I don't know about you, but I spend hours a day planning for retirement.
I devote a good portion of each day to deciding where on Peninsula de Nicoya I should build my beach bungalow. How many hours a day I'll spend out in the surf trying to ride the waves versus how many hours I'll spend sitting at the bar, pretending I can.
How often I'll come back to the States. If I'll come back to the States. Whether I should buy an old beat-up Jeep, or just walk the lonely, dusty streets of Mal Pais, Costa Rica. You know, the important stuff.
You probably think I'm crazy …
… especially now that we are firmly in the teeth of one of the worst bear markets any of us can ever remember.
In fact, a few people have even suggested that I stop daydreaming about retirement, and start dusting off my resume. After all, they're convinced that thanks to the past two months all of us are now going to have to work until the day we die.
To these people, I suggest a simple exercise ... head over to Yahoo! Finance and take a look at the one-year chart of the S&P 500. It's gut-wrenching. Then check out the two-year chart. Even worse. Five years. Still pretty dismal.
But then pull it all the way out to 10, 12, or even 15 years. Suddenly things start to look pretty good again. If nothing else, it shows you that stocks really can grow your money over time. It also demonstrates that as bad as this drop has been, it's only a bump in a road that has historically climbed steadily upward. You don't have to take my word for it, though.
In a recent op-ed piece Warren Buffett wrote for The New York Times, he points out, "Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."
So, what would Buffett do now?
I realize many of you -- like my parents -- don't have 10, 12 or 15 years until retirement. In that case, I'd suggest you take advantage of our Motley Fool Rule Your Retirement service immediately -- my parents do.
After all, our in-house retirement expert Robert Brokamp can give you some great advice, tips, and tricks for preserving -- and even growing -- your wealth in these tough times.
But for those of us who still have 10, 15, or even 50 years until retirement, I urge you follow Buffett's lead and look for great businesses with strong moats, selling at good prices. As you probably know, Buffett just bought major stakes in both Goldman Sachs and General Electric.
And whatever you do, don't fall into to any of these traps that could one day keep you from living out your dreams, such as:
Trap No. 1: It's too early to plan for retirement
According to a study cited in a colleague's article, 49% of people age 25-34 have less than $25,000 saved for retirement. While that's not particularly surprising, this certainly is: A mere 23% of people over 55 have more than $250,000 saved up -- and they're within a decade of retirement!
Too early to plan for retirement? Hogwash! Can you imagine if Tiger Woods' parents had told him he was too young to swing a golf club, or if Roger Federer's coach had told him he didn't need to practice his forehand yet? A large part of the reason those two men so dominate their respective sports is because they got a jump start -- and they never let up.
The same holds true with investing for retirement. You need to practice, work hard, and focus -- so that when game-time finally arrives, everything is effortless and just falls into place. Is it a coincidence that Warren Buffett began investing at 11, has practiced every day since, and is now the richest man in the world? I think not.
So, what gives? I think it has a lot to do with the second investment myth you need to ignore at all costs.
Trap No. 2: The "I Can't Beat Federer" Syndrome
If you've watched professional tennis anytime in the past decade or so, you know that virtually no one can beat Roger Federer -- except for Rafael Nadal. Likewise, virtually no one can beat Tiger Woods on Sunday or otherwise. You probably can't, and I certainly can't.
Furthermore, it's not very likely any of us will ever be a better investor than Buffett. Nor is it likely we will one day be able to brag about how we got in early on and then rode off into the sunset.
So what? Just because I can't beat Roger Federer doesn't mean that years of practice and dedication won't turn me into an exceptional tennis player, or that hitting a bucket of balls at the range every day won't improve my drive immensely.
And just because you may not ever match Warren Buffett's wealth doesn't mean you shouldn't follow his investing style -- regular purchases of excellent companies selling for less than they're worth. Yet many investors mistakenly believe that the only hope for securing life-changing wealth is to get in early on the next Dell (Nasdaq: DELL ) or Sun Microsystems (Nasdaq: JAVA ) .
But as my colleague Seth Jayson points out, there are plenty of well-known stocks that can still deliver superior long-term returns. Believe it or not, from 1957 to 2003, well-known names like Merck (NYSE: MRK ) and Pfizer (NYSE: PFE ) would have delivered you more than 15% annual returns.
And thanks to the unprecedented market sell-off, many great businesses with high yields are selling at huge discounts. Take for example Johnson & Johnson (NYSE: JNJ ) , Reynolds American (NYSE: RAI ) , and Kraft Foods (NYSE: KFT ) .
Trap No. 3: Planning for retirement is hard
The final thing that seems to keep many people from achieving their dream retirement is the very thing that could achieve it for them in the first place: hard work.
There's no sage advice I can quote here, and I'd be lying if I said investing well or planning for retirement was simple. But you must make it a commitment and priority today -- for the sake of your future. Plus, with a little help, it can be far easier than you ever imagined.
If you don't believe me, I invite you to take a free 30-day trial of Motley Fool Rule Your Retirement. You'll get full access to all of our retirement experts' tips and advice, as well as detailed information on the best place to invest your money -- whether you're 20 years out from retirement, 10 years away from retirement, or already there.
Remember, it's never too early -- or too late -- to start working toward your dream retirement, so simply click here to get some help on ruling your retirement.
See you in the surf!
This article was first published June 24, 2008. It has been updated.
Austin Edwards doesn't own shares of any of the companies mentioned, but his parents do subscribe to both Rule Your Retirement and Motley Fool Stock Advisor. Dell and Pfizer are Motley Fool Inside Value recommendations. Kraft, Johnson & Johnson, and Pfizer are Motley Fool Income Investor recommendations. The Fool owns shares of Pfizer and has a disclosure policy that isn't afraid to ride the big waves.