Rules of Thumb

To research this post, I Googled “Rules of Thumb”.  Most of the results were 8 or even 10 Rules of Thumb.  That seems like a lot to digest in one post, so I will discuss 4, all related to investing, money management, and asset allocation.

Rule of 72

This one is pretty well-known.  It relates to how long it takes for an investment to double in value.  The easiest example is an investment that earns 8% will take 9 years to double, an investment that earns 9% will take 8 years to double.  8 times 9 = 72.  If you only earn 4%, it will take 18 years to double.  This assumes compounding of returns.  This is one reason investors are favoring equities.  With returns on fixed income securities as low as they are, investors are seeking a shorter time for their investments to double in value.   Do the math yourself.  The Rule of 72 us a rough estimate but it is very helpful.

120 Minus Your Age

This is an estimate of how much of your portfolio you should allocate to equities.  If you are 50 years old, this rule says you should allocate 70% of your portfolio to equities, and the rest to safer investments such as cash, cash equivalents, and bonds.  If you are only 10 years old, you should borrow 10% of your net worth and stick it in the stock market (just kidding!).   I like this because it illustrates that you should keep a relatively large percentage in equities even when you are over 50 years old because you are probably going to live many more years and you will need the money.  It also reflects that equity returns have continued to exceed returns on fixed income investments and older investors will need the equity returns as they get older.

Save 20 Times Your Gross Annual Income

If your gross annual salary is $100,000, this Rule posits that you need to have $2 million in the bank when you retire.  If your salary is $200,000, then you need $4 million.  You can achieve a good chunk of this by following my advice in my 401k Millionaire post from May 11, 2018.  For the remainder, you have to discipline yourself to save more.  The alternative is to keep working after you “retire”, or file for Social Security well after your full retirement age, or to put your investments in income or dividend-generating securities such that your cash flow needs will be met and you will live comfortably.

4%

This Rule of Thumb states that, once you retire, you can withdraw any earnings on your investments plus up to 4% of your principal and still continue to live comfortably and keep enough money for your future.  If you had a bad year last year and you didn’t make much or even lost money in your portfolio, then you will have to make some cuts this year.  Too bad our governments don’t abide by this!

Others

Ok, I will bullet-point some others:

  • Don’t buy a new car unless you are planning to drive it for at least 10 years.
  • Only borrow as much in student loans as you are planning to make as an annual salary during your first year out of college.
  • Don’t buy a house that costs more than 3 times your annual gross salary.  This is very difficult in most cosmopolitan areas.

IMO

The point of these Rules of Thumb is to incent investor discipline.  They give you some shape and guidance around what you are trying to do.  I’m sure there are other Rules of Thumb that you may live by that I haven’t covered here.  What are some of your Rules of Thumb?  Please email me and I will consider writing about them.

 

Artificial Intelligence and Investing

There are a number of firms out there that are trying to marry Artificial Intelligence (AI) and Investing.  Machine Learning is closely related to AI, but slightly different, insofar as you need the AI before the machine can learn anything.  The goal is to “code (computers) to think like human beings, and then plug them into the internet to give them access to all of the information of the world (Forbes Magazine, 12/6/16).”  There is so much Past Performance information out there on all types of securities that the hope is that, through AI, computers can learn and discern patterns from all of this information and can make wise investment decisions parsed from all of that data.

My Experience

I am not computer savvy-enough to develop my own AI/Machine Learning program for trading securities.  However, I did for a while employ an outside service that had developed an excellent machine learning program to predict market downturns in certain specific securities.  There are a lot of services that try to do this but I believe the service that I used was the best out there.  Without giving too much away, the service would send me an email whenever it calculated that there was about to be a market downturn.  It was up to me to determine what to do when I got that email.  I found that the service was accurate most of the time.  However, the overriding issue during the period that I used the service was that the market was in an overall upward trend.  Any “warning” signals that my AI provider gave me turned out to be short-term.  The service did not follow up with an “all clear” email once the downturn was over, although the service has since developed something similar that works on the long side as well as the short side.  I have not used this service since we have had market turbulence dating back to February 1, 2018.

Instead

Instead of the AI service, I rely on overall market indicators.  While these may not be as up-to-the-second as my AI service was, I find that they are as accurate in discerning the large trends in the overall market.  My indicators tell me that we are still in a general uptrend but there will continue to be hiccups.  We won’t go straight up again but up is the overall general trend.  As a result, I am finding that I am holding on to positions for a longer period and not getting caught up as much in day-to-day market fluctuations.

IMO

Having spoken with other investment managers that have used or are currently using AI/Machine Learning tools, I find that my experience is not out of the norm.  These systems are nice to have but don’t bet the farm on them.  They work if the data that they crunch plays out in a manner that is consistent with the past, and they are useful if they are correct more than half of the time or if they show that their trades are more profitable than they are not.  I wrote in my previous blog about the necessity of continual reinvention.  AI makes such reinvention more possible, but there is never an end to it.  For the individual investor, it is better to stick to your plan of investing in a diversified basket of financial assets and leave AI to the rocket scientists.  AI investing may one day have mass appeal but it is better right now to invest the old-fashioned way, through your own diligence with help from investment professionals you trust.

 

GOOG vs. GOOGL

Let’s say you decide one day to buy stock in Google.  You look it up and find there are two tickers:  GOOG and GOOGL.  What is the difference between the two, and which one should you buy?

Alphabet

First of all, the parent company is now known as Alphabet, so when you want to buy stock in “Google”, you actually buy stock in Alphabet.  Google, Inc. is one subsidiary of Alphabet; others include Waymo (self-driving cars), DeepMind (AI) and Google Fiber.  Any business that is internet-related reports up through Google, including YouTube, Google Search, and Android.

Voting vs. Non-Voting

The main difference between GOOG and GOOGL is that owners of GOOGL have a right to vote in corporate elections whereas owners of GOOG do not have such a right.  The difference resulted from founder/owners Larry Page and Sergey Brin’s desire to retain as much voting control over their company as they could.  Alphabet actually has 3 classes of stock, summarized here as follows

  • Class A:  GOOGL – Has Voting Rights
  • Class B:  Owned entirely by Brin and Page.  Have 10 votes for every 1 vote of owners of GOOGL, thus ensuring control by Brin and Page
  • Class C:  GOOG – No voting rights, but has the same claim on corporate earnings as the other Classes of stock.

Which One to Buy?

If you want a vote in corporate issues, then buy GOOGL.  If you just want to participate in the awesome company Brin and Page created and don’t care to participate in corporate elections, then buy GOOG.  Because of their voting rights, GOOGL is typically priced very slightly higher than GOOG from a P/E standpoint, but the difference is less than 1%.  The current P/E difference is 0.26% (34.46 times earnings for GOOGL and 34.20 times earnings for GOOG, according to macrotrends.net).  So you are not paying very much more per share for GOOGL and you get the voting rights.  That sounds like a better deal to me, but it can be a pain to vote in proxy elections, so if you want to avoid the hassle of voting, buy GOOG.  Either way, you get the same company.

Tesla

Wall Street Journal columnist Holman Jenkins writes frequently about Tesla.  He is skeptical that Tesla will survive as it is currently constituted, as am I.  His column from June 22, 2018, titled “A Tesla Crackup Foretold” states why he is skeptical, as you might deduce from the title.  Jenkins’ prose is sometimes dense, so I will try to translate it.

Government Policy

Teslas have been made more attractive to purchase for consumers because of a $7,500 Federal tax credit.  Some states have additional tax credits.  However, the Federal tax credit will start to go away after Tesla sells its 200,000’th car, which is expected later this year.  Thereafter, the Federal tax credit will be reduced over time and will ultimately go away entirely.  Tax credits are better than a price reduction on the car because tax credits directly reduce the purchaser’s taxable income.

Now, ironically, according to Holman Jenkins, it is government policy in a different way that could whack Tesla.  The Federal government sets mileage and emissions standards at the automaker level, not at the individual auto level.  If an automaker (such as GM) wants to sell a lot of gas-guzzling SUV’s and pickups, that is fine with the government, as long as the same automaker also sells enough zero-emission vehicles to offset the high-emission big vehicles.  That’s why GM sells the Volt and now the Bolt, and why GM doesn’t much care about the profitability of the Volt/Bolt because GM more than makes up for the losses through those vehicles via profits in their large vehicles.  Tesla doesn’t have the option of using their e-vehicles as a loss leader; Tesla must make money (eventually) on its e-vehicles because that’s all they have.

Tent

Although Tesla continues to be considered the best electric vehicle option available, other e-vehicles are improving, and they are available at a better price relative to Tesla, and there is little motivation for the other automakers to raise e-vehicle prices as long as they are making money by selling other vehicles while complying with Federal emission standards.  So, whereas government policy and incentives have favored Tesla heretofore, it will harm Tesla going forward.  This is one reason Tesla’s CEO Elon Musk has become more aggressive in his earnings calls and through his Twitter account, and it is also why Tesla just announced it was laying off 9% of its management team.  Tesla needs to become cash flow positive and soon because they need to service the estimated $10 Billion of debt on their balance sheet.  Tesla is having well-documented problems meeting production for its new Model 3 and they just erected a big tent in their parking lot to create more room for Model 3 production.  It is California, but a tent?  How can you ensure quality control if you are building in a tent?  Check it out:

IMO

Elon Musk is brilliant.  He is distracted by a lot of other businesses and projects (Solar City, Space X, Boring, Hyperloop), but Tesla’s production and cash flow situation seems to have his full attention right now.  I believe Tesla will either need to acquire a division that spins off enough cash flow to prop up the electric car business, or it will itself be acquired (maybe by Apple?  Just a guess).  I don’t expect the Tesla auto to disappear with the rollback of the Federal tax credit, but I do expect Tesla’s business model to be different within 2 years.  I don’t advocate shorting Tesla because Musk is so talented, and if Tesla is acquired its stock could run up, but I am not bullish on Tesla as it is currently constituted.

Constant Reinvention

In order to be successful in the long run, I believe people and companies have to reinvent themselves constantly.  What worked yesterday isn’t necessarily going to work tomorrow, at least without some tweaking.  At a minimum, you need to constantly reassess your current business or investment strategy because there is always a change in the markets and/or a new technology that is nipping at your heals.  If you have found something that works or makes you money, chances are someone else out there has also figured that out and will have priced you out of the market at some level.

Andy Grove

The late Andy Grove, one of the founders of Intel, titled his memoir “Only the Paranoid Survive.”  In order to employ the mentality that you constantly need to reinvent what you are doing, you have to be paranoid that you are one step away from being obsolete.

Quant Investing

I believe one of the most glaring, real-time examples of constant reinvention is Quant Investing.  By Quant Investing, I mean investors who take mega-terabytes of data from the past performance of securities, put all of that data into a supercomputer, and then try to divine patterns from the data that the investors will then try to exploit in the markets in the future.  The very best Quant investors, by their own admission, are correct only a little better than half of the time.  And, what worked 2 minutes ago may not work in the next minute because the input factors may have changed.  That’s why the best Quant investors, firms like Renaissance Technologies and Two Sigma, hire and overpay for Physics Ph.d.’s and the like – the biggest brainiacs on the planet – people who can figure out an edge to exploit that may only work for a fraction of a second, and who then can move on and find the next investing edge to exploit.  All in a hope to bat a little better than .500, which, if enough money is allocated toward it, can result in outrageous profits.

IMO

On one level, mere mortals probably won’t be successful at Quant Investing.  Only the best can succeed.  You may think you have a “system” that works for you in the market, but it is likely that other factors or even luck caused you to win.  However, on another level, I think it is very appropriate to have a mindset that you need to constantly reinvent yourself.  Such a mentality is focused on the future instead of the past.  Use the past as a basis, but always be on your toes in an effort to make sure your strategy is appropriate for what you believe is going to happen over the next few months or a year.  Don’t rest on your laurels – or any other decorative flora.  You don’t need to have psychological paranoia, but you need to be on the lookout.  I love learning new stuff every day and thinking about how what I have learned applies to the future investing world.

Popular

The featured song in the hit Broadway musical “Wicked” is titled “Popular”.  “It’s not about aptitude, it’s the way you’re viewed,” Galinda tells Elphaba, in an effort to spruce up Elphaba’s appearance and image.  It failed – Elphaba became the Wicked Witch of the West.

Index Funds

Is the S&P 500 Index on a bull run because its fundamentals are strong?  Or because it is Popular?  Is it truly aptitude?  Or is it the way it is viewed?  The same questions can be posed about other indexes, such as the Nasdaq 100 (QQQ), as well as some of the main component companies therein, such as the FAANG companies (Facebook, Apple, Netflix, Alphabet (as opposed to Elphaba)).  If the answer is more on the side of that these indexes are going up because they are Popular, then we are heading for a hard and rapid fall once word gets out that they are no longer Popular.  People invest in index funds because of their liquidity, but they may not be that liquid once their popularity wanes.

Howard Marks

Howard Marks is the legendary head of Oaktree Capital Management, a fund manager based in Los Angeles.  Yours truly has had the pleasure of hearing Mr. Marks speak a few times.  He writes a periodic newsletter that is posted on the Oaktree website.  His most current newsletter was posted this week.  In the newsletter, he shows that companies that are components of indexes have outperformed companies that are not index components, all other things being equal.  Index-component companies outperform because index investing is currently Popular.  This doesn’t make sense for Marks because, if the fundamentals are the same for both companies, then their stocks should be similarly priced, but they aren’t.  Marks, a fundamental value-based investor, would buy the unpopular company that is not an index component because the popularity of the index fund is temporary, and the unpopular company will prove to be the better value in the long run.  Marks’ overall point in this newsletter, at least in the first part of it, is self-serving:  that passive index investing will never fully supplant active investing (such as that which Oaktree Capital does) because there will always be better values through active investing.  Makes good logical sense to me.

IMO

I agree with Marks that there will always be a place and a need for active investors.  Only active investors care about and therefore allocate more of their capital toward companies that do a better job of managing their capital.  That’s why I previously stated I believe index funds should not be able to vote in corporate governance issues.  However, I don’t believe the market is currently in a Popularity Bubble.  Corporate earnings are strong and are projected to grow even more, higher interest rates notwithstanding.  There have always been companies that appear to be overpriced (Popular!) and those that are underpriced.  It is the job of the active investor to flush out one from another, and it is the job of the index fund manager to ensure that their investors are adequately diversified such that their company-specific risk is minimized.  The market will work these issues out in real time.

The Motley Fool

The Motley Fool is an investment service with a website founded by brothers David and Tom Gardner in 1993.  It is a free website and I encourage anyone who wants to learn more about investing and to improve their financial literacy to go to fool.com and read the articles there.  The saying goes that you get what you pay for, but in this case, I think you can learn and gain a lot by reading these free articles.  There are embedded ads in the articles – the Fool owners and employees have to get paid somehow – but if you don’t get sidetracked by clicking on ads, the site is worthwhile.

Irreverant

As you can tell from the photos of the founding Gardner brothers, The Motley Fool is a serious financial website with an irreverent delivery.  Their mission, as stated on the home page of the fool.com website, is “Helping the World Invest – Better”.  They are in business specifically to help readers do a better job of investing their own money.  The Motley Fool doesn’t get paid commissions, and their advice is independent of any brokerage or other financial institution.  They get paid through advertisements on their website, so their job is to generate as much site traffic as they can by posting the best investment vice that they can.  They do offer a paid subscription service called Stock Advisor for $99/year, which is a good value in my opinion, but you can still read plenty of good articles through the free site.  Unlike other sites such as Seeking Alpha, the authors of the articles on fool.com work for fool.com, which means that fool.com endorses any of the investment opinions put forward on their website.

High Tech

Having been founded in 1993 during the beginning of the dot-com era,  The Motley Fool initially made its reputation by touting high-tech stocks.  Good idea, and good timing on their part.  They continue to tout high tech stocks, but not entirely.  One of their current top picks, for instance, is Tractor Supply Company, a big-box retailer that caters to rural America – not high tech.  Their analysis and picks are mostly fundamental in nature (meaning they look at individual companies’ finances and try to find value therein) and long-term.  Don’t go to fool.com if you are looking for quick trading pops.  Do go to them if you want to invest your retirement money in individual stocks.

IMO

One piece of advice that I received early on is that you should develop hobbies that will either earn you money or improve yourself or both.  Nowadays people (not you or I, of course) spend hours each month looking at videos on Facebook, YouTube, Instagram and the like.  Think about cutting the time that you look at social media in half, and instead better yourself by reading The Motley Fool or a similar site with the time that is no longer devoted to social media.  Another idea?  If you see an article you like on fool.com and have further questions about it, contact me and we can discuss it together and maybe we can both learn something.

I do subscribe to Stock Advisor but I otherwise have no connection with The Motley Fool.  I am writing this post only because I admire their website and because I think you all can benefit by reading it.

 

Social Security Depletion

“By 2034, those (nearly $3 Trillion of) reserves will be depleted and Social Security will no longer be able to send it its full schedule of benefits,” according to the latest annual report by the trustees of Social Security and Medicare, which was released on June 5, 2018.  Although not surprising, it is nevertheless a warning that things could change drastically for Seniors unless something is done about it.

Here is a link to a Wall Street Journal article on the subject:

https://www.wsj.com/articles/social-security-expected-to-dip-into-its-reserves-this-year-1528223245

Good News/Bad News

The good news is that there are nearly $3 Trillion of reserves and employment is at record levels, so there is enough money to pay 100% of all benefits for the next 16 years.  Thereafter, there will still be money coming in from the SS Payroll Tax such that benefits will still be paid at some lower percentage.  This means that Social Security is not on life support and benefits will still be paid out.  This all assumes that nothing is done politically to shore up the Social Security fund – there is still plenty of time for politicians to do something.  As we have seen recently, it seems that politicians typically act only at the 11th hour, when there is a cliff they are about to go over.  We haven’t arrived at the cliff yet, though we may be able to see the cliff.

The bad news is that there will be a cliff and something needs to be done.  Some ideas currently out there:

  • Increase the maximum income level subject to the 6.2% Social Security Tax.  In 2018, that maximum is $128,400, meaning that wages above $128,400 are not subject to the SS tax.  If that maximum was bumped up higher, that would help, but it would be another tax on the wealthy, which at some point might not be a viable political option.
  • Increase the tax rate from 6.2% to something higher than that.  Remember that employers match what you are taxed at so that a 1% tax increase on you is a 2% increase in funding to the SS Trust.
  • Increase the minimum age to receive Social Security.  People live longer now (if they don’t get hooked on smoking or opiates or if they don’t engage in gang activity), so maybe 70 is the new 65.  The minimum age for Full Retirement benefits will be pushed up as it is for the next several years.
  • Make benefits subject to means testing, meaning wealthier retirees may not be able to collect their full benefits if they otherwise have enough money to live on.  Forfeited benefits would go back to the trust fund to be given to the needier.   Warren Buffet is an advocate of means testing.

IMO

I believe something will eventually be done politically to ensure 100% of Social Security benefits are paid.  The AARP is a very tough political lobby and they will make sure their constituents won’t suffer.  Any political resolution will occur at the 11th hour, with some deadline that needs to be addressed.  I believe there will be a combination of a small increase in the tax itself coupled with an increase in the maximum income subject to the tax.  I don’t see an increase in the age brackets nor do I see means testing.

The more important thing to keep in mind is that you need to save money for your retirement.  You cannot rely on Social Security to 100% fund your retirement.  Prepare for the worst (Save!) and hope for the best (new laws to shore up Social Security).

Labor Force Participation Rate

The Bureau of Labor Statistics and the Federal Reserve Bank of St. Louis put out great data and great charts.  Maybe the St. Louis Fed buys Google Click Ads so that their charts pop up first when you Google a subject, but their charts are great.

The latest chart follows the release of the May Jobs Report on June 1, 2018.  The headline was that the US economy added 218,000 non-farm jobs in May, which caused the Unemployment Rate to fall to 3.8%.  It was the 92nd consecutive monthly increase in non-farm payrolls and the lowest Unemployment Rate since prior to 1989.

The growth in jobs is great news, but what I want to address here is the Labor Force Participation Rate, which is the number of employed plus unemployed but looking divided by the total population over Age 16.  Here is a link to the chart by the St. Louis Fed:

https://fred.stlouisfed.org/series/CIVPART

The chart shows that the LFPR has been stalled at between 62.3% and 63% for the past 4 years.  That’s a very tight range for 4 years.

Inflation?

Economists and market watchers are looking at the LFPR to see what happens next (isn’t that always the case?).  The issue is:  If the LFPR remains constant and the Unemployment Rate also remains constant or continues to fall, does that mean wages will rise?  And if wages rise, does that mean inflation will go up?  And if inflation goes up, will interest rates also go up?  Gaze into the crystal ball.

Wages

There is evidence that wages are rising.  This website shows that hourly earnings (on a macro level) have increased for 7 months in a row and 11 of the last 12.  However, the annual increase is 2.7%, which is still pretty tame.  One line of thinking is that the increase in wages will incent more of those who are not currently participating to actually participate.  We will see how that plays out, but I’m skeptical.

Aging Demographics

I believe large demographic trends explain a lot of economic phenomena and that the aging workforce populace explains a lot of the decline in the LFPR from the 67%-range during the 1990’s to the current under-63% range.  The Baby Boom Generation is retiring en masse, a lot of them early.  Our overall population is aging – not as much as Japan’s, but it is very significant.  Younger people tend to work more than older people.

Anomaly

I look at the LFPR chart a little differently.  Perhaps the period from about 1978, when the LFPR broke above 63%, until 2014, when it broke back below 63%, was the anomaly.  Perhaps the 63% level is equilibrium – as it has been for the past 4 years.  If you go back many years, the LFPR flirted with 60% in 1956 but didn’t actually rise above 60% and stay there until 1969.  Then it rose throughout the remainder of the 20th Century until reversing and falling during the 21st.  I don’t believe the slightly higher wages in our current economy will incent to non-participators out of their couches.  It would take drastically higher wages to do so, something that isn’t happening in our current global economy.

IMO

My take on all of this is that you should Buy Stocks.  I don’t see inflation picking up because labor costs are globalized.  I don’t see the LFPR increasing because US wages are not increasing fast enough and because the population continues to age.  The unemployment rate may go down more but I don’t think it will ultimately result in significantly higher inflation.  Cast your fishing line into the water; get off the pot; use any metaphor you want, but you should be long stocks in this environment – not your entire investment portfolio, but enough so that you are comfortable with the risks therein.

 

The Retirement Pyramid

This appeared in Kitces.com, a renowned financial blog.  It is called the Retirement Pyramid.  It looks like it was drawn by a grade schooler but there is real wisdom in it.  Here it is and let’s have a discussion about it:

 

Top

It is hard to read and the top got cut off, so here is what the top of the pyramid says:

Avoid at All Costs!  No!:

  • Market Timing
  • Financial Salespeople
  • Permanently Losing Capital
  • Mingling Politics with Investing

It’s difficult to avoid financial salespeople, and so I would say you should avoid Bad financial salespeople.  As a Financial Planner, I believe most people in any economic circumstance can benefit from the services of a good Financial Planner, and we don’t work for free.  That said, don’t take major flyers with your money, which is how you can permanently lose capital.  As heartily as you hold your political beliefs, over time, markets can perform about the same regardless of who sits in the White House.

Next

The second level of the Retirement Pyramid says the following:

Moderation At Best!:  Current Events and Account Monitoring:

  • Checking your account balance frequently
  • Watching financial media
  • Worrying about your finances

In short, Chill Out!  Take a long-term perspective and everything will be ok.  This is good advice to live by.  Maybe having a cocktail once and a while will help with this.  Financial media can be helpful to traders, but, in retirement, you should not be a trader.  Being a trader can make you tear your hair out, and, as a retiree, you may not have much hair left.

Middle

Below the middle line, the tenor changes from negative to positive.  Of the following, it says to Use Freely:

  • Save! Save! Save!  Increase your Savings Rate
  • Compound Interest
  • Dollar Cost Averaging
  • Avoid unnecessary taxes and expenses
  • Diversify your assets and income

You should always avoid paying taxes unless you break the law.  Work with a financial planner to develop and implement a financial plan that diversifies your assets and income sources and avoids taxes all at the same time.  For instance, dividends are tax-advantaged – invest in a diversified basket of steady dividend-paying companies and you will check a number of these boxes.  Dollar cost averaging means don’t put all of your chips on the table at once.  Put your chips in over time.  You like the company but the timing may or may not be right, so you put a little in now and a little more in over time.  It is a good way to build a solid portfolio.

Bottom

Indulge!  Invest in Yourself $$$!:

  • Read
  • Learn
  • Experience
  • Listen
  • Acquire skills to increase your income
  • Work to control your emotions
  • Focus on long-term vs. expiring knowledge
  • Establish healthy eating and exercise habits

These are the path to leading a good, healthy, happy productive life in retirement.  Work on personal skills and development rather than worrying about your finances.  You won’t enjoy your retirement unless you are healthy enough to do the things you want to do.  You don’t need to go back to college in retirement and become an electrical engineer in order to acquire skills to increase your income.  For example, do you like pets?  Maybe you can start a pet-sitting business in your home.  Watch pets when you can or want to, and go on vacation when you want, and get paid for it.  Taking care of pets is a good skill that is much in demand.

IMO

This Retirement Pyramid is part financial advice and part a guide to healthy living.  It is a great way to think about how you want to plan for your retirement.  Start today!