Warren Buffett: 10 Saving and Investing Tips for Retirees
Warren Buffett is one of the most famous and popular investors of all time. The billionaire CEO of Berkshire Hathaway is as well-known for his homespun wit as his long-term investment success, along with his willingness to share his opinions on all things financial.
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Dubbed the “Oracle of Omaha,” his annual remarks at the Berkshire Hathaway annual meeting in his hometown draw tens of thousands of in-person attendees, in addition to a worldwide audience of millions. Here are some of his best pieces of advice that apply particularly to retirees.
Have a Purpose
Some Americans view retirement as a time to stop working, “wind down” and finish out their lives. But Buffett suggests a recalibration of this thinking.
By viewing your retirement as simply the next phase of your life rather than a time when you should start “shutting down,” you can plan accordingly and enjoy a fruitful retirement. Buffett believes that without a purpose, retirees can suffer health concerns, which could reduce the quality of their life in retirement and even shorten their lives.
This approach certainly seems to have worked for Buffett. Rather than retiring in the traditional manner after reaching age 65, Buffett has continued to head one of the largest companies in the world, Berkshire Hathaway, even at age 92. His famously poor diet that includes cheeseburgers, ice cream and Coca-Cola doesn’t seem to have slowed him down, even at an advanced age, so perhaps his advice holds merit.
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Don’t Risk Your Financial Security for Family
Buffett doesn’t suggest that you abandon your family financially, but he does encourage you to take care of yourself first. If you dig yourself into a financial hole in retirement by helping your family members, you won’t have any source of income to replenish your funds. This doesn’t make you selfish, just practical.
If you still have a large retirement account as you approach the end of your life, that is the time you should think about leaving more money to your heirs. But you should enjoy most of it yourself while you’re still in retirement. As to how much you leave, Buffett said “the perfect amount is enough money so they would feel they could do anything, but not so much that they could do nothing” in the book “Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2013.”
Pick Up an S&P 500 Index Fund
Two of Buffett’s most famous proclamations about investing are that people tend to make it more complicated than it is, and that buying a low-cost index fund is the way to go for most investors. For one thing, you may live a lot longer than you imagine if you retire at age 65, perhaps 30 years or more. This suggests that an allocation to stocks is still appropriate for retirees, who will still likely have plenty of time to recover from any bear markets.
However, Buffett also strongly believes that it’s nearly impossible to beat the stock market’s return over time for even professional investors — especially after factoring in fees — making an S&P 500 index fund a better option. Buffett even goes so far as to say, “I just think that the best thing to do is buy 90% in an S&P 500 index fund,” when referring to how he wants his estate to be invested after he passes. If nothing else, this is a great way to avoid paying excessive fees in your investment account, which can add up over time and drag down your return.
What Do Advisors Say?
Buffett has an interesting relationship with financial advisors. Many advisors quote Buffett religiously, suggesting he’s one of the greatest investors of all time, while others are critical of his investment advice.
For starters, many advisors would suggest that a 90% allocation to the S&P 500 is too heavy for almost anyone, particularly someone of retirement age or older. They also argue that his advice on investing is too simple.
Buffett counters that this is because advisors are incentivized to make investing seem more complicated so they can earn more money. “It’s amazing how hard people make what is a simple game,” Buffett said of advisors. “But of course, if they told everybody what a simple game it was, 90% of the income of the people that were speaking would disappear.”
Buffett went even further than this, saying that “you can have monkeys throwing darts at the page, and, you know, take away the management fees and everything, I’ll bet on the monkeys [over the advisors].”
The bottom line is that you’ll have to take Buffett’s investment advice with a grain of salt, as he’s one of the richest billionaires in the world and the way he approaches things might be different than you. But there’s no denying that having a purpose in retirement, choosing historically successful, low-cost investments and avoiding fees and other drains on your retirement account are all solid pieces of investment wisdom.
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