Column for the New Haven Register’s Sunday EditionMay 25, 2014

To My Fellow Young Investors:

This week, I thought I would give my columnist dad a break and talk about an often overlooked subject that pertains to my life and millions of others my age throughout the world ̶ saving for retirement.

The majority of twenty-somethings share the notion that they are "too young" to think about retirement, that it is a lifetime away and years too early to begin planning.  However, this false perception is the reason why so many senior citizens today are forced to re-enter the workforce after their insufficient savings run dry.  

To avoid similar problems, take a step back and evaluate the long term.  To all those who have yet to begin thinking how you might want to live later in life, listen up:  The “15 Percent Rule” is a fundamental principle for retirement success emphasized in William J Bernstein's book, “If You Can”, which relates that by age 25, at the latest, you must begin to save at least 15 percent of your earnings every year and place it in a 401(k), IRA (regular or Roth), or a taxable account. Investing today is essential to prepare for increased longevity.  It mitigates the temptation to spend your extra cash on unnecessary goods.  Over time, the monthly contributions, along with the tax break you receive from the 401(k) and IRA's, will compound significantly.  

Bernstein's second core edict follows this: The money in your plan should be divided equally into three different mutual funds: a US total stock market index fund, International total stock market index fund, and a US total bond market index fund.  This diversity spreads out your risk ̶ Don’t keep all your eggs in the same basket.  At the end of each year you rebalance these three funds, again setting them equal.  This reallocation begets selling high and buying low.  These are the two primary pillars that will, over time, help you accumulate enough money to retire comfortably.

However, this is easier said than done.  

Like Hercules and his 12 labors to freedom, Bernstein reveals five hurdles to overcome in reaching financial liberation. The first is spending too much money.  Although this is intuitive, a lot of people lose track of their expenses in relation to their savings, and later in life this can bite you.  Before rushing out to buy the next high tech phone, stop and think ̶ do I really need this?

The second hurdle is understanding financial theory. This means knowing the difference between a stock and a bond, how a mutual fund works, and the way these vehicles interact with one another for your benefit.  Hurdle three is understanding financial history.  This differs from the former concept, in that the history of the stock market tells the story of the emotional

environments during up and down swings.  This knowledge will expand your scope, providing a lens to compare the present market. Most importantly, this will open your eyes to the subtle signs around you. As Bernstein says of Joseph Kennedy Sr., "When the shoeshine boys started offering him stock tips, he knew it was time to get out." 

The fourth hurdle is you.  The phrase, "you are your own worst enemy" rings true, for when the markets are peaking we want in, against what common sense might tell us, and vice versa if the market is tanking.  Emotion cannot be a part of the mix; you have to keep your cool and remember the long-term plan.  

The last obstacle is making the right decisions in managing your money.  If you want to get a financial adviser, make sure he or she has the right credentials (e.g.. CFP) and that you have a set range of questions to ask them.  Make sure that you are the right fit for each other.  This is just some of the advice Bernstein offers.

 For more details, look up his book, “If You Can.” Now being a 20-year-old college student, I'm on the cusp of joining the professional world, and decisions made now will reverberate 50 years down the line. This might seem like some far away fantasy, but the day will come for me and for you.  The question is will you be prepared? 

(Daniel Weiss is the son of regular columnist Alan P. Weiss, president of Regent Wealth Management Group in Woodbridge. He is also a CERTIFIED FINANCIAL PLANNER™ and a certified public accountant. Daniel attends the University of Michigan and is a member of the 16College of Literature, Science, and the Arts’ Class of 2016. Readers are reminded that certain investments and investment strategies may not be appropriate for them and that all investments involve risks and uncertainties. Consult an expert of your choosing if you have questions about investments. More information is available at www.regentwealth.com.)