Human beings weren’t made to save for retirement. For 99% of our existence on earth, we lived in tribes. Our roles would change as we aged, but there was no “retiring.” A built-in function of this lifestyle was also cradle-to-grave insurance: As long as we took care of the tribe, it would take care of us.
We don’t live in that world anymore, but we can still learn something from it. If you follow these three steps toward investing for retirement — building up a safety net, living below your means and investing the difference in low-fee ETFs, and developing your passions — your golden years could be your most enjoyable yet.
1. Build up that safety net
Obviously, feast and famine were a part of life during the Stone Age. What we often forget, however, is that the struggle was shared: One group of people didn’t eat while the others starved to death.
Because everyone in the tribes was necessary for survival, the hard times were shared — everyone ate a little less. While that dynamic doesn’t play out in modern society the same way, we have our own systems in place to provide a safety net — namely, insurance and an emergency fund.
By far the most important thing to square away to save for retirement is insurance — be it healthcare, auto, homeowners, disability, or long-term care. Without said insurance, one freak accident could wipe out all the work done in steps two and three.
Once that’s done, an emergency fund needs to be started for the very same reason. If you don’t have enough money on hand to make ends meet for (at least) three months without income, one untimely firing could also undo all the work you put toward saving for retirement.
2. Live below your means and invest the difference
Our ancestors had a built-in way to ensure they didn’t overconsume. Food wouldn’t stay good forever, so they were much quicker to give any extra stuff away than hoard it. And goods were burdensome for hunter-gatherers who were nomadic.
But don’t be blinded to the obvious investments they made. By giving away their extra food and providing for one another, they were investing in their futures. Surely, if/when they fell on hard times, the tribe that they had supported would be there to support them.
That’s the approach we have to take today to our own retirement portfolios. First,…