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The Story of Your Future Retirement

Where you place your bets today will matter tremendously in 30 years

I. The Future Is Your Past

Last weekend, I had the distinct pleasure to spend a Saturday morning with an old mentor and friend. He retired about the same year I started my professional career, so I always found it interesting to look at the world through his eyes, while he was looking at the world through mine.

You can learn a tremendous amount of wisdom by sitting quietly and listening to one of your elders regale you of stories when they were coming up. How to make good decisions. Where to place your value in life. How they handled struggle. And what life after work is really like.

His advice was as simple as can be, but powerful as hell:

“Don’t give up on yourself.”

He’s right. Without yourself, you’ll never get anywhere. You have to get out of bed, walk somewhere, talk to someone, send a note. People aren’t going to just show up knocking on your door.

The atomic unit of this entire thing called life could be broken down into something equally as simple: make good choices. Easier said than done. How do you know up front what’s a good choice and what’s a bad choice?

Read on to find out how to invest best for your future, both in life and with your money.

II. Making Good Choices

I want you to imagine a simple mechanic. You make a single choice today. You make another choice tomorrow. You make a third choice the day after. Each of those choices compound on each other and at some point in the future you see the result and impact of that choice.

Let me give you a very simple example.

You know you need to save for retirement, but you also want to go on vacation because you work hard and dang it, you earned it.

So this year, you decide to spend $5,000 taking the family to Disney World for a week. If you didn’t go, you could have invested that money. So the question you have to ask yourself is how much is that experience worth to you. We can actually model that out financially and tell you.

There are a number of stats that show the average annual stock market return is 7% after inflation from 1950 to about 2009. It’s a nice round number and relatively accurate for the S&P 500 so lets just go with it.

If you’d have taken that $5,000 and invested in the stock market for 30 years, that money would be worth nearly $40,000 (remember we removed inflation from the return calculation so this is in present value, not future value, dollars).

Thus, that vacation you took today didn’t cost $5K, but rather about 8x more than that. It cost you $40,000 which you will need to help you survive after you retire and no longer have an income from working. You only have an income from what you saved.

Based on your standard monthly living expenses, how long would that $40K let you survive? Call that your monthly burn rate. Depending on your lifestyle, maybe you can stretch that out for 6 months to a year with house, car, food, entertainment, travel, etc.

So that 1 week vacation could have cost you a year of living in the future.

I bet you never thought of it this way, but that’s the power of compound interest and investing properly.

III. “Don’t Be Stupid”

There’s this great philosophy employed by Jeff Bezos of Amazon fame and Warren Buffett and Charlie Munger of Berkshire Hathaway fame. In both cases, these gentlemen pass any choice they make through the “is this a stupid move?” test.

Bezos will tell you that Amazon will always spend money investing in R&D on things that make prices cheaper and deliveries faster. What customer is going to complain about faster and cheaper? Nobody. So it’s a sure bet. It’s not being stupid.

As you think about decision-making for your own lifestyle and consider the choices you will make for investing in your future, it’s an apt framework to test anything against.

Investing for the future doesn’t always have to mean putting money into a CD, Bitcoin, Stocks, Real Estate, or Bonds. It can also mean the job that you take. Or the partner you choose to live your life with.

But the one that we will focus on here is specific to investing for retirement because without that burdensome thing called money, you simply can’t survive.

Charlie Munger (left) and Warren Buffett (right) of Berkshire Hathaway fame. Jeff Bezos of Amazon fame.

IV. The New Retirement Savings Game

One of our favorite apps is Robinhood. It has turned saving for retirement nearly into a game. With zero trading fees (everyone else charges $10 per trade), it’s an easy way to onboard new customers.

And onboard people they did. The team, product, and funding is growing like crazy. They just raised another $110M in a Series C round bringing their total funding to $176M.

The impact it’s having, however is more remarkable. Young professionals just entering the workforce are saving more, more often. Instead of relying on a corporate 401K program with 10 incredibly bad mutual fund options that they never tell you what is actually being invested in, the new way is to take the after tax money and invest it yourself in places like Apple.

There’s even a bit of Fantasy Football style competitiveness where friends are sharing their returns with other friends, much like how the people in the 90s would brag about how their dot com investments were doing during the bubble.

Of course, now that’s been replaced with ICOs but we’ll get to that in a minute.

The more you invest, the closer attention you pay, the more you see your balance going up sheerly from you putting more and more money into it. It becomes your own viral mechanism for retirement saving. And you’re doing it all on your own, with a little competition from friends using as little as $25 for the cheaper stocks.

So, instead of buying that t-shirt for $25, the choice becomes “Do I buy this stock for $25 and get a return on it”. It’s like the Disney World vacation analogy up top, but now brought down to everyday life.

The more you choose to invest today, the more money you will have that can compound in the market over decades. Time, when it comes to investing, is your best friend.

Holding your savings in cash is the worst possible decision you can make over the long term. Because every year that cash is guaranteed to be worth almost 3% less than it was the year before. That’s this little devil called inflation eating away at your hard-earned money, day after day, year after year, decade after decade, until it’s finally all gone. Nasty little trickster.

The only way you can combat inflation is by investing it in something that gets a return greater than that.

From 1950 to 2009, the median annual rate of inflation was 2.7%.

Some years more, some years less, but overall that’s what you can expect for how much less your money will be worth next year as it is this year. So, if you made $100,000 this year, without a raise it means you’re making $97,300. That’s nearly $3000 per year! That’s $225 per month. So basically a car payment.

Every year, it’s like giving away your car with nothing in return! Jeez, that sure makes this situation real doesn’t it.

What are we to do about it?

V. New Apps for Investing

If you’re going to beat back the cold shrew called inflation, and begin making money with your money, you’re going to need some help. So let’s do a little round-up of how the state of Saving For Retirement has shifted in recent years with the push towards mobile for digital natives.

Robinhood. First up is Robinhood as we’ve mentioned above. Zero trading fees. Makes investing fun. But you have to do your own analysis. We’ve helped you with that in the past on The Base Code, but ultimately you need to do your own valuation analysis, Warren Buffett style if you want to pick the right stocks. Or, you could just invest in the S&P500, which has handily beat the best hedge funds on Wall St over a long time horizon.


Stash. Next up is Stash, which doesn’t let you invest in a single stock directly like Robinhood. Instead they let you put in as little as $5 and invest in one of 30 ETFs (Exchange Traded Fund). If you don’t know what that means think of it like a mutual fund, where you’re getting a portfolio of stocks. Sometimes that could be hundreds, other times only a handful. But their value proposition is that you choose your risk tolerance and they select the right group of stocks best suited to that.

Of course, we believe investing is about something different. You either invest in the entire market at large (i.e., the S&P 500) or you find a single stock or two that you’ve valued appropriately and know that it’s undervalued by the market, then invest in that until the price increases to reflect what you think it should be. Truthfully, we do both. It helps reduce risk while also giving you exposure to the large upside.


Acorns. This is similar in concept to Stash in that they offer a number of ETFs that track the S&P 500 or smaller portfolios of stocks and bonds. But the main difference here is that you can invest your spare change and set up recurring monthly investments to get money into your account. They round up your credit/bank card purchases to the nearest dollar and invest that small difference. Over time, that starts to add up.

If you find you always seem to spend all your money, then this could be a good solution to start saving for retirement. A few cents here, a few cents there, over the years adds up and you’d be surprised how much money you can earn over time.


Betterment. This exists more like the classic model of investing. You have real human people to help you plan for, and invest for, retirement. Of course, they also offer the mobile and web apps. It’s a more full-service type of product.

You can solicit unlimited expert advice from professionals. But be careful, not all investors are created equal, so it pays to understand how they make decisions. Most credible people will tell you that success in the past doesn’t predict success in the future, but what does work is a way of thinking. If you utilize the same frameworks and models for what you invest in, and they prove to be right, then you’re in for something good.


AI Investing. There are also some apps and startups out there who claim to do all the investing on your behalf using mathematic AI equations. Don’t get caught in this trap. It’s algorithmic trading, and in order to do it right, you need incredibly high speed, technical analysis, colocation at the exchanges, and a $250M infrastructure, plus an experienced team to do it like the big boys. They are so good that they have algorithms that are built just to identify the novices in the space and take advantage of them. You lose, they win.

Either get smart and do it yourself, or invest in the S&P 500. Or have someone you trust an incredible amount to manage it for you. But even then, we’ve seen how that can go haywire with Bernie Madoff. Just be careful, and do your homework. You’ll be fine.

VI. Getting Educated

If you’re not familiar with the name Ray Dalio, that’s okay, not too many people outside the finance community. But he owns the largest hedge fund of all time and is worth a cool $17 billion. Not bad for 68 years old and heading into retirement.

But the reason we’re reading him is because he just released a new book, which is really an update to Principles that he’s been writing his entire life. It’s a set of, ahem, principles to help you make better decisions, whether in life or investing money. You can watch his TedX talk to see how he developed a system where even a new intern can call out his ideas as garbage. Pretty radical, but clearly effective.

Go buy the book. And you’ll learn how to make better decisions in life and in investing. It’s not going to hurt. And it might open your mind to do-it-yourself investing that will protect your family for years after you’re gone.

Good luck. Godspeed. And stay thirsty for knowledge. It’s the one tool you can invest in that will never hurt you. It’s a “don’t be stupid” kind of thing. See you soon.

Sean Everett

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