3min
Apr 16, 2024
Warren Buffett — CEO of Berkshire Hathaway and king of investment and retirement planning — is often hailed as one of the most successful investors in history. He’s best known for his unique investment approach which has proven to be resilient and successful, particularly during economic downturns. In 2008, amidst the global financial crisis, Buffett injected $5 billion into Goldman Sachs, fortifying the firm and generating massive returns of more than $3.1 billion.
While we're far removed from the challenges of 2008, today's ever-changing financial environment can still feel intimidating. Between inflation, wars, and the rise of AI, navigating how to invest can be especially daunting. And when it comes to retirement, things feel increasingly shaky due to rising healthcare costs and social security’s solvency in question.
It’s not all doom and gloom, though. The time-tested wisdom of Warren Buffett offers a guiding light — and innovative retirement solutions built off his principles are on the horizon.
So, what’s Buffett’s secret recipe? It’s simpler than you might think. To quote the icon himself, “It is not necessary to do extraordinary things to get extraordinary results.”
1. Choose an S&P 500 index fund: The 90/10 strategy
At the heart of Buffett’s long-term investment advice is the 90/10 strategy. It’s beautifully straightforward: 90% of your savings should be placed in a low-cost S&P 500 index fund, taking advantage of the market's long-term investment returns. The remaining 10% should be invested in low-risk, short-term government bonds. Adopting this blend in your savings plan offers a steady growth trajectory with a cushion of stability — helping give you peace of mind in volatile market swings.
Source: OptimizedPortfolio.com
2. Be patient and let compounding do its thing
The real secret to investing success isn’t timing the market — it’s time in the market. Buffett encourages starting your investment journey as early as possible and sticking with it, allowing the magic of compounding to do its work. One of our favorite Warren Buffett quotes on investing is, “If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.”
The chart below speaks for itself. While it shows a longer time frame than many might have to invest, it’s clear that time in the market is much more important than trying to time the market.
Source: Win Smart, CFA, Visual Capitalist
3. Leave your emotions at the door
Even experts can’t always time the market. Investing isn’t a race, but it can be tempting to buy and sell in pursuit of some quick wins. Slow down to make informed decisions and resist the urge to react impulsively to market ups and downs. While it’s enticing to try and chase the popular high-return investments, emotional investing often leads to mistakes.
The image below illustrates the typical rollercoaster of emotion. Stay calm, keep a smart savings plan, and focus on long-term investment returns.
4. Be intentional with your time
Retirement isn't just about clocking out — it's about defining your goals, whether it's traveling the world, spoiling the grandkids, or pursuing lifelong passions. Having a clear purpose ensures your financial decisions are aligned with your aspirations. It can also bring in extra income. Retirees can use their skills to offer consulting, start a business, or work part-time, boosting retirement security while staying engaged.
Buffett is purposeful when he picks his stocks, but also with how he spends his time. Rather than retiring after reaching age 65, Buffett has continued to lead Berkshire Hathaway, even at age 92. Buffett sets a powerful example of having a purpose, proving that retirement doesn't mean disengagement — it's an opportunity for continued impact.
Having a purpose is also clearly correlated with longevity. Take a look at the chart below.
5. Remember, you come first
Lastly, Buffett advises that while supporting your family is important, it's crucial to prioritize your own financial well-being first. That way, you can help your loved ones without compromising your own future and risk running out of money.
2 in 3 Americans run out of money before they reach 85, regardless of income or net worth.* The chart below shows that even with an annual contribution rate of 10-15%, there’s still a chance of running out of money if you don’t adequately prepare.
One more bonus tip you’ve never heard of
At Savvly, we follow Warren Buffett’s methodology and believe the best investment options are driven by the market over time. That’s why we created the first market-driven pension for retirement. It’s an innovative retirement solution that leverages the long-term value of the S&P market and can provide payouts when it’s needed most.
Our market-driven pension is designed to give you easy and affordable financial security for life, at a fraction of the cost of an annuity. It can offer market returns plus a long-life bonus, made possible by partially giving up some investment liquidity. Buffett famously said “My favorite holding time is forever” and we couldn’t agree more. Learn more here.
And don’t forget to subscribe to our Retirement Roundup newsletter. Retirement is an industry that hasn’t changed much in over 50 years — until now. We’re here to shake things up and share everything you need to know about the industry, as well as fresh tips to help you maximize your savings and increase your longevity.
The bottom line
Whether you’re just starting out or refining your retirement plan, Buffett’s simple, tried and true insights will steer you in the right direction.
