{"id":10094,"date":"2025-02-13T01:58:43","date_gmt":"2025-02-13T01:58:43","guid":{"rendered":"https:\/\/finderica.com\/?p=10094"},"modified":"2025-02-13T01:58:43","modified_gmt":"2025-02-13T01:58:43","slug":"5-keys-to-investing-like-a-happy-retiree-and-retiring-sooner","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=10094","title":{"rendered":"5 Keys To Investing Like A Happy Retiree And Retiring Sooner"},"content":{"rendered":"\n<div>\n<figure class=\"embed-base image-embed embed-8\" role=\"presentation\"><figcaption><fbs-accordion><\/p>\n<p class=\"color-body light-text\" role=\"button\">What helped keep human ancestry alive often hinders the investing decisions of today. <\/p>\n<p><\/fbs-accordion><small>getty<\/small><\/figcaption><\/figure>\n<p>The fight-or-flight response to stress \u201c. . . evolved as a survival mechanism, enabling people and other mammals to react quickly to life-threatening situations,\u201d <a href=\"https:\/\/www.health.harvard.edu\/staying-healthy\/understanding-the-stress-response\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.health.harvard.edu\/staying-healthy\/understanding-the-stress-response\" aria-label=\"according to Harvard Medical School\">according to Harvard Medical School<\/a>. Unfortunately, the very thing that helped keep human ancestry alive often hinders the investing decisions of today. Once an investor\u2019s hackles are up, it can be difficult to make calm, objective retirement planning decisions.<\/p>\n<p>Behavior is perhaps the most prominent variable and determinant of investor success. Benjamin Graham, author of <a href=\"https:\/\/www.investopedia.com\/articles\/07\/ben_graham.asp\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.investopedia.com\/articles\/07\/ben_graham.asp\" aria-label=\"The Intelligent Investor\"><em data-ga-track=\"ExternalLink:https:\/\/www.investopedia.com\/articles\/07\/ben_graham.asp\">The Intelligent Investor<\/em><\/a> and the man many see as the father of value investing, wrote, \u201cThe <a href=\"https:\/\/www.goodreads.com\/quotes\/9352859-the-investor-s-chief-problem---and-even-his-worst-enemy\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.goodreads.com\/quotes\/9352859-the-investor-s-chief-problem---and-even-his-worst-enemy\" aria-label=\"investor&#039;s chief problem\">investor&#8217;s chief problem<\/a>\u2014and even his worst enemy\u2014is likely to be himself.\u201d<\/p>\n<p>Yet, it is possible and vital to control fear enough to avoid impulsive or irrational decisions. A study of nearly 2,000 American retirees conducted by the <a class=\"color-link\" href=\"https:\/\/podcasts.apple.com\/us\/podcast\/retire-sooner-with-wes-moss\/id902749218\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/podcasts.apple.com\/us\/podcast\/retire-sooner-with-wes-moss\/id902749218\" aria-label=\"Retire Sooner Team\">Retire Sooner Team<\/a> for <a href=\"https:\/\/wesmossbooks.com\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/wesmossbooks.com\/\" aria-label=\"What The Happiest Retirees Know\"><em data-ga-track=\"ExternalLink:https:\/\/wesmossbooks.com\/\">What The Happiest Retirees Know<\/em><\/a><em> <\/em>revealed several core investment habits that separate the happiest retirees from the unhappiest.<\/p>\n<ul>\n<li><strong>Historically, stock dividend income trumps bond income by a considerable margin. <\/strong>When used appropriately, dividend investing can be one of the most powerful tools in a happy retiree toolkit.<\/li>\n<li><strong>In general, investment success is less about perfection and more about participation. <\/strong>History shows that time in the market is typically more productive than trying to time the market because chasing its fluctuations is extremely difficult.<\/li>\n<li><strong>Losing money feels twice as bad as making money feels good. <\/strong>It may not make logical sense, but it tends to be true. Unhappy retirees want to feel good in the moment, so they\u2019re reactive. The happy ones know to take the long view.<\/li>\n<li><strong>Happy retirees do not make investment decisions based on emotion. <\/strong>Happy retirees are not fueled by fear. They do their homework and make a calm decision.<\/li>\n<li><strong>Happy retirees are tomorrow investors, not today investors<\/strong>. Though it may feel counterintuitive, volatility can be a productive aspect of investing. The happiest retirees know how to stick to a strategy to reap the benefits.<\/li>\n<\/ul>\n<h2>Stock Dividends Vs. Bond Interest<\/h2>\n<p>Stock dividends have consistently outpaced inflation throughout much of market history.<\/p>\n<figure class=\"embed-base image-embed embed-0\" role=\"presentation\"><figcaption><fbs-accordion><\/p>\n<p class=\"color-body light-text\" role=\"button\">Stock Dividends vs. Bond Interest<\/p>\n<p><\/fbs-accordion><small>Source: Chart created and owned by Capital Investment Advisors using Bloomberg Financial Data. Past performance does not indicate future results.<\/small><\/figcaption><\/figure>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>Though it\u2019s commonly believed that bonds are the conservative counterpart to stocks, the chart above compares how an investment in equities for dividend income fared relative to one in bonds between 1980 and 2024. Some find the results surprising.<\/p>\n<p>The study examined a $10,000 investment in the S&amp;P 500 vs. the Lehman\/Barclays Aggregate Bond Index (AGG) beginning in 1980. In each case, the investor parked the principal while retrieving (<em>not <\/em>reinvesting) the annual income produced.<\/p>\n<p>In 1980, a $10,000 investment in the S&amp;P 500 paid a yearly dividend of about $529 \u2014 5.29% of the initial investment. Forty-five years later, it had climbed to $6,837 \u2014 a 68.4% annual yield on the original investment. And the original investment itself grew as well. A $10,000 holding in the S&amp;P 500 in 1980 would have blossomed to nearly $544,898 <em>without <\/em>reinvesting the annual dividend income.<\/p>\n<p>On the other hand, the Aggregate Bond Index only grew from $10,000 to $13,902 and would now pay out just $646 per year, or 6.46% on the original investment. Stock dividend income clearly outpaced bond interest. Annual stock dividend payouts increased almost 13 times, while the remaining price-only return grew 54 times.<\/p>\n<figure class=\"embed-base image-embed embed-3\" role=\"presentation\"><figcaption><fbs-accordion class=\"expandable\" current=\"-1\"><\/p>\n<p class=\"color-body light-text\" role=\"button\">A forty or fifty-year-old still has potentially three to four decades of investing and spending <span class=\"plus\" data-ga-track=\"caption expand\">&#8230; [+]<\/span><span class=\"expanded-caption\"> remaining.<\/span><\/p>\n<p><\/fbs-accordion><small>getty<\/small><\/figcaption><\/figure>\n<h2>Time Horizon<\/h2>\n<p>Future retirees often lament failing to start planning and saving early enough. But keep in mind that a 40- or 50-year-old still has potentially three to four decades of investing and spending remaining. Taking the time to create a future vision and then having the long-term patience to allow consistent dividend-growing stocks to pay out can make a huge difference, even later in life.<\/p>\n<p>Furthermore, dividend investing can serve as a calming effect amidst choppy stock market waters. When eyes are set on the horizon, folks are less likely to panic with every move up and down for the stock market. Dozens of companies have a record of paying 10, 20, 30, or even 50 years or more of steady dividends. This dynamic translates to recurring cash flow that is typically reliable enough for retirees to depend upon. In simpler terms, dividend investing can be seen as an apple tree. When nourished adequately over time, a retiree has the potential to live off the apples without overconsumption, allowing the tree to bear fruit for years to come. A bigger tree means more apples, just as a bigger investment means more income paid out. However, regardless of size, the cultivation regimen remains the same: time and care.<\/p>\n<figure class=\"embed-base image-embed embed-4\" role=\"presentation\"><figcaption><fbs-accordion><\/p>\n<p class=\"color-body light-text\" role=\"button\">The hidden variable for protecting purchasing power is accounting for inflation.<\/p>\n<p><\/fbs-accordion><small>getty<\/small><\/figcaption><\/figure>\n<h2>Purchasing Power<\/h2>\n<p>Investing is often conceived as a means to grow one\u2019s overall nest egg, liquid assets, and net worth. But the actual purpose is to protect purchasing power. If an investor lived on $75,000 per year during primary working years, they want to be able to live off a similar amount for the next 20 to 30 years.<\/p>\n<p>The hidden variable for protecting purchasing power is accounting for inflation. The target doesn\u2019t just stay at $75,000; it\u2019s $75,000 plus inflation because, in subsequent years, it could require more money to afford the same lifestyle. Market history has shown stocks to protect purchasing power <a href=\"https:\/\/knowledge.wharton.upenn.edu\/podcast\/ripple-effect\/stocks-for-the-long-run-jeremy-siegel\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/knowledge.wharton.upenn.edu\/podcast\/ripple-effect\/stocks-for-the-long-run-jeremy-siegel\/\" aria-label=\"more consistently than nearly any other long-term asset.\">more consistently than nearly any other long-term asset.<\/a><\/p>\n<h2>Perfect Is The Enemy Of The Good: Participation Vs. Perfection<\/h2>\n<p>When the market is soaring, people with more money in cash or bonds often experience FOMO. They fear missing out but are unsure when to invest. Should they wait until the market drops?<\/p>\n<p>It\u2019s natural to feel that good timing is imperative for investment success, but that instinct can often do more harm than good. The amount of time invested typically impacts the results far more than the specific moment chosen to enter the market. Since no one can predict the future, the more productive answer lies in the data. The numbers are apparent when comparing the difference in growth between investing $10,000 in the S&amp;P 500 at the \u201cperfect\u201d time and the \u201cworst\u201d time.<\/p>\n<figure class=\"embed-base image-embed embed-1\" role=\"presentation\"><figcaption><fbs-accordion><\/p>\n<p class=\"color-body light-text\" role=\"button\">Participation vs. Perfection<\/p>\n<p><\/fbs-accordion><small>Source: Chart created and owned by Capital Investment Advisors using Bloomberg Financial Data. Past performance does not indicate future results. The S&amp;P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. The Bloomberg Barclays U.S. Aggregate Bond Index is an index that measures the performance of the US bond market. Indexes are unmanaged and performance does not include the effect of management fees, transaction costs or taxes. If such costs and fees were reflected, returns would be lower. You cannot invest directly in an index.<\/small><\/figcaption><\/figure>\n<p>Note that the data points show what an investor would have as of July 31, 2023, if they had chosen to invest the $10,000 during each unique starting point rather than keeping money in cash.<\/p>\n<h2>Long-Term: Dot-Com Bubble<\/h2>\n<ul>\n<li>Investing in 2000-2002<\/li>\n<li>Peak: March 2000<\/li>\n<li>Trough: October 2002<\/li>\n<li>SP 500 Performance: -49%. Some investors\u2019 wealth was almost cut in half.<\/li>\n<li>Getting into the market with \u201cperfect\u201d timing (October 2002) yielded growth to over $116,00.<\/li>\n<li>Getting in with the \u201cworst\u201d timing (March 2000) still yielded growth from $10,000 to $61,168.<\/li>\n<\/ul>\n<h2>Intermediate Term: The Great Recession<\/h2>\n<ul>\n<li>Investing in 2007-2009<\/li>\n<li>The most significant downturn since the Great Depression, with the U.S. Housing Market turned upside down.<\/li>\n<li>Peak: October 2007<\/li>\n<li>Trough: March 2009<\/li>\n<li>SP 500 Performance: -57%<\/li>\n<li>\u201cPerfect\u201d timing yielded growth to over $117,000.<\/li>\n<li>The \u201cworst\u201d timing yielded growth of nearly $52,700.<\/li>\n<\/ul>\n<h2>Short-Term: Covid-19<\/h2>\n<ul>\n<li>Investing in 2020<\/li>\n<li>Economic gridlock<\/li>\n<li>Lockdowns<\/li>\n<li>No end in sight<\/li>\n<li>Media hysteria<\/li>\n<li>Tough: March 2020<\/li>\n<li>SP 500 Performance: -34%<\/li>\n<li>\u201cPerfect\u201d timing yielded growth to almost $28,300.<\/li>\n<li>\u201cWorst\u201d timing yielded growth to almost $18,700.<\/li>\n<\/ul>\n<p>Understanding this market history can help investors focus on what really matters: success is less about perfection and more about participation. In every scenario outlined above, investing at the \u201cworst\u201d time bested holding cash by a long shot.<\/p>\n<figure class=\"embed-base image-embed embed-6\" role=\"presentation\"><figcaption><fbs-accordion><\/p>\n<p class=\"color-body light-text\" role=\"button\">Losing money seems to feel twice as bad as making money feels good.<\/p>\n<p><\/fbs-accordion><small>getty<\/small><\/figcaption><\/figure>\n<h2>Keep Calm and Carry On: Be A Tomorrow Investor<\/h2>\n<p>Unhappy retirees exhibit a heightened sense of emotion around their investment portfolios. They confuse clickbait headlines and market volatility for permanent threats rather than temporary upsets. This is partly because losing money feels twice as bad as making money feels good. Loss aversion is a key concept in Prospect Theory, which won a Nobel Prize for Daniel Kahneman and was developed jointly with Amos Tversky. Specifically, it posits that fear of psychological pain leads people to make decisions that prioritize avoiding losses over achieving gains, even when the potential rewards outweigh the risks.<\/p>\n<p>This scenario occurs quite often in investing. An account that rises from $1 million to $1.5 million and then falls to $1.3 million is viewed as a loss of $200,000 rather than a gain of $300,000. It\u2019s also prevalent in sports. Suppose a basketball team is winning by 30 points at halftime but ends up squeaking out a two-point victory. In that case, people criticize its performance rather than complimenting the original lead despite its surplus being ultimately responsible for the win.<\/p>\n<figure class=\"embed-base image-embed embed-5\" role=\"presentation\"><figcaption><fbs-accordion><\/p>\n<p class=\"color-body light-text\" role=\"button\">Rather than relying on emotion, happy retirees tend to trust reason and rationality. <\/p>\n<p><\/fbs-accordion><small>getty<\/small><\/figcaption><\/figure>\n<p>Happy retirees are not immune from the same instincts. What distinguishes them from their unhappy counterparts is their discipline to resist the urge. Rather than relying on emotion, they trust reason and rationality. They look at the data or trust someone else to do so and realize that remaining stoically invested over a long period provides the highest probability of success.<\/p>\n<h2>Bottom Line<\/h2>\n<p>Happy retirees are tomorrow investors, not today investors. They understand that within the U.S. stock market sits a significant number of companies that have typically shown growth over time. They know that if they invest patiently in that growth, they stand a chance of sharing the gains, and have the potential to be on a \u201cretire sooner\u201d path.<\/p>\n<p>There are many productive strategies for managing money. The crucial step is to pick one and then stick to it. Happy retirees set out with the baseline goal of protecting their purchasing power, creating a portfolio designed to provide a steady income to keep up with or outpace inflation. They let go of the distractions and market forces beyond their control. Many rely on stock dividends to generate their retirement income so they don\u2019t have to pilfer the principal.<\/p>\n<p>Happy retirees know that by investing for tomorrow, today doesn\u2019t have to be perfect. They are proactive but not reactive. An investment means trusting that the army of American productivity will continue to march forward over time. Having this faith can potentially give happy retirees the hope and conviction it takes to live happy, healthy lives \u2014for themselves, their children, and their grandchildren.<\/p>\n<figure class=\"embed-base image-embed embed-7\" role=\"presentation\"><figcaption><fbs-accordion class=\"expandable\" current=\"-1\"><\/p>\n<p class=\"color-body light-text\" role=\"button\">Happy retirees strive for the hope and conviction it takes to live happy, healthy lives \u2014for <span class=\"plus\" data-ga-track=\"caption expand\">&#8230; [+]<\/span><span class=\"expanded-caption\"> themselves, their children, and their grandchildren.<\/span><\/p>\n<p><\/fbs-accordion><small>getty<\/small><\/figcaption><\/figure>\n<\/div>\n<p><a href=\"https:\/\/www.forbes.com\/sites\/wesmoss\/2025\/02\/12\/5-keys-to-investing-like-a-happy-retiree-and-retiring-sooner\/\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What helped keep human ancestry alive often hinders the investing decisions of today. getty The fight-or-flight response to stress \u201c. . . evolved as a survival mechanism, enabling people and other mammals to react quickly to life-threatening situations,\u201d according to Harvard Medical School. Unfortunately, the very thing that helped keep human ancestry alive often hinders<\/p>\n","protected":false},"author":1,"featured_media":10095,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[196],"tags":[2872,226,3174,3092,3175,4060],"class_list":{"0":"post-10094","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-finance-news","8":"tag-happy","9":"tag-investing","10":"tag-keys","11":"tag-retiree","12":"tag-retiring","13":"tag-sooner"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/10094","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10094"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/10094\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/10095"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10094"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10094"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10094"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}