Every seven minutes in the United States, someone is turning 50. Monday, I contemplated my seven minutes of fame.
I'm not one of those people who think 50 is the new 30. It's more important for me to eat well, exercise, and get a good night's sleep than to stay out late. It's funny how your metabolism slows down just when your children seem to be speeding up.
One of the few things I'm accelerating is my saving. I'm optimistic about building a new personal prosperity, my replacement term for retirement: something I don't plan to do. With two children younger than 12, I'm saving for college educations and have no intention of stopping work entirely. In my view, new personal prosperity is a life plan that's flexible, affordable, and what Benjamin Franklin would say is "useful."
I'm in my peak accumulation years, financial planners say, and I'm ahead of the curve a bit. Most Americans my age have saved about $100,000. I've done considerably better than that and look forward, now that I'm 50, to "catch up savings" of an additional $5,000 a year in my 401(k) plans to max out at a total $20,500 annually.
Although I have saved prodigiously, it doesn't make me feel too comfortable since I have seen the social safety net unravel in the past 30 years. I'm not sanguine about the future of public retirement and medical programs. That makes me want to fully fund my tax-deferred vehicles.
The Social Security program is due to go into deficit mode by 2017, the Social Security board of trustees warned this year. The Medicare hospital insurance trust fund is in much worse shape: Spending will exceed assets by 2013.
If Congress ever gets its act together on Social Security and Medicare funding, I just might see my $2,550 a month retirement benefit when I start taking Social Security at 70, though I'm saving as if it won't be there.
Retirement accounts also need to be consolidated. I have five different forms of tax-deferred accounts, and it's a headache. And generous tax credits or subsidies for low-income savers are essential if we are to encourage everyone to save.
My goal is to set aside 15 to 25 percent of my gross income every year. Unlike the conventional wisdom of Wall Street, though, I have no fixed goal of how much to save by a certain age or a specific rate of return.
Instead, I look to beat inflation in my portfolio by at least two percentage points a year. I'm doing that with a 16 percent return over the past three years. Inflation has been running at 2.7 percent annually.
I know my performance is lackluster, and I should be even more diversified with private equity and alternative investments that run counter to market cycles.
After having speculated in tech stocks, platinum, and palladium as a callow youth, my high-rolling days are behind me. I'm more interested in beating inflation with a mostly passive diversified portfolio.
My inflation hedge is a 10 percent position in Treasury-Inflation Protected Securities and commodities through the Pimco Commodity Real Return Strategy Fund. I also own funds that invest in Real Estate Investment Trusts, US stocks, and international shares and bonds. They are all relatively low-cost, well-managed vehicles. I try not to pay more than 0.50 percent annually in management expenses.
For life insurance, I have a 20-year level term policy. With a premium that stays the same every year, that's enough to cover college expenses until my daughters leave the house, I surmise. My other savings would leave a decent nest egg for my survivors.
Last year I bought a reasonably priced disability policy through my alumni association that will pay me $4,000 a month in the event I can't work.
For short-term emergencies and property taxes, we keep about a year's salary in a money market and short-term bond account.
The simplest cog in my prosperity plan is to save regularly and stay out of the most expensive kind of non deductible debt. We despise high-interest, short-term debt of any kind. We pay off our credit cards every month.
John F. Wasik is a Bloomberg News columnist.