You Know What's Overrated? Retirement

RetirementBy Brian Stoffel, The Motley Fool

It was late 2010, and after years of teaching in Washington, D.C. schools, my wife and I were nearing the burnout phase. We loved our students, but the situation simply wasn't sustainable. With students at my school in class for over nine hours per day, we'd never have time for a family.

The same question was repeatedly entering our minds: "Why are we killing ourselves?" We needed to make money, but other than meeting our basic needs, we didn't have too many expenses.

"I guess we're just saving for retirement," was our most common response... until we came upon a book that changed our mind.

Retirement as Worst-Case-Scenario Insurance

Though far from perfect, Timothy Ferriss' The 4-Hour Workweek makes some thought-provoking assertions about retirement.

In the book, Ferriss finds three major flaws in the "retirement as a goal" scenario:

  1. It is based on the assumption that you're doing something you don't like during your most physically able years. "Nothing can justify that sacrifice," Ferriss says.
  2. The great majority of people haven't saved up nearly enough to maintain their same standard of living post-retirement.
  3. You'll likely gouge your eyes out due to boredom once you retire... or start your own enterprise. Which of course begs the question: Why not start that new life now?

If you are lucky enough to have avoided major debt and have an education that allows you to ponder such questions, they can really turn your world on its head.

If you're serious about changing things -- like my wife and I were -- the next question becomes: What do we do now?


Ferriss suggests mini-retirements as a way to downshift and (re)discover your passions. Think of them as three-to-six-month stints where you have a blank slate. It may involve traveling somewhere for those months, or just staying put. The goal is to have nothing that you must do.

Because we didn't own our condo, and because the cost of living was so high in Washington, D.C., my wife and I chose Costa Rica for our mini-retirement. We lived in a tiny village for six months -- I volunteered on a coffee farm, she at a community center. And I discovered my passion: investing, which led me to The Motley Fool.

Enough About Me, Where's the Investing Takeaway?

If starting over or trying a mini-retirement is something you'd like to do, being careful about finances is a must. Just because Ferriss pushes back against our common conception of what retirement is doesn't mean we shouldn't maximize the tax advantages that our system offers, through IRAs and Roth IRAs.

Indeed, saving and living below your means is the best way to build up a nest egg, whether you throw caution to the wind, or you're perfectly fine staying exactly where you are. And if spending hours researching stocks isn't your thing, you have a couple options.

You could focus on exchange-traded funds -- which offer you focused bets on entire sectors or geographic regions. Our analysts recently came out with their best ETFs for 2012.

Or if you like investing in individual stocks, you could focus on solid, dividend-paying stocks that would require minimal upkeep on your part to ensure your investment thesis is intact. Here are five of my favorites:

  1. Intel (NAS: INTC) -- Though this chip maker was late to the game in providing chips that run mobile devices, it's finally entering the realm and already dominates the laptop market. It offers a hefty 3.5% dividend yield and only uses 32% of its earnings to pay it.
  2. Johnson & Johnson (NYS: JNJ) -- This company gives you exposure to both medical devices and staple consumer products like Tylenol. Johnson & Johnson also gives investors a 3.5% dividend yield, which accounts for just 54% of its earnings.
  3. Coca-Cola (NYS: KO) -- One of the strongest brands in the world, Coke is expanding to the Middle East and other parts of the developing world. The company also gives investors a safe 2.7% dividend, which has a payout ratio of just 34%.
  4. Abbott Labs (NYS: ABT) -- This medical company will be splitting into two parts: one to focus on medical devices, the other to focus on pharmaceuticals. Get in now, and you'll have a hand in both, as well as its 3.4% dividend yield.
  5. General Electric (NYS: GE) -- Though it certainly hasn't recovered to the heights it stood at before the Great Recession, GE is actually an interesting play on alternative energy -- as well as several other industries. Its 3.8% dividend yield doesn't hurt either.

Ready to Take the Leap?

Writing off retirement and starting your dream life might not be the approach for everyone, but it's worth exploring. Whether you're happy where you are, or you're dying for a change, maximizing your retirement accounts is crucial to giving you the freedom to direct your future.

The Motley Fool has prepared a special free report to help you accomplish your savings goals, titled "The Shocking Can't-Miss Truth About Your Retirement." Inside, our experts fill you in on some simple steps most people miss to maximize their benefits. Get your copy of the report today -- it's absolutely free!

At the time this article was published Fool contributor Brian Stoffel is infinitely thankful for his mini-retirement. He does not own shares in any of the companies mentioned. You can follow him on Twitter at @TMFStoffel.The Motley Fool owns shares of Abbott Laboratories, Coca-Cola, and Johnson & Johnson. The Fool also owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel, Johnson & Johnson, Coca-Cola, and Abbott Labs, as well as creating a bull call spread position in Intel and a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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Investing is a fancy word for gambling which is what the stock market is. So you are going to tell me that this man just invests all day, goes to Costa Rica and doesn't have to worry about if something crashed ? Must have pensions coming in because it isn't this easy.

January 05 2012 at 4:33 PM Report abuse rate up rate down Reply

When the scum on welfare, after a life of doing nothing but ******* the government teat, turns 65 what do they do? I mean, what is it that they "retire" from?

January 05 2012 at 3:28 PM Report abuse rate up rate down Reply
1 reply to ilm9p's comment

"what do they do?"...They look back fondly on the last 40 years of sitting on their a$$ while some other poor slob was working his off to support them.

January 05 2012 at 3:47 PM Report abuse rate up rate down Reply

I am an engineer. I retired 21 years ago at age 65. That is, on a Friday afternoon. I had a beautiful retirement Saturday and Sunday. Then on Monday morning, the phone rang. An old friend of mine had a problem that I could solve and he asked for my help. 21 years later I am still receiving phone calls from friends needing help.

Today, any person with expertize in a productive subject will not be able to retire in the old sense as our economy needs all the expertize we can give. What a country we are in!.

January 05 2012 at 3:25 PM Report abuse rate up rate down Reply
1 reply to akline1490's comment

I'm a retired electrician. I know the feeling.

January 05 2012 at 5:52 PM Report abuse rate up rate down Reply

Invest in market securities and ETF's? Only for the foolish. IRA's & 401K's? Only for the gullible who believe that Uncle Sam will somehow abide by the rules this time around, and not just simply confiscate those plans altogether. If one had been aggressively purchasing U.S. Series I & EE Savings Bonds during the last twenty years for his retirement needs, he could have accumulated quite a nest egg by now. In fact, some of those I Bonds are currently paying out over 8.5% interest right now, and the accumulated interest is all tax deferred.

January 05 2012 at 1:29 PM Report abuse rate up rate down Reply
1 reply to rgkarasiewicz's comment

Since the government might confiscate IRA's and 401K's what's to stop them from refusing to pay off on those bonds?

January 05 2012 at 3:08 PM Report abuse rate up rate down Reply
1 reply to evd10's comment

You can be sure that U.S. Savings Bonds would be the last thing that the Feds would want to fool with. If push came to shove, U.S. Savings Bonds holders (who are all U.S. citizens) would be paid off first , and foreign creditors last. That's why.

January 05 2012 at 5:46 PM Report abuse rate up rate down

If you had a very active work enviorment, I use to travel about 24 weeks a year, then do some consulting if you can for awhile to wind things down mentally and phyiscally. I know a few people that did not and they died within a couple of years. For all of you reading this that plan to start your own enterprise, do it with funds you can afford to lose as most enterprises fail. Second be prepared to work harder than you ever did working for someone else.

January 05 2012 at 1:17 PM Report abuse rate up rate down Reply

Why didn't the author mention the two fat pensions that I imagine he and the Mrs. are getting? That usually does give one a lotof flexibility.

January 05 2012 at 1:08 PM Report abuse rate up rate down Reply