although my earning capacity was quite low.

jack goldman
March 23, 2019, 8:48 p.m.

I like Bob Wells advice in Live in an RV or cargo trailer, especially if single. His site teachers how to live on $500 to $1,000 per month, on public lands in an RV or even in a car. Many senior citizens are forced into this lifestyle if they only have $1,000 per month income. Bob’s site explains all that is needed to live well but free on BLM land for free. That is austerity. No house payment, minimal bills. It’s called boondocking. It’s necessary to get out of the subsidized over priced cities and get where living is cheaper when retired. This is for the people who already are 62 or over, have hardships, and need a plan that works. Not easy but it works.
March 22, 2019, 6:49 a.m.

If you’re still working, then sure, don’t start collecting Social Security until you stop working or reach age 70.  If you know for sure that you’re going to live to 110, then you should delay.  But for someone who did save an adequate amount of money and retires early, then it makes no sense to spend down your capital while delaying taking SS benefits.  SS benefits are actuarialy adjusted, so the net present value of your benefits may not increase at all as you get older, depending on interest rates.  It takes a really long time to get back to even in liquid net worth terms by delaying receiving SS benefits if you retire at or before age 62.

Gordon Foreman
March 21, 2019, 9:11 p.m.

I guess we lived a fairly austere life ever since we got married nearly 36 years ago, but because we always did it, it didn’t seem hard. We set a goal as newlyweds to never buy more car than we had cash to pay for. We never drove new cars, but by paying close attention to Consumer Reports we got good used cars that served us well. After our first child was born, my wife never worked outside the home ( she taught piano lessons for a small income), but as a Civil Engineer I earned a good income. We paid off our home when I was 48, and all of what had been going into mortgage payments now went into my 401(K). I had been contributing before, but now I maxed it out.
Given this background, let me add one additional comment. Rather than needing to replace 80% of my final income in retirement, we only need to replace 80% of what we were spending before, which sets the bar a LOT lower. I actually took retirement at 54, we moved to Ecuador when I was 56, and we are very comfortable. Clearly not a lifestyle for everyone, but it suits us well, and we are not stressed financially, even though I haven’t started collecting SS yet. Probably not until I hit 70 in another 5 years, but we’ll see what the future holds.
One interesting rule we set with our boys when they were still very small is that we buy nothing that we see advertised on TV, with very few exceptions, such as eating out when traveling. It’s amazing how much this one simple rule has simplified our decisions over the years.

Paul O'Brien
March 21, 2019, 5:31 p.m.

Jared, nice piece.  You are right about saving.  It’s that or get lucky….

But I disagree some on gold.  I see the argument, but believe long TIPS are a better deal for most folks.

Gold is a zero-coupon real perpetual bond.  Why not buy one with a 1% coupon?  Your absolute worst case 30 year real return is +30%.  Gold has a lot more downside.

The case for gold is either inflation or a crisis plunge in real rates.  TIPS do well in both scenarios.

Treasury is not increasing issuance.  It’s expensive for them.

Sure, the Treasury may not pay the principal and interest on the TIPS.  But in that scenario, whose going to guard your gold?

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