My great-grandparents didn’t think much about their retirement. Neither did yours. Chances are they didn’t have one.

The whole idea of retirement is fairly new (except for the very rich, of course, who always lived a life of retirement). Before the Social Security Act of 1935, most people worked till they were no longer physically capable of doing so, then got by on savings, help from family members, or perhaps a pension, which, given the life expectancy at the time—about 60 years old on average—usually sufficed for any remaining years.

Social Security provided the guarantee of an insured income for the post-work years of life, and then came all the advances in healthcare that have extended our lifespan, and what do you have? A marketing opportunity for the producers of financial services—the newly minted phenomenon of “retirement planning.”

That’s what’s behind all those richly filmed, vibrantly scored, emotion-stirring, heart-pounding commercials for retirement funds. You know the ones I mean: a fit, good-looking couple in their fifties is flying off to some spectacular lake in a part of Alaska reachable only by private bush plane—he fishes, she photographs—as the husband announces that “when we retire, we’ll take trips like this all the time.” Or an equally fit, equally good-looking couple in their sixties is on the tee of some spectacular golf course in a part of the Caribbean reachable only by private yacht—they both golf—as they exchange a glance that tells us that once this hole is played, they’ll be off to the condo for some passionate afternoon love-making.

It’s a whole new fantasy: in retirement, we’ll live even better than we do now! We’ll be better-looking! We’ll fly to exotic destinations! We’ll have so much leisure and fitness that we’ll be making love with the vigor and excitement of 20-year-olds!

Moral? Do whatever it takes to grab the money bonanza now so we can really live later!

In a marketing minute, the retirement income once seen as a blessing for working families has become yet another arena of money madness. The guarantee that once blunted our anxiety about getting by in the last years of life has now become fertile territory for all kinds of new stress: how much money will I need to reach this golden lifestyle I’ve seen only in ads? how and where will I get that kind of money? Better work harder/sacrifice more/defer pleasure today/make the killer investment so I can make the grade.

But when a fantasy about tomorrow makes your life today seem worthless by comparison, and when you find yourself making one sacrifice after another to achieve that fantasy, it’s time to re-think the retirement game.

What kind of retirement do you really want? (By the way, not one of my wealthy clients ever “retires;” they all just change the shape of their engagement with life, although, granted, they have the wherewithal to do that.) More to the point: what kind of life today do you want?

I’m reminded of the old story about the wealthy ship owner who returns to the little fishing village where he was born to live out his golden years. One day on the beach, he sees a young man lazily fishing, and he gives him a lecture. “Why, when I was your age, I had ambition and enterprise. I worked hard, bought a boat, fished round the clock, bought another boat, then  another. Today, I am the owner of a fleet of ships, with enough money to do exactly what I want.”

“And what is that?” the lazy young man asks.

“To come back here and fish”—the ship owner gulps—“just like you.”

Moral: if you want to kick back and fish, think about doing it today—and consider how much of a fleet you really need to own first.

Here are some recent posts about retirement, and resources for you to explore :

Jaclyn is one of the smartest women I know—and certainly one of the savviest real estate investors. Her investing success made her a wealthy woman, and she lived like one, in a sprawling, high-tech house, valued at $2.4 million, that she shared with her husband, and three stepkids. Then about a year ago, just as the real estate market was starting to skid, and with two of the kids now in college, Jaclyn and her husband sold the $2.4-million house and “downsized” to a one-million-dollar establishment. And just recently I learned that Jaclyn had sold the million-dollar-house, at something of a loss, and was hoping to rent a little place somewhere.

I was sorry to hear it, but I didn’t need to ask the reason. Clearly, with her money tied up in a portfolio of properties that were fast losing their value, Jaclyn needed cash simply to stay afloat.

“How did you escape making a similar mistake?” my wife asked after I had told her the sad news about Jaclyn.

“I learned the lesson at my mother’s knee when I was seven,” I replied: “’Don’t put all your eggs in one basket.’ Didn’t you hear that when you were a kid?”

Janine thought for only a second, then nodded.

Of course, we all learned it. In my case, I think it was when I finally got tired of always being assigned to right field when we played baseball at school. “Maybe you should try another sport,” my mother suggested. “After all, you shouldn’t put all your eggs in one basket.”

I would hear the same dictum when I devoted so much time to studying math that all my other grades suffered. And when I got on an ice cream kick and wouldn’t eat anything else. And when I developed such a crush on the tallest girl in sixth grade that I had no eyes for anyone else. “Don’t put all your eggs in one basket,” my mother repeated as I sank into each of these disasters. “Keep your eye on the big picture. It’s a varied world out there.”

That is precisely what Jaclyn forgot. A business school graduate and an expert in all the complexities of real estate investing, she neglected this simple wisdom from childhood—and she put all her investing eggs into the real estate basket.

Does this mean that investing in real estate is a bad idea? On the contrary. It is a very good idea. As investment categories go, real estate, over ten-year periods, is typically a very good investment. What’s more, through the power of leveraging, real estate investing offers the potential advantage of “multiplied” gains, although that entails the risk of multiplied losses as well. That is, if you borrow money to invest in real estate—as most people do, putting up a portion in cash and the rest as debt—your returns are magnified on both the upside and downside. If the property increases in value, your gains are greatly multiplied because you’re getting a return on the whole amount invested, even though you only laid out a small portion from your own money. But if the property decreases in value, your losses are also multiplied: you’re responsible for the debt as well as the lost value.

That’s what happened to Jaclyn. And it happened, not because she was naive or because real estate is a bad investment; neither is true. It happened because she forgot the childhood wisdom about not putting all your eggs in one basket. In investment terms, she concentrated all her resources in only one asset class; that’s why she’s hurting today.

What’s an asset class? Here’s how I define it in my upcoming book, The Cure for Money Madness: “An asset class is simply a group of investments with similar characteristics such that the investments behave the same way in the marketplace.” Specifically, the companies have similar size and growth characteristics, and so they behave similarly as investments. Large, fast-growing companies—Microsoft , Nissan, General Electric, and FedEx, for example— behave similarly to one another, even though they represent different industries. By the same token, small, slow-growing companies behave, as investment assets, like other small, slow-growing companies; stocks in small manufacturing companies, for example, no matter what the companies manufacture, tend to go up and down together.

So do real estate investments. They rise or fall in value as a class, as recent events illustrate: when mortgage money was readily available, demand for houses, to take just one example, outstripped supply; house values rose, and investors in housing made fortunes. As they did so, the investors’ tendency was to ply their gains back into more real estate investing, concentrating in this one asset class even more.

That’s what Jaclyn did, and for a good number of years, as her leveraged gains registered as nothing less than spectacular, plowing everything back into this one asset class must have looked like a good idea. Maybe Jaclyn grew giddy on this soaring wealth, and maybe the giddiness seduced her into concentrating more and more resources in these persistently rising investments. It was Jaclyn’s money madness gone wild; she was hitting not just home runs but grand slams on every at-bat, and it must have seemed to her that nothing could go wrong.

I think that kind of madness is just human nature. We stop thinking when we’re on a high; we stop seeing things clearly. By the same token, when we’re low, we see too sharply and narrowly, and think too much. If only there were a mechanism to keep us level—at least where investing is concerned: to stop us when we’re carried away by some infatuation or other, and to move us along when we’re stuck in a rut.

There is. It’s the Rainbow Portfolio™, and I created it for just these reasons: to stop me in my tracks when I get giddy and to keep me going when I get low. In both cases, the Rainbow Portfolio™ is a fail-safe mechanism that automatically reminds me of what I learned at my mother’s knee.

Had Jaclyn been a Rainbow Portfolio™ investor, for example, it would have forced her to take some of his gains and diversify into other assets—large- and small- and medium-cap stocks, international and domestic, value and growth stocks, commodities and bonds. Automatically, the losses she is suffering today in her real estate investments would have been offset, or at least mitigated, by gains from other investments. What’s more, instead of being forced to sell her family home, as she must now do, she’d be able to stay put, despite the house’s dwindling value.

That’s why ‘Don’t put all your eggs in one basket’ is the most basic, most profound, most important investment mantra there is. It even trumps that other classic, ‘Buy low, sell high.’ Another friend is a case in point.

I’ll call him Frank. Like Jaclyn, he was a real estate investment wizard. So stunning was his fast climb to wealth that he actually disdained the kind of investing I advise, and we used to kid one another about our opposing investment ideas—mine for multi-asset, passive investing, Frank’s for go-getter, highly leveraged investing in real estate.

Until the day, not too long ago, when Frank phoned to say he was desperate. Plunging real estate values were reducing his net worth steadily and substantively. He did not know where to turn or what to do. What could I advise?

“How much of your portfolio is in real estate?” I asked.

Frank did some quick figuring. “Ninety-six percent,” he said.

I gulped. “Sell,” I said.

“But I’ll lose a fortune selling at the bottom of the market!” Frank protested. Such an idea—selling low, especially after having bought fairly high—was simply anathema to him, schooled, as we all are, in the principle of buying low and selling high. It’s an important principle, but in Frank’s case, it clearly came in second to the eggs-in-the-basket principle. Simply put, it is better to sell low and diversify than to have nothing at all.

So I refrained from mentioning that Frank was losing a fortune anyway. Instead, I argued that with that much concentration in a single asset, he was looking not just at loss but at wipe-out. “The first thing you need to do is avoid total disaster,” I asserted, “and that means reducing your real estate allocation from ninety-six percent to fifty percent. That way, even though it’s painful to sell at a loss, reinvesting what you earn on the sale might very well make you more money in the future. So for now, sell.”

Two friends who hit fantastic heights with their investing have now plunged to unexpected depths. The fault was not in the asset they invested in but in the concentration on that asset to the exclusion of others. The fact is that there are some simple rules about money that keep us safe and, like smoke alarms, alert us to impending disaster. When our money madness makes us giddy, luring us into thinking we just can’t miss, it becomes easy to forget the rules—and such forgetfulness is fuel on the fire.

Jaclyn and Frank forgot the simple rules—and were badly burned. They abandoned the wisdom we all learned as children: in investing, as in all of life, it pays to embrace the world’s infinite diversity.

It’s a reminder that now may be a good time to count how many baskets your eggs are in…

Some blogs you might find interesting on Real Estate :

I want to be remembered as someone who was able to truly help people relax around their finances and find true peace and joy in their life where there was once so much stress and anger.

Here’s how I can do it : My six simple rules on how to relax around money.

Everybody knows how to lose weight. The rules couldn’t be simpler: eat less and exercise more so you burn more calories than you take in. Yet many dieters break the rules, or cheat on them “just a little,” or avoid the rules and then rationalize their avoidance. They go out and buy the latest diet book, hoping for a magic bullet that will let them quite literally have their cake and eat it too. But there’s no such thing, and continuing to insist on one is a somewhat childish response.

The rules about money are pretty simple, too. And everybody knows them. I’ve distilled them down to a quick half dozen, and I’ll wager that you nod with recognition over each one:

1. Pause, take a breath, think, and look at the numbers before any financial decision.
2. Diversify your investments into different asset classes.
3. Buy low and sell high by rebalancing your portfolio. Get aggressive when the market is down and act warily when the market is up.
4. Keep track of your cash flow and net worth.
5. Spend less than you earn now, not as much as you might earn in the future.
6. Save something and give something—regularly.

Simple, right? Yet from top to bottom, these rules are broken, bent, or circumvented as routinely as the dieter’s rule about skipping dessert or exercising for half an hour every day.

Which rule is hardest for you to keep?  Can you think of something you can do to play by that rule, just for today?

Check out www.stickk.com, it’s a cool tool to keep promises to yourself.

These are also some great posts about relaxing ( and money ! )  :

At the end of my Cure Money Madness talk last month, I had a great opportunity to dissect a common—though complex—money madness situation. On the last day, a 50 year-old man came up to the podium and said, “I’m not sure if I have money madness.” He went on to share that he hadn’t filed a tax return in almost a decade, not only to avoid taxes, but also to avoid the hassle of completing an administrative form.

After we talked about some numbers, he publicly confessed what he already suspected, and what I knew—that he wasn’t actually saving much money by not filing. Then, he blurted out, “I’ve also kept my income low all these years so I’d be below the IRS’ radar – too small a fish for them to fry…But now I’ve spent my small inheritance and am struggling to make ends meet.”

“OK,” I responded, “let’s get clear about what your money madness drives you to do. First, earn less money than you’re capable of earning. Second, reject work that would increase your net worth and refuse to ask for better compensation for the work you’re doing. Third, shirk your legal obligation to pay taxes.”

He agreed that this was a fair assessment, so we explored the money messages on which this behavior was built. Three important messages emerged.
1. The “system” is unfair, and a hassle, to boot.
2. You should get away with something if you can
3.Not paying taxes makes perfect sense, given #1 and #2.

Curing money madness begins with examining the costs of money madness. In this case, money madness locked him into making less than he needed to live, into doing uninteresting work that didn’t capitalize on his genius qualities and into a constant state of stress at the specter of being caught by the IRS.

Then, he had to accept the numbers we’d just looked at, and truly understand that while he might have avoided an end-of-the-year check to the IRS, what he avoided in earnings was far greater than any taxes could ever have been.

Next, he had to make the connection between not paying taxes and his self-confidence.  One consequence of the system he’d concocted was that he lived a smaller, less public, more limited professional life, which no doubt affected his personal life, too. His system both reinforced and created low self-esteem. He had to see that the whole thing was, for him, a way to avoid personal pain, yet a source of the very pain he was trying to avoid.