How much should you save? Where will your income come from? Retirement guru Wes Moss has the answers you need for a happy retirement. Moss is a student of what makes retirees happy and has identified five money secrets of what goes into a successful retirement. Actually, only four of them are money-specific. The other secret, Moss’s first, is the most important: deciding what you want to do with all that retirement money.
Turns out the happy retirees are those who are passionate about at least three “core” pursuits. By contrast, “unhappy” retirees have less than two core interests.
Moss is only 38 but is fast becoming a guru for those who aspire to a happy retirement. By day, he’s a mild-mannered money manager, the chief investment strategist for Atlanta-based Capital Investment Advisors. In addition, he’s the host of a live radio financial advice show called Money Matters, which airs in Atlanta. He’s the author of three books, including one that focuses on the five money secrets: You Can Retire Sooner Than You Think.
Oh, did I mention he was famously a participant on Donald Trump’s hit TV show, The Apprentice? He got half way through season two in 2004. In an interview with me, he confesses: “If I were to make a recommendation to a younger adviser, I’d say never go on a reality TV show, but it worked out. I got out unscathed. I didn’t win but there was no damage.” And living in the spotlight for a while set the stage for Moss’s career as a public speaker and broadcaster.
Now about those five secrets. Once you’ve decided on what you’re going to do in retirement, you need to figure out how much money you need to save to achieve this. Here’s where one of Moss’s most popular concepts comes in. In a nutshell, Moss has developed a Thousand Bucks a Month Rule that says you need to save $240,000 for every $1,000 a month you will require in retirement income. This assumes a retirement that begins no earlier than 60, and the money you save is the amount needed to fill the “gap” between what’s provided by government-issued retirement benefits and employer pensions and what’s needed for your projected lifestyle.
Let’s assume you are getting $1,500 a month from the Canada Pension Plan, Old Age Security and possibly the Guaranteed Income Supplement as well. Assume another $1,500 will come from your employer pension. So you have $3,000 coming in but your aspirations require $5,000 a month, so your monthly “gap” is $2,000. Based on the Thousand Bucks a Month Rule, you’d need two chunks of $240,000, or $480,000 in invested capital to generate that extra $2,000. Fortuitously, $480,000 is almost exactly the magic number that most “happy retirees” view as the minimum necessary to achieve their retirement objectives.
Moss’s Rule is based on generating a 5% annual investment return. That’s slightly more than the 3% or 4% guideline championed by financial planner and author William Bengen, but it’s a return that Moss believes is eminently achievable through his fifth money secret: become an income investor. He recommends building a portfolio of dividend-paying stocks, high-yield bonds and alternative investments. You may not quite make it to a portfolio that generates 5% in income, but even if you have to slowly break into your capital, most nest eggs should last several decades.
Secret three, by the way, is to pay off your mortgage in as little as five years, which is exactly what I’ve always argued: the foundation of financial independence is a paid-for home. And Moss is in the U.S., where the wisdom is that mortgages can be dragged out because the interest is deductible.
Secret four is to develop an income stream from at least three or four sources, not just one. Unhappy retirees too often have only government benefits and an employer pension to live on. Moss wants to see multiple streams of income even if some of them are mere rivulets: real estate rental income, part-time employment income, investment income, income from royalties, etc.
Moss’s book contains only a short list of book recommendations. One I’m reading is Lowell Miller’s The Single Best Investment: Creating Wealth with Dividend Growth, a book that is one of Moss’s investment bibles. Another is Dan Buettner’s The Blue Zones, which is about longevity.
In our interview, I ask Moss if there is a contradiction between planning for both extended longevity and early retirement. “A legitimate question,” he concedes, “they are a little contradictory. We all know people who have lived a long time: I have several clients in their 90s. But then there are those who left this world too early: couples who retired only when they were financially set and six months later the husband is gone with cancer. Sure, maybe we will all live longer but so many people don’t. I want to help people enjoy the time they do have.”
We agree financial planning would be so much easier if we just knew the exact moment of our deaths. But who’s in that situation?