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The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017

Social Security
Issue #450, December 26, 2016

My Outlook for 2017: Part II of II
Issue #449, December 19, 2016

My Outlook for 2017: The Market
Issue #448, December 12, 2016

Medicine in 20 Years
Issue #447, December 05, 2016

Higher Interest Rates
Issue #446, November 28, 2016

Trump and the Markets: The Bad and Ugly
Issue #445A, November 23, 2016

Trump and the Markets: The Good
Issue #445, November 21, 2016

Negative Trends: The Suits aren’t Makin’ Steel
Issue #444, November 16, 2016

The New DOJ Fiduciary Rule
Issue #443, November 07, 2016

Barron’s Conference, Part IV of IV
Issue #442, October 31, 2016

Barron’s Conference, Part III of IV
Issue #Interim Bulletin #441A, October 26, 2016

Barron’s Conference, Part II of IV
Issue #441, October 24, 2016

Barron’s Conference, Part I of IV
Issue #440, October 20, 2016

This Newsletter
Issue #439A, October 12, 2016

Memoirs of US Grant: Vol II
Issue #439, October 10, 2016

More Points on Collecting, Investing and the Economy
Issue #Interim Bulletin #438A, October 05, 2016

Personal Memoirs of US Grant
Issue #438, October 03, 2016

Ideas for a High School Part-Time Job
Issue #Interim Bulletin #437A, September 29, 2016

Collecting, Investing, and the Economy
Issue #437, September 26, 2016

Free College
Issue #436A, September 22, 2016

A Military Commitment to Pay for Med School
Issue #436, September 19, 2016

When a CD isn’t a CD
Issue #435, September 12, 2016

I Made a Mistake
Issue #Interim Bulletin #434A, September 07, 2016

What is Your Spare Time Worth?
Issue #434, September 05, 2016

Credit Cards and Bonus/Loyalty Points
Issue #433, August 29, 2016

The Write-off of Student Loans
Issue #Interim Bulletin #432A, August 25, 2016

412 Retirement Plans
Issue #432, August 22, 2016

Join the Club
Issue #Interim Bulletin #431A, August 18, 2016

The Case for Precious Metals and Hard Assets
Issue #431, August 15, 2016

When the US went off the Silver Standard
Issue #430, August 08, 2016

Why NOT to Open a Restaurant
Issue #429, August 01, 2016

Some Tips on Life Insurance
Issue #428, July 25, 2016

More Observations on Negative Interest Rates
Issue #427, July 18, 2016

Issue #426, July 11, 2016

Is a PhD Worth It? Part II of II
Issue #425, July 04, 2016

Is a PhD Worth It? Part I of II
Issue #424, June 27, 2016

Avoid Part-time real Estate Agents
Issue #423, June 20, 2016

Issue #422, June 13, 2016

The Problem with Auction Reserves
Issue #421, June 06, 2016

Make Full Use of Your Capital Investments
Issue #420, May 30, 2016

The Fed’s Announcement
Issue #419, May 23, 2016

Quit While You’re Ahead: A True Story
Issue #418, May 16, 2016

The Precious Metals
Issue #417, May 09, 2016

Negative Secular Trends: Part Ii of II
Issue #416, May 02, 2016

Negative Secular Trends: Part I of II
Issue #415, April 25, 2016

Not Winning is not the same as not Losing
Issue #414, April 19, 2016

Behavioral Economics: Part II: Weaknesses
Issue #413, April 11, 2016

Behavioral Economics: Part I: Valid Points
Issue #412, April 04, 2016

The Most Important Books I’ve Read
Issue #411, March 28, 2016

Secret to Success: Take Risks and do Things Differently
Issue #410, March 21, 2016

The Over-Priced Food Presentation Hustle
Issue #409, March 14, 2016


By Robert M. Doroghazi, M.D., F.A.C.C.

Some Tips on Retirement

Issue #395, December 04, 2015

    In the November 9 issue of Barron’s, there was an interview with Laurence Siegel of the CFA Institute Research Foundation about retirement. I’ve made most of the points before, but one is new, and some are from a different perspective, so are worthy of review and discussion.
    How much should you save? Siegel notes that “with a zero capital-market return, you need to save 30% of your income”.
    RMD comment: I think everyone, no matter what their income, should save at least 10% of what they make. Physicians should save at least 20%. Since the average physician in the US makes $250K, all you have to do is be careful with your money, save 20% = $50K per year, and by age 60 you will have a lot of money. You can retire when you wish, rather than work because you must.
    I recommend that high-earning physicians save 1/3 of their income. 1/3 goes to taxes, 1/3 to living expenses (including the mortgage payment), and 1/3 to savings. This amounts to 50% of your after-tax income. Looked at another way: if your income dropped 50%, it wouldn’t affect your life style
    The other important point is the return you can anticipate on your investments. For the 20th century in the US, stocks returned 10% (6.7% after inflation) and long-term Treasuries 6% (2.6% after inflation). I strongly recommend you review Issue #384 (9/22/15), because it has important long-term implications. Financial assets under-perform or over-perform in periods that average 15-17 years. With the bull market that started in 1982 and ended in the bubble of 2000, people were seduced to expect 15% or more per year. Since 2000, adding dividends, but subtracting inflation and taxes, stocks are barely positive. If you retired in 1982, you were set. People who retired in 2000 have suffered a terrible draw down in their stock assets, further compounded by the zero-interest rate environment. Fortunately, I believe history suggests that the current 15-year period of inferior returns will end sometime in the relatively near future (? 2-5 years).
    The fear in retirement is that you will outlive your money. Siegel suggests you divide your assets into two piles. Put 85% in conventional investments to fund your expenses from age 65-85. Put the other 15% in a deferred annuity that would start to pay at age 85. If you die before 85, you have nothing from the annuity, but if you live to 100, you are guaranteed an income stream.
    RMD comment: I am not a fan of annuities. Second only to Whole-life Insurance, it generates the highest commissions for the selling agent and the company. Furthermore, it is a bet. If you die early, you have nothing. If you live many years, it’s great. I would only consider this option if you aren’t good at handling money, and want reassurance.
    What I really like about Siegel’s discussion is the emphasis on savings and the importance of thrift. He strongly recommends auto-enrollment in your retirement plan at work, and that the employer match is free money. (RMD comment: Basically, you never see the money, so you aren’t tempted to spend it). He also mentions SMART, Save More Tomorrow, where you commit to automatically save a portion of all raises: you get a 4% raise, save half of it.
    The main variable over which you have the most control is how much you spend. If things don’t go as well as you wish, you cut back. Drive a modest Chevy rather than a BMW 750. Take only 1 trip a year rather than 2, and stay in a less expensive hotel.
    I also believe people don’t need as much as they think to maintain their lifestyle in retirement. One car rather than 2, and it will be driven less. I wore a suit and tie and starched, long sleeve cotton shirt to work every day. I bought 2 suits and 6 shirts every year. Now 2 suits and 6 shirts last about 5 years.
    Don’t retire until you are debt and obligation-free, with your mortgage and all other debts discharged and your children educated and self-supporting. Assets that you own debt-free are a further cushion. I have a condo at Lake Ozark, a 73 acre piece of land with a 23-acre lake, and some art work that could be sold if it came down to that.
    What I like about this article is that it emphasizes what I have emphasized all along—work hard, save your money, stay out of debt, and be careful with your money.       
    The #1 thing I miss since my retirement 10 years ago is—?? Answer at end of letter.
    Last week the International Monetary Fund added the Chinese yuan to their basket of reserve currencies. The weightings were rebalanced as follows:
                              Previous                           New
        US dollar             41.9%                            41.73%
        Euro                   37.4%                            30.93%
        Chinese renmimbi     —                              10.92%
        Pound Sterling       11.3%                              8.09%
        Japanese yen           9.4%                              8.33%
    RMD comment: This is a big deal for the Chinese, both practically, but especially symbolically. They have arrived. The reweighting came mostly out of the hide of the Euro. Note also that China has a greater weighting than Great Britain and Japan.         
Makin’ Steel = Makin’ Money
    I was going to make this a topic for a newsletter, but it’s just not enough. I do think, though, it makes a good point.
    My first summer at Granite City Steel (1970) was in the Yard Maintenance Department. Base pay was $2.68 per hour. Labor was a 2 point job, each point was 7 cents = another 14 cents per hour. Bonus was a % of the base pay from 1959, which was $1.90 per hour. So a laborer made about $3.00 per hour.
    I was in the lower level of the soaking pits, to clean up slag with an air hammer, sledge hammer, and crow bar. It was so unpleasant, hot, and stinky, that if you were blindfolded and transported there, when the blind fold was taken off, you would say “so this is what Hell is like”. The foreman comes around, sees my work, takes out his tape and measures the pile of slag, does some figuring, and says “Doc, you just made 6% bonus”.
    I said “6%. I worked really hard. The roller at the blooming mill (literally right above me, the highest paid job in the plant at 28 points) makes 50 or 60% bonus”.
    He said something that was one of the most important lessons of my life. “Doc, he’s makin’ steel. You’re not makin’ steel”. In other words, he was putting money on the bottom line, and I wasn’t.   
    When my boys were growing up I told them there were 3 ways in life to make money. 1) Aside from having a specific skill, such as an athlete, artist or musician, the two important ways to make real money are 2) make decisions, or 3) manage people.
    I write on this now after a young man told me there were some layoffs in his department. They were all people who had no responsibility. One handled inter-office communications and did not report directly to the manager. Even though he was at a higher level than the young man, he was let go. He wasn’t “makin’ steel”.
    The #1 thing I miss since retirement is—secretarial help. I will tell you: I really don’t believe you appreciate how much your nurse and your secretary do until you have to do it yourself. Treat them well and pay them well: if they are competent, they are worth every penny and more.


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