Saving it
I’m meandering my way through six questions that will determine your productivity as a family physician, to wit:
1. How fast do you work and think?
2. How many problems can you manage in an hour?
3. How much time do you spend on non-paying medical activities?
4. How much do patients trust you?
5. How efficient is your collection system?
6. How much attention do you pay to coding?
This week I had occasion to divert my reading into the Journal of John Wesley, who once said, “Make all you can, save all you can, give all you can.”
This inspired a diversion from “Making It” into “Saving It,” because, of course, some day all of us will retire. And after the economic events of the past year, that may be problematic. The only people who are unconcerned work for the government and have defined benefit pension plans. For the rest of us, intelligent saving will be more important, over the long run, than salary negotiations. So this blog is devoted to all of you who will retire on your own investments; and the younger you are, the closer you should attend. I’m not going to tell you where to invest your money. That would imply that I am a prophet, and I’m not. There are lots of lamebrains and goofballs out there who will assume that role, and if you want to throw in your lot with them, be my guest. I’m going to stick with what is demonstrably, historically and mathematically true. First: No financial advisor, stockbroker, or hedge fund advisor can claim, going forward, that he is going to beat the returns of an unmanaged index fund. Historically, the odds are overwhelmingly against him. If you put a gun to my head and made me turn over my retirement funds to an individual, I would pick Warren Buffett. Everything about his investment philosophy, his demeanor, his performance and his way of life, ring true. But the Sage of Omaha won’t make any promises, and he’s having a hard time figuring out where to park his cash right now. Second: If you invest $10,000 per year in an IRA that earns the historical average of 6 percent after inflation, and you work 40 years, you’ll have $1,750,000 (inflation-adjusted) at retirement. That ought to be enough. Third: If you are completely unnerved by the recent
shenanigans on Wall Street, be assured that you don’t have any good
alternatives. Put you money in a mattress, and inflation will steal its
value year by year. Buy gold, bury it in the back yard, and hope for
hyperinflation? Over the long haul, that hasn’t proved to work. Real
estate? That’s a hoot. Certificates of deposit? Bonds? Plan on giving
up 2 percent per year, and over 40 years your retirement fund drops to
$1,000,000. Fourth: If you can’t call Vanguard or Fidelity and ask them to
help you set up a SEP-IRA (it takes about 10 minutes) using index
mutual funds that charge about one-tenth of one percent per year as a
management fee, then you’re going to have to use a financial advisor,
or worse, a stockbroker. The stockbroker will earn a commission every time he sells you on a hot tip. The financial advisor will earn a percentage of the funds he manages. So will our Academy, if you use their investment services. If you are lucky, that will only cost you an additional 2 percent per year. See above. And if the stock market only earns 4 percent, half your earnings go to the advisor. Here’s the only hot tip you ever ought to take: Call Vanguard or Fidelity and invest in an index fund that approximates the entire U.S. stock market, or maybe the whole world stock market. Write your check every year, and don’t pay any attention to the ups and downs of Dow Jones or Nasdaq. Fifth: Don’t get divorced, and don’t invest in businesses started by friends or family. Trust me on those. Here’s more good advice from John Wesley, off the subject: “Do all the good you can,
By all the means you can,
In all the ways you can,
In all the places you can,
At all the times you can,
To all the people you can,
As long as ever you can.”
Posted at 09:47AM Apr 02, 2009 by Doug Iliff | Comments[0]
