The Bogleheads' Guide to Investing, 2nd Edition

Chapter One Choose a Sound Financial Lifestyle

Drive-in banks were established so most of the cars today could see their real owners.

—E. Joseph Grossman

It’s an old statistic that has held very consistent over time. Take 100 young Americans starting out at age 25. By age 65, one will be rich and four will be financially independent. The remaining 95 will reach the traditional retirement age unable to self-sustain the lifestyle to which they have become accustomed.

Without assistance from government programs such as Social Security, Medicare, and Medicaid, many would literally starve. And if you are harboring dreams of the government providing you with a full and prosperous retirement, it’s time to wake up. Although the government won’t let you starve, it’s not committed to making your golden years golden. That’s up to you. A lifestyle totally based on government handouts has always been uncomfortable at best.

With 76 million baby boomers in or nearing retirement, it could get a whole lot worse.

We live in the richest country in world history. Our wealth is enormous and growing. Yet only 5 percent of us manage to become financially independent by age 65. Why is this? More often than not, the answer lies in what we choose to do with the money that comes into our lives.

WHAT’S YOUR FINANCIAL LIFESTYLE?

Although you might not be aware of it, you have chosen the financial lifestyle that you currently live. For purposes of simplicity, let’s look at three common financial lifestyles ...