Tuesday, January 15, 2013

Saving, Investing, Land of Critical Mass for Golden years

In 1980s Savings accounts in Savings and Loan banks like Home savings (now part of Chase), use to pay 5% interest. Then came the savings and loan crisis, money market accounts and various innovations which all meant you had to look for good deals like Vanguard Prime Money Market account for decent return.

Then came the financial crisis in 2008.The Federal Reserve under Ben Bernanke adopted ZIRP (Zero Interest Rate Policy) from December 2008. It is very hard now to get a decent return without lot of work. I think I have come us with some strategies to do this and wanted to share with rest of the world.

A word of caution. Please read these posts and do your own research before investing your hard earned dollars. As a wise man once said everything can be explained in financial market after it happens.

My goals are very simple. Try to get around 4 % return with minimum risk as recommended by this article: The ideal retirement withdrawal rate. A withdrawal rate of 4% from your savings is supposed to be sustainable for a long term. If you can manage a 4% return you might be able to live on the interest without touching the principal or use 2 to 3 % of the principal to cover inflation!

I will try to cover in these posts my discoveries and various links to reference material which will help you to decipher the financial world. I hope all of us can achieve critical mass as defined below by Bob Brinker.

CRITICAL MASS:  “A state of freedom from worry and anxiety about money due to the accumulation of assets which make it possible to live your life as you choose without working if you prefer not to work or just working because you enjoy your work but don't need the income. Plainly stated, the Land of Critical Mass is a place in which individuals enjoy their own personal financial nirvana. Differentiation between earned income and assets is a fundamental lesson to learn when thinking in terms of critical mass. Earned income does not produce critical mass......critical mass is strictly a function of assets.”

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