People who have been investing in income securities for 30 years in their IRA can buy ten to twenty
thousand dollars in new securities every year. In this case, when they
retire, they can withdraw $10,000 to $20,000 from their IRA to live on
without touching their principal. They can also receive Social Security,
and some of them a pension or two. But you notice, I said that they
started 30 years ago meaning that they started around 35 years old or
younger? Here is the trick. They did the following;
1. Started their IRA or company matching 401K early in life
2. Moved their 401K to their rollover IRA when they left their old employer
3. Saved money from every pay and moved it into their IRA or Company Matching 401K.
Why Should You Care?
As
I go around talking to people about investing with an objective like
retirement, children’s college, or the next car 10 years from now. I
usually find out these important facts.
1. They never have any money to invest
2. They don’t know anything about it and don’t really care to learn
3. They believe that some government grant is going to take care of it
No Money to Invest!
When
I was 14 years old, I asked my father why working two jobs, (16 hours a
day, Monday through Friday and twelve hours on Saturday) he never
invested any of his money in Stocks and Bonds. His answer was, he did
not want to lose it like people did in the stock market crash of 1929. Instead
he spent it all on who knows what. He died at age 57 because for 25
years, he worked himself to death. In the end, he died broke. He never
wanted to talk about money or plans dealing with money. After all, this
was not done in the “depression people’s” society. This mentality has
been passed on in many families to this day. My father did not know
anything about investments, did not care about learning about
investments, and he thought that the government will provide whatever he
needed in life outside of home, job, and a
car.
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He
did not have to worry about retirement because he died at age 57. But
he left behind a 13 year old son (my younger brother) who had financial
needs. A wife who had financial needs. You ask; did he have insurance?
Yes but that policy was taken out in the 1950s. He died in the late
1970s. Inflation over time will and did destroy his life insurance
policy. So by not talking about financial planning to anyone, his family
suffered after his death. This is common and most people do not think
about these consequences because the crisis may not come up this
weekend. The crisis hits 20 years from now. What was wrong with paying
himself $25.00 per pay into a “rainy day fund” to pay for emergencies,
education, or other future expenses? That was not the mentality of the
“Depression people.” The mentality was make it and spend it! If you did
not do that, something
was wrong with you.
The Government will take care of it!
When
my daughter Stephanie was a Senior in High School, I took her to a
seminar on financing college. I wanted to see if they had an idea of how
my daughter could finance her MBA without using her money. What I found
out about the program was shocking to me. Most of the people in the
room had children 16 years old and older. Many did not have a dime saved
up. They were all looking for free money to send their children off to
college. What further shocked me was that the people running the seminar
had no knowledge of free college money except for what you can find
from the school guidance counselor. You pay them to sit down with them
and figure out the best school to go to so that the parent can pay their
children’s way with the parent’s credit. Here
is the reason why we have young people walking around the street with
debt of $100,000 or more but can’t find a job that pays them more than
$35,000 per year. The parents are in debt and can no longer help them
and the children can’t help themselves. Some can’t find a job after
graduating from college.
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I
just wanted to “mooch” off the government or get a state grants. But to
my surprise, these so called grants to pay for college education are a
myth. They are really college loans that must be paid back. So my
investing for my daughters education starting when she was born paid for
two of three college degrees. She elected to use the money for her MBA
to buy a house. This is why she is in debt for $30,000 today. However,
because of her three degrees and the financing of her two degrees, she
makes enough money to easily pay off the $30,000 education debt.
People of Color are at a disadvantage
Say
nothing and no one will know that I am talking about you! After I wrote
my first book on finance at age 25, I made friends with many well off
people in industry. One man set me up with an interview with a National
Brokerage Firm. The firm called me, telling me that one of their largest
customers wanted them to interview me for a brokerage position. But
brokerage is not for me. I can’t sell things that I don’t believe in.
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I
became friends with the CEO of Wilshire Oil of Texas. He was a Jewish
immigrant born in Germany and placed in a NAZI death camp. He was
liberated when the allies came in WW II. He
and his family came to America and worked the oil fields in Texas. They
formed an investment club with the objective of taking over the company
by buying and voting their stock. It took a decade but they finally put
people on the board then one day, they took over the board. He asked me
why not do that with the people of color to give them employment and
power in this corporate led world?
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My
answer: I have a hard time just getting people of color to focus on
investments let alone using economic power to gain a place in the world.
People of color are socialist because they never matured from having
their masters care for them in colonial or slavery days (good or bad).
They did not evolve trying to get away from their lords like people did
in Europe after the dark ages. Therefore people of color are not
capitalist.
I said all of that to say this!
If
you are going to start your retirement program or any other program
that needs to be funded such as children’s education or a new home, you
do not need a large sum of money. All you need is to pay yourself first,
$25 to $100 per pay will due. You will not be able to buy something
with $25 but as time goes on, your small amount of money will grow into a
large amount of money. My contribution to Stephanie’s account grew into
enough money to buy bonds over time. These bonds where used to send her
to college, $25 at a time.
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You can take out a loan of say, $2,000 and place it in your IRA. Your interest paid to the bank is an expense taken off your taxes as part of doing business. This means that this interest money is tax deductible. You place the money into your IRA and buy bonds. The interest from the bonds is tax deferred. The contribution of $2,000 comes off your total annual income. So if you make for example, $40,000, you pay IRS taxes on $38,000. Now tell me, who can beat that?
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