By Merrie Spaeth, KERA 90.1 commentator
Dallas, TX – Friday the stock market fell, although it was up for the week, the fifth weekly increase in a row. Since July hit a five-year low, have we seen the illusive "bottom?" Tired of worrying? Regis Philbin's "Who Wants to Be a Millionaire?" is no longer a current show, but it's certainly my current hope ... and without being driven crazy by the market ... I'm Merrie Spaeth for KERA Marketplace Middays.
Did the market fall Friday because of Fed comments during the week? Do you know? Does anybody know? And if someone knew, what could you do about it? It's time for our regular reminder about what Dallas columnist Scott Burns dubbed the Power of the Missing Margarita. Back in 1989, Burns wrote a column highlighting the importance of starting to save early for retirement. He figured that if you have a million dollars at age 65, you'll have enough money so you won't have to worry about whether you'll see a penny of your Social Security (and that's a topic for another day )
OK. Who wants to be a millionaire? Scott assumed a 9% return, and at that rate, money doubles every eight years. He noted that if you saved $167 a month for between 12 to 20 years starting in your 20s, you'd have a million bucks by age 65. He called it the 'missing margarita' saving plan because it worked out to about $5.50 a day or about the price of a margarita.
His strategy is still sound. I ran the numbers at 7% return - although I continue to think diversified equity funds are appropriate investment vehicles, and over the stock market's 40-50 year history, you'll make considerably more than 7% annually - over the long run.
Okay. Skip a margarita a day - we raised the price to $6 for this exercise - beginning at age 21, and you'll have your million dollars at age 70 ... when most of us will still be working anyway these days.
I know folks who hand over ten dollars daily for lottery tickets. Whether it's the lottery ticket or a margarita, the point is - you can have a secure retirement ... and you won't be driven nuts by whether the S&P, the NASDAQ, or whatever index went whichever direction it did. For KERA Marketplace Middays, I'm Merrie Spaeth.
Merrie Spaeth is a communications consultant in Dallas.