Ben Stein How Not to Ruin Your Life

When I first moved to Los Angeles 31 years ago, I had a number of rich friends. They were good to me. They took me to dinners at elegant bistros, threw parties for me in their Beverly Hills homes, and gave me lavish gifts for my birthday. They were fine people.

Today, some of them are still rich. They still have lavish homes in Beverly Hills, they usually also have homes in Malibu or out in the desert or both, and they travel the world and have servants.

Many of them, however, are broke or nearly broke. They're not happy. They worry constantly. They live smaller, more cramped lives.

Time Is Neutral

The interesting thing is that the ones with less money are, in every case, just as smart as the still-rich group. The big difference is that the still-rich group had a sensible, disciplined plan to stay rich.

As my old pal from Yale Law School who's now an iconic professor at Harvard would say, "They saved." They weren't super-geniuses. They just realized that such things don't take care of themselves, so they saved in a sensible way.

That may seem like the essence of triviality, but it isn't. Let me give you an analogy: Four decades ago, Martin Luther King Jr. was speaking about how to secure civil rights for African Americans. He said that one of the main stumbling blocks he faced was well-meaning people who said that time alone would heal problems. To the contrary, insisted Dr. King, "Time is neutral," and cures nothing.

A Plan of Action

The same is true of retirement planning. Time, by itself, will solve nothing. You have to have a plan to operate successfully in the time you have between now and retirement.

You have to put aside enough money so that you'll have an adequate income when you retire, counting pensions, Social Security, annuities, variable annuities, stocks, bonds, real estate, and whatever else you have. A retirement calculator can help you figure out how to reach your goal.

Remember, time is neutral and cures nothing, but making wise use of your time gets you exactly where you want to go. You also have to know that there will be serious inflation between the time you retire and the day you die.

There could be a dollar crisis, too, which I've warned about for years. If this happens, inflation won't just creep up, it'll zoom up. So you need investments in foreign-denominated mutual funds and ETFs. You need stock funds that pay a good dividend and also have the potential to rise in value. And you should look into variable annuities that have guaranteed payment increases even with inflation.

Above all, you must have a plan. You have to find a great investment advisor and go with his or her advice. Time cures nothing, but planning and action do.

An M&A Mania

Now for a shift in gears. As anyone who reads the news knows, there's been a mania of mergers and acquisitions lately. Many of these have been by well-funded private equity companies buying public companies, and usually, there's a major move upward in price in the acquired company.

It would be long-winded of me and more than you need to know to explain why these deals happen. Suffice it to say that they happen and, as the saying goes, "Money is made in the dark."

Once you own a company, you can do a lot of tricks with the books to make even more money from it. There's no older trick than to make a company look good and then sell it.

Calculate the Risk

So how can you profit from the mergers-and-acquisitions fever? You could always buy stock from a company that's being mentioned as a possible buyout victim. You'll usually do fine that way.

You could also buy stock from a company that's being mentioned as a buyout victim with a deal already on the table. You'll almost always make money this way, because the deal is inevitably sweetened. But whatever you do, please buy in small amounts. The deals sometimes fall through, and it hurts when they do.

In fact, I don't recommend this approach except for professionals and people with money to burn. Instead, I suggest that you just stick with the indexes. They'll move as the stocks in them move, and that's good enough. You can be a risk arb -- an M&A speculator -- if you want to, and maybe you should for a tiny fraction of your grubstake. But please don't risk a lot on this maneuver. As I say, deals have been known to fall through.

Let Them Eat Sushi

Finally, I get a number of emails from people traveling to my home city of Los Angeles. They want to know where to eat on a budget. I have a simple recommendation: my absolute favorite Japanese place, Whatasushi, at 260 North Beverly Drive in Beverly Hills. It's inexpensive, cheerful, clean, and has great sushi and tempura.

I know this is a trivial matter compared with retirement investing and mergers and acquisitions, but since so many people asked, that's my recommendation. I don't get any money for it, or any free tuna rolls for that matter -- I just love their food.