The speaker said that in the U.S., 8,000 Baby Boomers are turning 65 every day.

That’s a lot of gray.

(It’s also one reason there’s likely to be so much resistance to any efforts to cut Medicare and Social Security benefits, but I digress.)

I also know from talking to people on our Client Service side that the average new subscriber to a Cabot investment newsletter tends to be between 55 and 60 years old.

That’s a critical age range, in which significant changes abound.

By that age, people are more likely to have sufficient disposable income for investing. Typically, family expenses have tapered off, children have been out of college for a while, and even the boomerang kids are relieving pressure on the household budget by remaining off on their own.

At this stage, many Empty Nesters are either close to paying off their mortgage or are thinking about selling their oversized family homes, with their eye on a smaller and less expensive place (a domicile downsizing that’s sardonically referred to as “boomerang proofing”).

What’s more, most people reach peak earning power in their fifties, finally giving them the free cash flow they’ve never had.

Perhaps most importantly, people in their fifties can hear footsteps. At age 55, Medicare is just ten years away, and the first full Social Security retirement date is only a year after that. And statistics tell us that at the end of the terrible market year of 2008, an average 401(k) participant had a balance of less than $46,000 in his or her account. (By the way, that was down about $20,000 from the end of 2007.)

There’s nothing like a little calendar-based reality check to send people searching for ways to put some meat on the bones of their retirement accounts.

It does absolutely no good to tell someone in their late 50s that they should have started their augmented investment program sooner. In fact, it’s almost an insult.

These investors have lived through two major market collapses, the result of the bursting of both the Tech Bubble and the Real Estate Bubble.

Needless to say, this makes them more than a little skeptical about investing in the stock market as a way to play catch-up in their retirement accounts. After being burned twice, the risk appears just too great.

The problem is that the other solutions to the retirement shortfall problem are also problematic. Making a huge increase in contributions to institutional accounts just reiterates the market risk that produced the losses from Bubble I and Bubble II.

Investing in undervalued real estate, ditto.

T-bill, bonds and notes, or even (heaven forbid) munis? DOA.

Las Vegas? I won’t even dignify my own suggestion with a response.

You’ve probably already seen where I’m going with this, right?

I think there is only one way for an average person with an average amount of investable capital to make a run at big returns with controlled risk, and that’s by taking on the job of investing personally.

That’s right. You’ll have to step back from the advice your company’s plan sponsor and your full-service broker have been giving you for years. They’ve been telling you that “It’s time, not timing,” and that you can’t beat the market and that your only salvation is in diversification, continuing investment and professional management.

And if you’re not willing to take on the work of managing your own portfolio, they may be right.

But what about those people who are ready to step into the ring and go toe-to-toe with the market? The people who understand that the search for higher returns involves increased risk, and who enjoy the challenge of pursuing what professional advisors tell them isn’t possible?

Those people need to become growth investors.

And the best way for a growth investing newbie to get from zero to 60 in the shortest possible time is to subscribe to the Cabot Market Letter, which has been getting stock investors up to speed for more than 40 years.

I know what you’re thinking. If I’m the editor of the Cabot China & Emerging Markets Report, what am I doing sending people to the Cabot Market Letter?

The answer is that the Cabot Market Letter will teach you more about the Cabot approach to growth investing in a shorter time than my letter will. The Cabot Market Letter’s portfolio is a little larger, which reduces risk slightly. But like my letter, it will fully advise subscribers of all buys and sells, and all significant shifts in market momentum, which is the crucial step in avoiding the kind of portfolio meltdown that results when Bubbles burst.

I would love to be able to get younger investors interested in Cabot Market Letter and Cabot China & Emerging Market Report.

But the demands of family, college and mortgage, combined with the temptations of vacations, cars, boats and the other wonders of the modern world make that much less likely.

We are all (myself included) playing catch-up with our retirement goals. I’m fortunate that I fell in with Cabot six years ago and began using the Cabot growth principles in my own portfolio.

I hope you will do the same.

If this sounds like a good idea (or even if it seems scary-but-attractive), you can get a no-risk trial subscription to the Cabot Market Letter.

One reader remarked: I am interested in step-by-step instructions on stock investing. I think that request goes well with this question: How should I develop my portfolio for retirement?

Rather than give you my own opinions, I decided to consult expert advice, and no one is better than the American Association of Individual Investors. AAII, as it is called, is an independent nonprofit organization founded in 1978. AAII’s goal is to assist individuals in becoming “effective managers of their own assets through programs of education, information and research.”

AAII offers a lot of unbiased educational material online and in a monthly magazine. The organization offers a lot of free information, and a host of additional instruction is available for just $29 per year. Go to www.aaii.com for further details.

AAII divides the investment life of an individual investor into four phases:

Phase 1 begins as soon as you become employed for the first time. (My first job was long, long ago in Boston as a stockbroker trainee at Paine, Webber, Jackson & Curtis.) As soon as your income begins to exceed expenses, establish a cushion for emergencies. Your cushion will need to grow to the equivalent of six months of your income. You can fund your cushion by investing in no-risk investments such as savings accounts at your bank or money market funds at a brokerage firm.

One of the cornerstones of wealth building is being frugal. You should set reasonable savings goals and live below your means. Individuals gain financial independence by budgeting, controlling expenses, and saving a reasonable portion of their income.

When you have accumulated the equivalent of six months of your income and if you haven’t piled up a lot of debt, you are ready to move on to Phase 2. If your debts from college loans, car loans, credit cards, etc., are excessive, you will need to reduce your debt before moving on to Phase 2.

Phase 2 gets exciting. Any savings above your cushion can now be invested in mutual funds, exchange-traded funds (ETFs), stocks or bonds. Some advisors encourage investors to invest in mutual funds and ETFs first, and then stocks when your portfolio reaches certain levels. I recommend investing in whatever interests you the most, because you will probably be more motivated to learn about what appeals to you.

Phase 2 is the most important step in your investment career. You need to establish a solid foundation of investments that you can build on in future years. I do not study mutual funds, so I am not qualified to offer advice on a mutual fund strategy. Rather, I believe investing in a combination of ETFs and common stocks is a prudent approach for many new investors.

Your initial investments should be growth oriented, but conservative. I recommend low-risk companies with reasonably good growth prospects for the next five years. Each and every month, I recommend undervalued, high-quality companies in my Cabot Benjamin Graham Value Letter. Recommending high-quality value stocks is my specialty. I scan thousands of companies every month and pick stocks selling at modest prices with expected earnings growth of at least 10% per year. I want companies that pay dividends, although I will recommend non-dividend paying companies if I think the company will start paying dividends within the next couple of years.

The best route to financial independence is slowly accumulating wealth. Don’t expect to double your money every year. According to AAII, the average annual return for common stocks is 10% to 12% per year during the past 85 years. Nevertheless, an individual who invests $10,000 at the age of 27, adds $2,000 every year to his or her account for 35 years, and can average 11% annual returns including dividends, will end up with a cool $1,069,000 at age 62.

The following list includes a dozen companies that I believe will get you started in the right direction and provide a solid foundation for your investment portfolio. Invest approximately the same dollar amount in each stock.

Barrick Gold (ABX)
BlackRock (BLK)
Caterpillar (CAT)
Google (GOOG)
MasterCard (MA)
McDonald’s (MCD)
PepsiCo (PEP)
Research in Motion (RIMM)
Stryker (SYK)
Teva Pharmaceuticals (TEVA)
TJX Companies (TJX)
Walgreen (WAG)

All of these companies pay dividends with the exception of Research in Motion and Google, which offer exceptional growth potential. The list includes a diversified cross section of industry leaders, which is important because you will want to keep your risk low while you build for the future. Buying stocks in many different industries will reduce your risk.

Phase 3 begins after your initial investments start to show noticeable profits. Your initial stocks should be held for the long haul, unless the industry or the company falters badly. Sell a stock if it has risen to its Minimum Sell Price or the long-term outlook has deteriorated and replace the stock with a better one. All of the Cabot advisory services notify subscribers when to sell a previously recommended stock.

Assuming you haven’t accumulated a lot of debt, you are ready to start adding investments to your core portfolio. Stocks and ETFs are a good way to go, but mutual funds are also appropriate. Rather than staying conservative, now is the time to start investing according to your personal preferences. If you are a gambler, invest aggressively, but not foolishly. If you are conservative, then stay with low-risk stocks and mutual funds.

I advise adding stocks that are grossly undervalued and stocks with exceptional growth prospects. In addition, you might want to add to some of your smallest core holdings, but be sure that each company’s outlook remains robust. I also recommend offsetting your aggressive investments with bonds or defensive ETFs. You should be prepared to jettison risky stocks that underperform and sell stocks that become overvalued.

The following list includes three stocks selling at bargain prices, followed by three stocks with great growth potential and one defensive choice to hedge against unforeseen market declines.

Selling at bargain prices:
Computer Sciences (CSC)
Reinsurance Group (RGA)
SkyWest (SKYW)

Great growth potential:
Gildan Activewear (GIL)
LKQ Corp. (LKQX)
TAL International (TAL)

Defensive choice:
Templeton Global Income Fund (GIM)

As your investment funds grow and you invest in more stocks, you will need to decide how many stocks, mutual funds and ETFs are reasonable to follow. When you reach your limit, add to stocks that you already own.

Phase 4 begins about five years before your retirement. At this point in your life, you should start to reverse your investment strategy. Initially, start selling some of those risky stocks. Invest the proceeds in ultra-conservative investments such as certificates of deposits (CDs), money market funds, bonds or bond ETFs.

Your goal in Phase 4 is to get back to owning very conservative stocks (your core holdings). I advise selling stocks that aren’t paying dividends. If you need to be ultra-conservative, sell almost all of your stocks and invest in shorter-term bonds, CDs and money market funds. When you are retired, your main goal should be to not lose money, and to invest conservatively.

One of the most important attributes that an investor must acquire is patience.  The stock market can be a very frustrating place because of its unpredictability. Expect to lose money from time to time. Have confidence in your investment decisions. “If a business does well, the stock eventually follows. Our favorite holding period is forever,” states Warren Buffett, one of the greatest investors of all time.

Editor’s Note: You could take Roy’s excellent advice and purchase the investments above, hold on and hope for the best. Or you could get even more details on these and other top value investments in his Cabot Benjamin Graham Value Letter. Get up-to-date Buy, Hold and Sell ratings for these and other investments each month (and in his mid-month update), so you always know what to do with your holdings. Don’t miss another recommendation! Join today!

And there’s not much risk in predicting that when the first Boomers reach full Social Security retirement age–now 66 for those born between 1943 and 1954–there will be another spate of stories.

The Boomers have always been a source of great interest to lots of people (especially themselves) and attitudes toward them vary a lot.

Comedians love to roast Boomers for getting old while never growing up.  I thought the first joke I heard about a group of Sixties Survivors attending a Rolling Stones concert wearing Depends was pretty funny.  The next 15 times, not so much.  Same for the lists of Then and Now jokes (Then: Looking for some good acid.  Now: Looking for some good antacid.)

Conservatives have never forgiven the Boomers–who were college (and draft) age in the late 1960s–for sex, drugs, rock ‘n’ roll and protests against the Vietnam War.  That’s when things started to fall apart, according to this line of thinking.

Progressives give the generation a hard time for losing revolutionary zeal and relaxing into disco madness and cocaine use in the ’70s, then settling down to buy houses, make a living, and raise kids.  Too much work left undone by these lights.

Gen X, Gen Y and subsequent generations are just plain sick of hearing about them.

But say what you may about the Baby Boom Generation–and since there are 77 million of them, almost everyone has something to say–their age cohort still has the highest earning power and the highest voting power and represents the biggest challenge to the medical and social services industries in the history of the U.S.  What they don’t seem to have is enough money to retire on.

Unfortunately, if financial publications are to be believed, Boomers are the least prepared for retirement of any generation before them.  Citing a fall in home prices and stock prices, a study by the McKinsey Global Institute laments that “more than two-thirds of early Baby Boomer households, meaning those between the ages of 50 and 63, are financially unprepared for retirement.”

In 2007, one study showed that 53% of households with at least one retirement account had combined balances of just $45,000.  Households of those closest to retirement (head of household between 55 and 64) had median account values of just $100,000.  And those dollar amounts were harvested before the Stock Market Crash of 2008.  Using the interest rates from May 2009, that $100,000 would buy an annuity of just $700 a month for life.  Where I live, that’s just enough to pay my property taxes and subscribe to a newspaper.

A more recent study by the U.S. Census Bureau shows that only 41% of workers between the ages of 25 and 64 have any kind of retirement account at all.  And those who had them had average balances of less than $33,000.

Whatever your attitude toward Boomers, you have to admit that the potential problem is enormous.

Some retirement planners advise that you should have 70% of your current annual income in the bank for every year you think you may have of retirement.

My response: How the heck am I supposed to know how many years of retirement I might have?  As a connoisseur of the obituary writer’s art, I see lots of people shuffling off at ages lower than mine.  And at the other extreme I have my father-in-law who is now 93 and doing fine.

I know that I find the idea of making lots of money and then not making more money for the rest of my life a little creepy.  It’s like having a period of your life when you fill the bucket and then a period in your life when you empty the bucket.  Just be sure to put in more than you need to and take out less than you want to.  Better safe than broke.

I’m not a Boomer myself.  I’m one of the last of the War Babies.  So I’ll keep breaking trail for the Boomers as long as I can.  And I’ll watch with interest as reality catches up with the generation that thought it would change the world.  Should be fascinating.

Whether you’re a retiree, a Boomer or a Generation whatever, you might want to consider getting more active in working toward retirement.  401(k)s are fine, but they’re way too passive to achieve real gains against inflation and predatory markets.  Cabot’s newsletters are specifically designed to help individual investors invest successfully.