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Your Retirement Disaster -- Guaranteed!

Invert, always invert.

I didn't say that, Carl Jacobi did. Jacobi, a famous mathematician, also excelled as a teacher. Among his other distinguished accomplishments, Jacobi discovered that you can solve for X by first determining what is not X. Today I'd like to apply that same strategy to another complex problem -- your retirement.

What does the perfect retirement look like? Good question. There isn't a specific answer, either. There is, however, a firm answer for what is not the perfect retirement, and my aim today is to instruct you on a surefire way to plan for a disastrous retirement. If you elect not to follow this checklist, you're probably well on your way to a worry-free retirement. The choice is yours.

Hope for the best
Don't worry about calculating how much you'll need for retirement; don't save or live below your means. After all, saving is much less fun than spending.

Consumer spending is 70% of our GNP. Government, corporate, and consumer debt levels are at all-time highs. Federal Reserve Chairman Alan Greenspan noted on Aug. 26 that "debt has fostered economic growth, which has created imbalances in the form of a housing boom and the swelling current account trade deficit." For a truly miserable retirement, just keep doing what we're doing. Make sure you live for the moment and mortgage tomorrow.

Count on Uncle Sam
That's right, good old Uncle Sam will take care of you. Medicare and Social Security are all you'll ever need to live in the lap of luxury.

The average Social Security retirement benefit was less than $11,000 per year in 2003, and Medicare is bound to be around for a few more years before it runs out of money. So don't take control of your own destiny: Uncle Sam is looking out for you.

Choose to decay
Earlier this year, Motley Fool Rule Your Retirement editor Robert Brokamp interviewed Chris Crowley, author of Younger Next Year: A Guide to Living Like 50 Until 80 and Beyond. Crowley offered some thoughts on how to live a healthy and vibrant retirement. But that's not our goal; for a truly unhappy and unhealthy retirement, follow these precepts:

  1. Don't exercise. Exercise sends a constant "grow" message to your body to get stronger and more limber. By not exercising, your nerves will decay and your joints will wear out.
  2. Eat junk. Indulge yourself with french fries, fast food, and delicious Krispy Kreme donuts. And don't ignore trans-fatty acids, high-fructose corn syrup, nicotine, and alcohol each and every day.
  3. Disconnect and wither. Close up shop and narrow your social circles. The key to an unsuccessful retirement is a life of isolation.

Take financial risks
Bond yields are low, and returns on cash are staggeringly low. Don't be satisfied with a measly 3% return on your cash. Follow the herd and get in on some volatile market action.

A good place to start is real estate, which is a no-brainer with prices flying so high today. You can employ all kinds of destructive instruments for a chance at better returns. Let's start with leverage. Borrow the money you need, and better yet, use an interest-only loan. Then speculate in a condo in Miami. Everybody else is doing it -- 40% to 70% of condos in the Miami area are being bought as investments. That could definitely end badly. Using large amounts of leverage in a speculative market is a fine recipe for fiscal disaster.

Buy what you don't know
There's no need to research your investments or even know exactly what business they're in. Don't get caught on the sidelines while others are getting rich on stocks like Google (Nasdaq: GOOG  ) and Taser (Nasdaq: TASR  ) . Remember, these are just pieces of paper -- not parts of a business. And no matter how much you pay, there will always be someone else wanting to pay more. Above all, avoid index funds. There's nothing worse than the slow and steady growth of the S&P 500 (AMEX: SPY  ) .

Or if you don't feel confident picking your own stocks, pay a lot for a full-service broker like those at Morgan Stanley (NYSE: MWD  ) or Merrill Lynch (NYSE: MER  ) .

But for some truly great opportunities, keep tabs on recent IPOs, penny stocks, lottery tickets, and online gaming.

Put all your eggs in one basket
Asset allocation is for fuddy-duddies. Make sure you invest all of your savings in few obscure, high-risk investments. If you want to make some serious money, you've got to pick something that's difficult to understand and very technical.

Robert also interviewed financial planner Roger Gibson in August. According to Gibson, "When you reduce the volatility of a portfolio, all other things being equal, the rate at which money compounds increases." That's no way to ruin your retirement.

Spend more than you should
You just retired and earned yourself an extra 40 hours of free time each week. What are you going to do? Eating out and shopping are two great hobbies. We've heard a lot of stories from folks who took the lump sum and spent it in the first five years! If you want to be sure you run out of money, withdraw at least 10% of your nest egg each year. That's more than double what Robert has recommended to his Rule Your Retirement subscribers. Hey, imported cars, new clothes, big-screen TVs, and 40-foot RVs don't come cheap.

Foolish final thoughts
You should now have an excellent idea of how to ruin your retirement. However, if you want some contrary advice on the matter, join Robert Brokamp for some expert retirement advice. His goal is simply to help you focus your chi and ultimately Rule Your Retirement. Click here to try the service for free for 30 days with no obligation to buy. And if you sign up today, you'll also be enrolled in the "How to Plan the Perfect Retirement" online seminar that Robert will be hosting in October.

Buck Hartzell does not own shares of any company mentioned in this article. Taser is a Motley Fool Rule Breakers recommendation. Krispy Kreme is a Motley Fool Stock Advisor recommendation. The Fool has adisclosure policy.


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Buck Hartzell
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Buck is the Director of Investor Learning and Operations.

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