Let me be 100% honest; we should have money pouring out of our eyeballs in our 70s. By leveraging the power of compounding early in life, we ensure our 70s are plentiful.
For example, let’s say my $340,000 portfolio compounded at 10% annually while I added $1,000 per month. In 27 years (I’m 43), I would have $5.9 million in the bank at age 70. Now that’s exciting!
Do not fret if your future doesn’t look that bright; you still have time. You always have time. Go back and read this series from the beginning (20s, 30s, 40s, 50s, 60s) to start building wealth.
Financial Freedom Road Trip #1
I’m going to tailor today’s article as if we are moving into our 70s in a position of power. We worked hard, saved religiously, and invested like clockwork. It’s time to live our best while setting up our future generations. Let’s begin.
Bond Investing in Your 70s. Bonds become increasingly important as we age because they represent peace amidst the chaos. However, if our money is flowing smoothly, we don’t want to push it to a screeching halt by overdoing it with bonds.
This means that if we understand the markets, we don’t need to put 80% of our holdings into bonds. Ideally, we would keep 20-30% of our wealth in short or long-term treasuries.
You want to continue to grow your wealth at a fast pace—if possible. Some people may reach their 70s with $1 million. In this case, they would need to protect their capital.
If you have a sizable portfolio and live below your means, you can keep a larger percentage in stocks because you can live on the cash flow. Cash flow is the heart of retirement, and the stock market will generate a much higher return (via dividends) than bonds.
The Road to Homeownership #2
The bonds we truly need to purchase at this age are Series “I” Bonds for our kids and grandkids. We can buy $10,000 per social security number.
Being in our 70s is akin to being on an airplane; in case of emergency, put on your gas mask first before helping others. In this case, ensure that you have a lifetime of income before you begin assisting your family.
You don’t want to put yourself in a position where your family must take care of you financially in your advanced stages. You can protect yourself by having an emergency fund in a high-yield savings account.
You also need a matching account of “working capital funds.” We can keep our working capital in bonds and certificates of deposit.
Stock Market vs. Bond Market vs. Options Market
If we have $150,000 in our emergency fund, we can match it with $150,000 in Treasuries. That way, we can prevent ourselves from having to sell stocks during a downturn.
Stock Investing in Your 70s. As you can read above, we want to keep as much money in stocks while protecting capital elsewhere. Why the love of stocks?
Stocks represent the future. The minute we start dismantling our stock portfolio, the minute we begin to stop all progress toward the future.
Our 70s is a good time to convert some high-flying stocks into more conservative index funds like DIA, SPY, QQQ, and VTI.
We can also start arranging our dividend-paying stocks and index funds into separate but equal portfolios that we can leave to the family via trust funds.
Let’s take a $6 million portfolio. Let’s say that I have two kids and four grandkids that I want to protect via income. I know that cash flow is more important than a lump sum.
The Road to Homeownership #1
I want to set up an irrevocable trust that includes the $6 million. I could arrange six different $1 million accounts. Inside each account, I could include 30% index funds and 70% dividend-paying stocks and income-investing products.
The key here is teaching one of my sons to manage these accounts, which will save the family tons of money (fees) throughout their lifetimes.
My son can set up distributions from the accounts based on last year’s growth. Or he can give conservative cost-of-living increases based on inflation. The goal would be to spend much less than the portfolio is growing.
This mindset is how the rich stay rich and the poor stay poor. The rich think far into the future and aren’t afraid to put “controls” on their kids and grandkids.
I plan on leaving my family an irrevocable trust that will survive many, many generations. I want to generate cash flow for another 100 years (minimum).
Love, Passion, & Freedom: Welcome to Passive Income
Index funds allow the portfolio to keep growing along with the market. Dividend growth stocks help grow the portfolio while providing income. However, someone must babysit dividend growth stocks over the years.
Finally, income-investing products like closed-end funds and business development companies require extensive knowledge to supervise. That’s why I need my sons to become subject matter experts to ensure their income continues to increase throughout the years.
Options Trading in Your 70s. Why would we need to trade options in our 70s? We definitely don’t want to have hundreds of thousands of dollars in our options trading account at this stage in life.
Options trading will play a huge role in keeping our brains healthy and sharp. There is nothing quite as exhilarating as options trading.
We can have a $20,000 long strangle account or a $50,000 account for selling covered calls and cash-secured puts. We aren’t trying to grow our wealth as much as keep our minds sharp. We also want to stay in lockstep with what’s happening in the markets.
Don’t Gamble with Retirement 11
More importantly, we want to teach our grandkids how to trade options. If someone can learn how to trade options in their 20s, they are well on their way to becoming successful traders and investors.
Why do I say this? Our natural instinct is to fear the stock market and options trading. Conversely, many young people jump into the markets recklessly without having a plan or strategy.
They jump in, trying to double their money overnight, burn themselves out, blow up their accounts, and then swear off trading for the rest of their lives.
As seasoned options traders, we can teach patience and persistence. We can create a strategy that consistently produces a 30% annual return.
Most young people do not consider a 30% annual return anything special, so we must teach them differently. That’s how we can raise a generation that can take their trust funds and grow even more wealth safely and securely.
Five Ways to Make Rental Income
Putting it all together. Our 70s are about the future, not the past. We have led extraordinary lives and built wealth for ourselves and our spouses.
It’s time to pay this wealth forward. Many people don’t believe in giving to the next generation, and they have the right to feel this way.
I am the complete opposite. My wife and I went through this life without having one penny given to us. We made it through with extreme work ethic and unabashed obsession.
Happy Cash Flow Retirement 10
Conclusion. I don’t need my sons to suffer through life with the weight of the world on their shoulders. Most of the issues my wife and I faced were caused by a lack of knowledge, not a lack of effort.
Therefore, if I would have had someone to talk me through some of these financial pitfalls, that would have changed my life much sooner.
I want to leave my kids and grandkids with not only cash flow but also knowledge. If they can start thinking like investors early, it will allow them to see their lives with “adding value” as the top metric.
Once someone commits to adding value to the world, they will attract others who do, in turn. Investing is about adding value so one can receive a return on one’s investment.
That’s why I want to create a family of investors—with a foundation of wealth to grow and build. That’s my dream for my 70s. What’s your dream? Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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