But that's OK because there are really good books that explain how to invest our money appropriately and to put us on the right path for a successful retirement.
Understand that the retirement process is complicated. We don't know how long we'll live; we don't know what market returns will be; we don't know what the inflation bite will be. We are told that Social Security won't pay what it has promised, and even the government will likely change tax policies that will affect us.
It is not surprising that many people throw their hands up and choose to live for today. They choose to let the the last third of their life take care of itself. Good luck at that!
Another approach is to let advisors talk you into a $3,000 financial plan and charge upwards of 1% to manage your assets. For most people, I believe this isn't the optimal way to go and, in fact, can be detrimental to the bottom line goal of achieving a successful retirement. Leave the stock planning analyses of stock options, fancy trusts, and Monte Carlo simulations to those with nest eggs of $5 million or more.
Reading the following four books will put most people on the right path for a successful retirement. These are the books I recommend most often. They teach the basic principles of investing, whether you can do it yourself, how to pick an advisor if you need one, etc. In other words, they explain basic principles that a growing number of people, including myself, feel should be presented in high school.
- Millionaire Teacher by Andrew Hallam. This book is filled with laugh-out-loud stories that take you on a journey whereby Andrew Hallam, a teacher, became a millionaire at a young age. Read this book in 2 weekends, and you will know how to construct a portfolio using low-cost, well-diversified funds that track broad sectors of the market. This book will give you the knowledge to pick appropriate funds from the 401(k) choices you are faced with. It is a great resource for the whole family.
- The Smartest Investment Book You'll Ever Read by Dan Solin. Solin's book can also be read in a couple of weekends. He emphasizes that most people don't finish most investment books because the books get bogged down in esoteric jargon. His book explicitly avoids this. Like Hallam, Solin provides explicit portfolios of low-cost well-diversified funds. As a highly experienced securities arbitration lawyer, he is especially well positioned to help you avoid the traps set up for the novice investor by the financial services community.
- Your Money Ratios by Charles Farrell. Charles Farrell will help you answer the nagging questions like how big should your nest egg be, how much you should be saving at your age, what income you should be targeting for retirement, do you have the right insurance? He provides a worksheet that you'll return to over the years as you approach retirement. Advisors will charge you up to $3,000 to answer the questions he gives guidance on.
- Your Money and Your Brain by Jason Zweig. Jason Zweig's highly readable book will ramp up big time your sophistication in understanding the pitfalls in picking stocks and timing the market. It will solidify your philosophical foundation in arriving at the all-important investment philosophy presented by the authors above. If you like books that make you smarter, you'll love this well-written book that takes you to the frontier of investment research.
There are other really good books as well: for example, any investment book written by William J. Bernstein (example: The Intelligent Asset Allocator) or Burton G. Malkiel (example: A Random Walk Down Wall Street - a must-read if you're going to advise others on investing!) or John Bogle (example: Common Sense on Mutual Funds). These books get more into teaching how the car works, whereas the above four books focus on how to drive the car. For most investors, how to drive the car is more than sufficient.
If you have favorite investment books, I'd love to hear them.