Haley Sachs has made a career out of translating Wall Street into plain English. You may know him as mrs dow jonesAnd she helps millions of followers understand investing, retirement, and how to grow your wealth when the cards are stacked against you.
She’s expressing that market knowledge in her new book, The Rich Man of the Future: New Rules for Wealth BuildingAnd Our Wake-up Call at Work Newsletter We caught up with Sachs to talk about the biggest questions investors are facing right now, why she’s tired of IPOs, her checklist for retirement, and estate planning 101.
Do you have any tips for everyday investors concerned about the current market volatility?
Haley Sachs: Volatility is basically the tax we pay to grow our wealth in the market, but it’s completely normal to feel worried about your money when the markets are volatile. These headlines are all about conflict and economic instability. Our survival instinct is to act: either get our money out of the market or try to predict how the next industry might collapse. But all the data shows that the most successful everyday investors never try to beat the chaos; They rely on boring and ineffective rules to increase their wealth. Basics like building your emergency fund, paying off your high-interest rate debt, and practicing dollar-cost averaging, which is when you invest a certain amount of money at regular intervals to see whether the market is up or down.
we have seen something big ipo recently. How do you think the average investor should approach these?
I am a staunch opponent of IPOs. I know it’s easy to get swept up in the hype, but for the average person making a purchase, it’s too risky, and you must understand that the game is really rigged against the little guy – because most of them are pop and drop. So people buy at the peak with the early day excitement, and then shortly after, insiders are going to sell their shares to lock in those profits, driving the price down. These companies also lack data. They’re not established public companies that have all this financial information available, so you’re relying on future promises versus proven profitability.
So I would say if you are really interested in an IPO, don’t buy on the first day. Wait three to six months, which is when the insider lock-up period – when insiders are allowed to sell their shares privately – ends. A less risky option is to look at IPO exchange-traded funds instead of putting all your eggs in one basket. A good rule of thumb to follow is that a healthy portfolio should have 95 percent boring index funds and 5 percent money for risky debt.
Do you have any advice for women preparing for retirement?
Women are disadvantaged, because we earn less on average, are more likely to take a career break careand us live longer. As a result, we retire with 30 to 40 percent less pay than men. The first thing I would say is don’t wait – even if you feel like you’re starting too late, don’t let yourself get out of control. If you’re age 50 and older, make sure you’re taking advantage of the catch-up rules, which allow you to contribute extra money to your 401(k), 403(b), or IRA. Even if you can’t reach the maximum, just an extra $50 to $100 per month will make a huge difference over a 10 to 15 year period.
Play the Social Security Delay Game. you can claim social Security At age 62, but your monthly check is about to shrink. For each year you delay claiming until age 70, your guaranteed monthly benefit will increase by 8 percent per year. So waiting until 70 could result in a 30 percent larger check for the rest of your life.
I also think we need to start redefining what retirement looks like, because the idea of working until age 65 is becoming outdated. If you feel behind, you may want to consider an easier retirement, or work part-time to transition to a less-stress situation that allows you to cover your daily expenses.
What about the things on your retirement checklist that people should make sure they have squared off before they leave?
The first thing to do is look at your lifestyle. People believe that their expenses will go down when they stop working, but spending free time can cost you money. Then, I’ll turn off your health care strategy. If you retire before age 65, you can’t get Medicare yet, so how will you make up the difference? And if you retire at age 65 or older, mark your calendar — the enrollment period starts three months before your 65th birthday and closes three months after.
I also believe that you should de-risk your portfolio. When you’re 30, a market decline doesn’t really matter that much because you have several years to recover, but if you’re 60 and a crash happens right before you retire, it could derail your plans. I would make sure you have one to three years of cash available in short-term bonds. And optimize your three big income streams: Social Security, pensions and annuities – if you have them. Work with a professional to figure out your drawdown order and which accounts to empty first, so you can keep your lifetime tax brackets as low as possible.
Many baby boomers have no plan for how they will move forward move their money forward. Do you have any advice when it comes to estate planning?
I think the biggest misconception about estate planning is that it’s only for rich people. But if you don’t have an estate plan, your state government will create one for you, and your family will have to pay the court system to figure it out. I think everyone needs a will, a power of attorney, and a POD (payable on death) and TOD (transfer on death) in your bank and brokerage accounts, as this will allow the money to be transferred directly to your heirs upon your death without going through probate.
People forget about their digital heritage. Make sure you have physical copies of all your special documents, lists of your assets, digital passwords and funeral wishes in one place. People don’t usually do all this work, but it’s really a gift for your family. Fifty-six percent of Americans have no estate planning documents, and 42 percent say they wouldn’t know what to do if a family member died. So it’s really important to have these conversations with your loved ones. I promise they’ll be grateful.
This interview has been edited for length and clarity.
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