Ask Doc A big part of investing is timing... when you get into an investment and when you get out.
But when it comes to your retirement, you can't control when you were born or when you'll turn 65.
And even subtle differences in those two points can reshape your financial destiny.
Consider two investors who wanted to retire at age 65. Investor A was born in 1935, meaning he hit 65 and retired in 2000. Investor B was born in 1937, putting his retirement date in 2002. Both of them cash out their investment accounts into annuities upon retiring.
For mathematical simplicity, let's say they both had $500,000 in 1997 – so the younger Investor B was actually a bit ahead on his savings.
Investor A followed the common "60/40" portfolio allocation – 60% in stocks and the other 40% in bonds. He saw his 60/40 stock-and-bond portfolio grow to $661,000 by 2000. Then he retired happily amid the peak of the dot-com boom and converted it to a comfortable annuity.
Investor B followed the same 60/40 strategy. But by the time he cashed out two years later, the markets weren't doing as well. And despite two extra years of work, his account had fallen to $577,000.
He did everything right... But he came out $84,000 behind Investor A just because he was born a little too late.
Investor B's problems don't stop there...
The 10-year interest rate when Investor A converted to an annuity was 6.5%. Annuities don't perfectly track the 10-year yield, but at those rates, the older investor earns nearly $43,000 per year from his retirement nest egg.
Investor B, who made no different decisions, cashed in after rates had plummeted to 3.8% – meaning his savings earned him only $21,930 per year.
The two investors contributed the same money to their retirement accounts... followed the same investment strategy... and had similar returns for most of their working lives.
But their slight difference in timing meant that Investor B got barely half of Investor A's retirement income. Sometimes you just get a raw deal, like Investor B got 22 years ago.
And if you're coming up on your retirement, you may be about to face a mess like Investor B's... A number of worrying factors in the market tell me to expect a tough decade ahead.
I've been through every crisis in recent memory – Black Monday in 1987... the dot-com bubble bursting in the early 2000s... the financial crisis of 2008...
But today, I'm as concerned as I've ever been.
And the worst part is... it's all because you're likely following the strategies your broker or adviser has been using and recommending to investors like you for decades. Times have changed... and the traditional wisdom just won't cut it anymore. You need to adapt.
Fortunately, I just released a brand-new presentation explaining how you can protect and grow your wealth in this modern era of investing. My strategy offers you big gains and peace of mind. Click here to watch.
Let's dig into the Q&A... As always, keep sending your comments, questions, and topic suggestions to [email protected]. My team and I really do read every e-mail.
Q: I tend to feel virtuous when I eat my breakfast oatmeal with blueberries every morning, but I add a couple of ingredients that may not be so good for me: about a teaspoon each of brown sugar and Smart Balance original.
I've often wondered if brown sugar is as bad for us as white sugar, even though I know you're not much of a white-anything fan.
I've also wondered if Smart Balance is just as bad as all the other butter pretenders. I eat very little sugar or butter otherwise.
Thank you! – W.H.
A: It sounds like you already know what we're going to say, W.H. This is a popular question – is brown sugar better than white sugar? The answer is no. Brown sugar is nothing more than white, processed sugar with molasses (which is a sugar byproduct) added to it. And even though molasses contains some beneficial nutrients, like potassium, the amounts you'd get are negligible.
When we're talking plant-based or vegan butters and margarine, they're blends of various vegetable or nut oils and water, with thickeners and flavorings to make the whole concoction solid and taste like a genuine dairy product.
Brown sugar and butter substitutes are both processed foods that I avoid or use sparingly.
The good news is, it sounds like that's what you're already doing. As I've said before, the key is moderation. As long as everything else you're eating is healthy, an indulgence here and there is fine.
Q: The recent edition of Retirement Millionaire had a comment that caught my attention.
In talking about liver toxicity, the implication was that turmeric supplements may cause liver problems. True? I take 1,500 mg a day (750 twice a day) with the black pepper. Should I pause? – J.M.
A: Thanks for your question, J.M. We regularly tell folks to avoid supplements altogether...
As with most spices and foods we write about, it's always better to go for the real thing instead of supplements. Turmeric has anti-inflammatory and antidiabetic properties. Plus, studies show it has potential to stop the growth of cancer tumors.
The problem with turmeric supplements is that higher doses can cause upset stomachs, diarrhea, liver injury, gallbladder contractions, and blood thinning. That last side effect is especially dangerous if you're already on blood thinners or an aspirin regimen. (And please be aware: Black pepper significantly increases the absorption of turmeric, which can increase these risks.)
One study published last year in the American Journal of Medicine found that liver injury due to turmeric supplementation has risen over the past two decades. And while many of the patients with liver injury recovered, some did experience liver failure (one fatally).
Also, since turmeric is a spice, the U.S. Food and Drug Administration doesn't regulate it. That means turmeric supplements may contain other, unwanted ingredients – including flour, food dyes, and lead. That also means the supplement could contain a higher dosage of turmeric than advertised, as there's no upper safety limit. Basically, you don't know how much turmeric you're actually getting in each pill.
So unless your doctor encourages turmeric supplements to address a specific medical issue, we recommend using turmeric as a spice to get its health benefits without all the extra risks. You can get a good helping of it with cooking, so try adding it to your next stir-fry dish, roasted veggies, or soup.
What We're Reading...
- Did you miss it? Most folks get income investing wrong.
- Something different: German language council enshrines "idiot's apostrophe."
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
October 18, 2024