The conversation centers on Warren Buffett’s advice on retirement, emphasizing the importance of maintaining a purpose, prioritizing financial security over helping family members, and investing in low-cost S&P 500 index funds. Despite being a stock picker, Buffett recommends index funds for their low cost and low stress. He also highlights the significance of staying active and engaged, as well as maintaining a long-term investment strategy to ensure financial stability in retirement.

Transcript:

Austin, Warren Buffett knows as much about money as let’s say to anyone alive.

And he’s full of classic advice and witticisms like rule number one, never lose money.

Rule number two, don’t forget rule number one.

But the question is, Buffett has talked a lot about money, but what does he have to say about retirement itself?

Yeah, I actually love Warren Buffett’s advice about retirement.

And we have to call out the ultimate irony here because he himself is not retired and he certainly has enough to do so.

I think he’s 93 now.

He’s not indicated any intention to retire anytime soon.

He’s still going strong.

But what’s interesting is that he does not actually give the advice that you would expect.

He does not give advice about picking individual stocks or sectors or income strategies and how much should you have in bonds.

Instead, he emphasizes the importance of having a purpose in retirement and avoiding financial risk for family and recommends a simple investment exposure to low-cost S&P 500 index funds.

That’s interesting because he himself is a stock picker.

So here he is recommending an index fund.

But look, in classic Buffett fashion, he bucks the trend and he focuses on the person and what matters instead of how to pick a market-beating stock.

And he surprises us yet again.

So number one here, have a purpose.

Warren Buffett suggests being in retirement as a new phase of life rather than winding down.

He believes you need a purpose to maintain health and longevity, and that’s true.

So despite being 93 himself, he still has a purpose, and that is running Berkshire Hathaway.

And he’s extremely confident, he’s got a lot of vitality, and he illustrates what that purpose can give for you even in advanced age.

And number two is other advice here is don’t risk financial security for family.

Eric, you and I have talked about how much of retirees’ budget ends up unexpectedly going to gifts for family.

An ARP study reported that nearly half of all retirees donate on average $6,500 a year to family.

And Buffett is saying, look, you need to prioritize your personal financial security over helping family members financially.

So he suggests only considering significant financial help to your heirs towards the end of life, ensuring that you, the retiree, can enjoy your savings without jeopardizing your stability today.

And his last piece of advice is to pick up a low-cost S&P 500 index fund.

Buffett has recommended this for many years, so no surprise.

He recommends this not just for people investing today, but also retirees.

He believes that over the long run, it’s difficult to beat the market over time.

And a low-cost index fund does provide a practical fee adverse investment strategy.

Also, let’s face it, it’s relatively low stress.

You don’t have to open your portfolio every day and see how individual positions are doing.

You can just put it in that index fund and then go harvest those hobbies in the garden, and do all those other things that Buffett is recommending.

Now, interestingly, Buffett has actually also suggested as much as a 90% allocation in an index fund.

Now, that’s between you and your financial advisor, and that’s really about temperament.

But we do believe that stocks beat bonds over the long run.

And that 90-10 exposure that Buffett is recommending will likely result in greater wealth in retirement, but also greater volatility.

So while I do like that number, you do have to put it in the context of your situation, and how much volatility you can bear.

But there you have it.

Buffett, surprising us again, wonderful, simple, straightforward advice for retirement.

So the key takeaways here, maintain a purposeful life, prioritize your financial security, invest in low-cost index funds.

And Austin, I want to mention one of my favorite Buffettisms, that he made 99% of his wealth after 50.

That’s not going to be true of everyone, but following his investment advice can help people continue to grow their wealth at a rate that might surprise them even into advanced ages.

So I would not look past what he has to say, especially about staying committed towards index funds.

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