Editor's Note: This story originally appeared on NewRetirement.
Warren Buffett earned his nickname honestly. The Oracle of Omaha’s success at investing is legendary, and he has ranked among the world’s wealthiest people time and again. But Buffett isn’t your typical wealthy business magnate. His retirement planning advice isn’t just for the rich and famous — it works for everyone.
He’s known to be frugal, still living in the same home in Nebraska that he’s owned for decades, and surprisingly down to earth, especially considering his net worth. If anyone knows how to build wealth, it’s him. And here are some of his best tips for creating a comfortable retirement.
Think long-term investments
Investing isn’t for the faint of heart. But because most everyone should be investing, that leaves a large portion of society at odds with a bad case of nerves every time the market wobbles. Jeff Rose, a certified financial planner, writes for U.S. News & World Report that Buffett’s strategy is long-haul investing. The people who weather the storms usually come out on the other side in a better position.
If the daily ups and downs get to you, you’re selling yourself short. Buffett believes that investors should stay the course, even when you’d really rather cash in your chips and go home. Pay more attention to stocks using index funds and less attention to short-term gains, and you’re more likely to come out ahead.
Watch out for bonds
Bonds and other cash-based investments might seem safe, but Buffett believes that they’re anything but. In the book, “Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012: A FORTUNE Magazine Book,” he warns that currency-based investments, even money-market funds, can be downright dangerous.
Currency-based investments are dependent on the value of the dollar, which means that even mortgages as investments are risky. He says “the dollar has fallen 86 percent in value since 1965.”
Don’t forget to plan your next phase
Retirement isn’t the end. If it was, you wouldn’t need to spend so much time and exert so much effort planning the financial side of it. So while you should devote a healthy amount of attention to retirement income, don’t forget to plan what you’ll do after retirement.
According to U.S. News & World Report, Buffett says retired folks need a purpose. Without one, you risk losing your health. Plan for retirement as if it’s the next phase of your life (which it is) instead of the slow wind down (which it otherwise could become).
Be cautious about financing the family
You shouldn’t devote too much time to planning what you’ll one day leave to your family. Retirement is about your life, not how you can finance everyone else’s. That doesn’t mean that you should only think about yourself, but you shouldn’t risk your own security and happiness for the sake of people who should also be working toward their own.
In “Tap Dancing to Work,” Buffett suggests that “the perfect amount is enough money so they would feel they could do anything, but not so much that they could do nothing.” He intends to leave more (by far) to charity than to his family.
It’s sometimes difficult to think about following the advice of people who might as well be considered professional billionaires. Sure, they can invest a certain way because they can afford to. But Warren Buffett uses plain common sense when it comes to investments, and you can, too.
Add a Comment
Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.