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Author: 39dopey One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75636  
Subject: Re: HELP! DID I WAIT TO LONG? Date: 10/26/1999 9:17 AM
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I guess I'm an idiot, but I would like to become a Fool. I'm fifty one years old and I just woke up to the harsh realities of being old and poor. I don't want to spend my old age living under a bridge with a shopping cart full of aluminum cans. I had a 403B from a previous job with about $18,000 in a stock fund.When I noticed that the DOW was melting down a few weeks ago I pannicked, after spending two days trying to find my paper work, and had the fund (Prudential) transfer my holdings to a money market. When the transfer was completed at the end of the day, my holdings were around $14,500. Since then I have opened an account with Scott Trade, and filed the paperwork to roll over the 403B into a self directed IRA with Scott. It will probably be another seven to ten days, before I have access to the funds so I've been trying to learn all I can. Yesterday I stumbled across this website. All the examples I've read so far are about the 25 or 30 year old who invests for 30 years and is a multimillionare. What can I do in the next 15 or 16 years to stay out of the shelter. My wife and I have just bought a house and we have about 20K in credit card debt to pay off, but Ive been making double and triple payments as often as I can. Is there any hope of becoming a Fool from the bottom of a pit like this. Till we pay off the plastic, all I have to work with is the IRA. Where do I start?

Well, it doesn't look good on just the IRA, but it's not hopeless either. Run an Excel or similar spreadsheet, and you'll come up with something like the following:

Social security will exist, and you'll be able to afford cat food on what you receive from Uncle Sam. Check with the Social Security Administration to see what you can expect from them, so you'll know whether to plan on generic cat food or name-brand.

In 16 years, at a reasonable 100% stock portfolio annual return of 12%, your $14,500 will grow to almost $89,000 even with no more investments. At a 5% withdrawal rate, that's an extra $370 per month. That's not great, but it's enough to move up from cat food to real food in a frugal lifestyle.

If you invest an additional $2000 per year in the IRA, at the same return, you'll end up with $185,000 in 16 years, or $770 per month beyond social security - real money and enough to visit grandchildren without hitch-hiking. With both you and your wife adding $2000 per year to the IRA at the same returns, you will have about $1170 per month beyond social security. That's real money, enough for cautious comfort.

I do not recommend taking extreme risks to have a chance at higher returns on your investments, for example, stay away from options, futures, day trading, penny stocks, and other attempts to out-smart people with more money and more information. I do recommend learning all you can about investing. Keep your money in either the money market or an index fund like the Vanguard Index 500 until you know what you are doing and are comfortable with individual stocks. It may be best to avoid stocks until after the new year, both to allow time to learn and to avoid the volitility they may experience with Y2K approaching, but that's your decision.

After you are ready to invest, do your own research and choose stocks that you are comfortable with. There are several portfolios tracked at this site, but you have to make the decision whether to use one or more of them or choose individual stocks on your own. You may want to move your IRA to a discount broker. I use Waterhouse, but you should do your own research including checking out the discount broker board here to see who best meets your needs for avoiding annual fees, low trading fees, and providing the service you want.

I haven't touched the topic of paying off your debts, but you should figure out how to accomplish that and make it as high a priority as investing more for retirement. The Living Below Your Means board may help you there. If you have trouble finding any board, just ask. Good luck, and don't lose hope - it's not as bad as it sounds.
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