Ben Stein How Not to Ruin Your Life

There's a school of economics called "rational expectations." This theory holds that when people sense a big problem ahead, they make rational provisions for it.

Thus, upon learning that Medicare is totally bankrupt and will ultimately bankrupt the federal government, sensible people add to their savings. These people also add to their savings upon learning that Social Security will be bankrupt in about 30 years.

And, upon realizing the sad truth that oil will probably fall for a few years, but will eventually cost a few hundred dollars a barrel, smart people make some provision to have enough money to pay for it.

I don't think the people who thought up the theory of rational expectations had enough contact with ordinary citizens.

Irrational Expectations

My pal Catherine Collinson at Transamerica Retirement Services emailed to tell me that only about one in five baby boomer families has as much as $100,000 in savings. The overwhelming majority have far less.

The overwhelming majority live in terrible fear of retirement, but are doing almost nothing about it. Only about one in four expects to have a comfy retirement. I suspect only a few of them have a clue about how the iceberg of Medicare is about to sink the Titanic of their hopes and expectations.

To add to this, what with the major balance of payment problems, severe dependence on unstable nations for our oil, a collapsing educational system, and a wild upsurge in crime that will necessitate major personal and government costs, we face major uncertainty.

This doesn't even factor in terrorism. Imagine the impact of just one "dirty bomb" in downtown Manhattan. How many years would the markets be down after that?

A Day in the Sun

Well, anyway, file that away in a corner of your brain for a moment and let me tell you about my day.

It was a perfect sunny summer day in Malibu. I spent a large part of it gardening (which I'm very bad at but enjoy), some of it filing financial statements, and about two hours of it lying in the sun with my dog while listening to Mozart on my headphones.

By the end of the day, I was in ecstasy. Then I got that e-mail from Cathy Collinson.

And here's what I thought: If I had to, I could, at 61, retire and live quietly for the rest of my life at my little home in Malibu doing what I did today. I don't want to, because I travel around preaching retirement readiness, and I love doing that. But I could if I wanted to.

Why can I? Because my parents were thrifty, and good planners. And because they bought low-cost variable annuities that paid off like winning the lottery, and bequeathed them to my sister and me.

Also because I've been a saver (although not as good of one as I should've been) all my life; because I took the trouble to learn at least the basics of investing and then some; because I have two great financial advisers named Phil DeMuth and Kevin Hanley; and because I'm lucky enough to have had a career that paid the bills.

All of that -- and, most of all, the greatest of gifts: being an American -- allowed me to enjoy this glorious summer's day.

Plan, Invest, and Save

Here's how you can get to a similar place in your life (if you're not already there):

• See a financial planner that you've chosen with a microscope. Tell him or her everything.
  
  
• Make a plan, and make sure you understand every word of it.
  
  
• Have widely diversified investments.
  

  I recommend devoting one-third to a very diversified international fund; one-third to a total stock market index for the U.S.; and one-third to a highly diversified bond fund that tracks the Lehman bond index.
  

• Put at least 15 percent of your wages into these investments every month, before you buy a plasma-screen TV or a cruise or even your child's education.
  

  Keep doing it even when the commentators are telling you that the markets are collapsing and the sky is falling.
  

• Make and keep habits of thrift. Unless you have an income of $1 million or more a year, don't spend any money you don't have to.
  
  
• Keep in mind that you're your future, older self's only dependable and indispensable friend. You're your own indispensable counselor, too. So you're the pillar on which your old self will rest -- behave respectfully to that older self.
  
  
• Carefully consider variable annuities in addition to your investment portfolio, but only when you understand them and know what each fee is for. In your really advanced years, when you no longer have the strength to keep track of things, that automatic check will be a lifesaver.

Make Your Own Day

As my student, Ferris Bueller, once said, "Life goes by pretty quick. If you don't slow down, you might miss it."

If you want the leisure to slow down, start making those plans and socking away those savings. Then you, too, can have those perfect summer days some sweet day.