How saving and sensible investing can pay for a long, active, comfortable retirement
Former newspaperman Gordon Eliot White wrote me a smart email a few weeks back.
White had a lot to say about how to save on a relatively small salary (his peak was $42,000), what to invest in (and what not to invest in) and how to make 30 years of retirement healthy and fun.
"I was a saver, not a spender," said White, who approached saving and investing with an entrepreneur's flair. "Aside from a few years in the early 1970s I have been a buy-and-hold investor."
The 85-year-old former "print guy" works hard at retirement. He lives on a creek in southeast Virginia, near the Chesapeake Bay. He relaxes by sailing a half-century-old sailboat he keeps docked at the edge of his yard. He also likes to travel, recently splurging on a 10-day trip with a grandchild to Paris and London.
White walks two miles a day, four or five times a week. He has written a monthly column for an antique car magazine for 25 years. He still drives his antique racing car in "vintage events" and has nine books to his credit. He is writing a history for his church and chairs Middlesex County's economic development agency.
"I certainly do not lack for things to keep me active and engaged," White said. "I act as 'harbor master' of Moores Creek and keep up with a new wife, 12 years my junior." (I will be happy if I make it to 85 with all my marbles.)
White and his wife live comfortably yet modestly on his $750-a-month pension ("small potatoes"), his $19,000 a year from Social Security and the income from more (maybe way more) than $1 million in taxable and tax-deferred investments that he has accumulated.
He was "involuntarily retired" at 55, in 1988, when his newspaper's circulation dropped by half.
"One reason I have survived financially after being early-retired is that I have no need for luxury," said White, who drives a 1985 Honda CRX with 247,000 miles. "Comfort, yes, but not luxury."
(My wife still ribs me about the black two-door, five-speed Honda Civic, with the roll-down windows, that was the Heathmobile for a dozen years. We have since gone upscale with a new Subaru Forester. I gagged on the $30,000 price tag.)
White gets it. He understands the investing thesis that if you buy and own stuff, and limit mistakes by not pursuing the quick return, your wealth will grow. You don't have to earn a big salary to get in on America's prosperity.
Like me, he gets jazzed from earning dividends on stocks and bonds.
Like me, he keeps his investing expenses low, doesn't trade stocks often, limits his tax exposure, and sticks with blue chip stocks rather than trying to play a highflying IPO such as Uber.
White and his wife live mostly on the dividends from 62 blue-chip companies, including Coca-Cola, Bristol-Myers, Ford, Verizon, Caterpillar, American Electric Power, Duke Energy, Baxter Labs, Johnson & Johnson and PPG Industries. He also owns a couple of exchange traded funds (ETFs).
He said all the holdings have appreciated "a lot," but he doesn't plan to sell any because, (a) he doesn't need the money and (b) selling would create a sizable tax bill. (He hates the "required minimum distribution" that he must take on his tax-deferred retirement accounts because they raise his taxes.)
White is fortunate in one respect. His father, who was an engineer with New York Telephone, gave him early training in investing and taught him the value of owning shares in good companies. It took me until I was 40.
"In 1952, when I was 19, he gave me a few hundred dollars' worth of stock and set me up with a Bache & Co. account," White said. He said his father's stock trades made the family "comfortable, but never really wealthy."
He fell in love with newspapers at the age of 7 when his parents took him to see a movie version of the play "The Front Page" in 1940. He graduated from Cornell University, where he worked on the Cornell Daily Sun, in 1955 and tackled the first of several newspaper reporting jobs, which included a stint at the Chicago American, a Hearst tabloid. He arrived in Washington in 1958, and spent most of the next four decades here.
"I am one of those people fortunate enough to have been able to spend his career doing what he wanted to do almost as far back as he can remember," White said. "I always thought I'd be a reporter until I dropped."
He has been a mostly conservative investor, but he went off the rails for a few years in the 1970s. The experiments included investments in gold, annuities, oil wells ("not worth the complications of doing the taxes"), convertible debentures (whatever those are), junk bonds and pork bellies. He even bet on horses.
White bought a couple thousand dollars' worth of gold and then found it was expensive to store and did not earn interest or pay a dividend -- and you had to pay a transaction fee to buy or sell it. "I tried all kinds of things, some of which were stupid," White said.
"I have probably made every investing mistake it is possible to make, though with only relatively small amounts."
Some early investments in homes paid off. He bought a small house from college pal Philip Merrill, who founded Washingtonian magazine. He used the rental income to buy another house in Alexandria, Virginia, and then another in McLean, Virginia.
The money he made from those properties, though not huge, was the seed money for future investments.
He won big on the sale of his Alexandria home in 1989. The house cost $50,000 in 1972 and sold for $650,000. (It is now assessed at $2.5 million.)
The key to White's comfortable life in his ninth decade is his abiding belief in living beneath your means and saving. When the 401(k) retirement savings accounts started in 1978, White stashed every cent he could in an account. He did the same with his individual retirement account. (I am a big believer in tax-deferred retirement accounts.)
"I saved what I didn't spend," he said. "And I made sure I didn't spend all that came in."
Any freelancing money, like a $100 monthly payment from an amateur radio magazine, went to investment accounts for his three children. When they graduated from college, they had $18,000 each to make a start in life.
White wrote several books on auto racing that have kept him sharp and engaged. The books have covered their expenses with a "wee bit to spare." He is still on the rolls as the Smithsonian's auto race adviser.
He moved from Alexandria to Middlesex County in 1996, saving on real estate taxes and housing costs. But retirement was not as inexpensive as he thought.
"We travel more," White said. "What we save on work clothing is peanuts. Food is the same. Utilities, if anything, are more. We drive more."
His investment portfolio, including IRA, 401(k) and taxable accounts, has changed over the years. In 1989, he was 40 percent invested in Virginia municipal bonds and 55 percent in index funds, mutual funds and individual stocks.
"Today I am 2 percent cash, 56 percent equities and 42 percent munis," he said. "You got to have equities to guard against inflation."
He calls the municipal bonds "my salvation," because they pay 4 percent interest and are not taxed. He stays away from mutual funds because of fees and taxes.
The biggest retirement shock was that Medicare isn't free.
"I thought I had already paid for Medicare over all the years when Medicare taxes were being deducted from my wages. But when my Social Security check arrived smaller than I thought, they said, 'Mr. White, we deduct your Medicare premiums from your check.'"
His biggest regret is not putting retirement money in Roth IRAs. With a Roth, you don't get an immediate tax deduction the way you do with a normal IRA. But you can leave the money in as long as you like and never pay taxes on it again.
"I could have afforded to forgo the tax deduction during my working years in order not to pay ordinary income rates on 50 and more years of appreciation on my investments."
Right now, his goal is preserving his capital so he can enjoy his 30-year-and-counting retirement.
"I plan to be around for another 15 or 20 years of it," he said.