Retirement savings ....Yikes !

[Agent Blue]

Too many new cars and vacations. Not enough work hours and jobs. At least some of us planned 40 years ahead and had a route to follow. We didn't have to skimp either. Kids got free college educations and a first near new car. We lived in four new homes and built several more. Years back the housing industry was very good to us. Its not what you make .... its what sticks to the left back pocket.

 

[daugen]

Sometimes management is worth the price you pay

Travelover, I think you would be surprised how little the average person understands the investment market.
Brokermike is absolutely correct, he said "sometimes". But his reference to bond mutual funds is not helpful in my mind.
For most of us, the management fees by Pimco and others are well worth the cost.

What you have to remember with mutual funds is that you ARE getting professional advice to a certain degree. If Vanguard says its 60/40
split in Wellington is invested properly, I'd believe that before I believed anyone promoting their own "custom blend" of equities and fixed income.
But some people can't even deal with the idea of calling up Vanguard, or even going online, and setting up an account. They need a person to go see, talk
to, reassure them in down times not to bail out if needed, and basically provide the oversight a broker should.

What is so challenging in this low yield environment is paying 1-2% in brokers fees when the overall bond heavy portfolio is only yielding 5%, which might be its target btw.
So spending twenty to forty percent of the account growth on management fees is hard to swallow. But it's done all the time, maybe not by me, as I learned to manage my own investments, and likely by many of those on this forum, but I bet a larger number of you get some professional help at times.

I put all my retirement savings in an annuity many years ago which had some secondary guarantees, meaning the balance would never go down and always would "go up" at least five percent a year.Yes, couple points of costs built in, though my annuity had a total all in fee of 1.3%, which is very low by today's standards. But I was buying insurance of sorts. And since the market went up over this time, after crashing, the extra money I paid in to make sure the final number would be at least X was probably wasted. But not entirely, it was nice knowing that short of the apocalypse the money I was putting away would not be lost. And it worked like it was supposed to. And yes I needed a broker to buy it.

do what you can yourself, if you truly are knowledgeable, and find a pro for the rest. And I see Vanguard as a "pro" here when the client is fairly knowledgeable and understands risk/reward and even better, how to formalize their own investment statement. And then stick to it.

 

[Travelover]

Sometimes management is worth the price you pay

Travelover, I think you would be surprised how little the average person understands the investment market.
Brokermike is absolutely correct, he said "sometimes". But his reference to bond mutual funds is not helpful in my mind.
For most of us, the management fees by Pimco and others are well worth the cost.

..........

I hear you, and I'm surprised every day with how people will spend weeks researching something like a camera or other toy, but won't spend an hour to learn basic investing. I guess they deserve to get plucked by "advisers", but I hate to see it.

Once you retire and you are living on that 4% or less, then hand over 1% or more to an adviser on an ongoing basis, you are essentially giving them 25%+ of your yearly living allowance. Of course, they will always tell you that they more than make up their commission, but they don't.

There is a reason that index funds didn't even exist a few years back and now Vanguard is the biggest mutual fund company in the world.

 

[daugen]

I hear you, and I'm surprised every day with how people will spend weeks researching something like a camera or other toy, but won't spend an hour to learn basic investing.

because they think they can figure out the camera and will never figure out investing.
too baffling, too scary, too many crooks, too easy to "lose all your money", etc, etc.

I found this a lot with older women whose husbands had passed on, and now were totally dependent upon
their broker. And my job was to analyze their portfolio and determine if the broker really was doing his/her job.
Portfolio design has always interested me, how does one build a financial engine that will reliably over time get the job done
efficiently and quietly. I was being paid a fixed fee, for my time and advice, and had no desire to manage their investments.
So there was no wolf under my sheepskin... My biggest concern was equity/bond ratio, and while Morningstar Principia would provide
reams of interesting data, my job wasn't to beat up on the broker or find fault. Some of the portfolios I reviewed were really
excellent, but I must admit, I never found an investment portfolio self managed that didn't have some pretty strange stuff in it.
Most self managed portfolios I reviewed were too aggressive for the financial goals of the client. They hadn't dialed back their portfolios enough as they reached retirement age. I told client after client, get out of the passing lane, reduce your risk, and there are myriad ways of doing that.

I also had one young couple who were just buying CD's, and that was a rare thing. They had some real
budget issues and conceptual issues like feelings of entitlement after one has worked a hard day. Well, that's good, but that doesn't in itself
mean you can go spend three grand on that tv on the wall, and over two grand on that new fish tank. And whatever else you felt entitled to because you worked so hard. And he did work hard. I had to break it to some of these folks as gently as I could that they really needed to
change the rules they lived by. But the two younger families both had at least three kids each, and they were flat out broke at the end of the week. There was no money to invest, an investment plan was a joke, they were deep in credit card debt, and living on the financial edge. And were smart enough to ask for help. In one case, a person's church hired me to help the one young family, who was the church groundskeeper and they knew this young couple needed help. Not money, but training. I kind of wonder how they are doing now, years later. I hope better.

 

[Travelover]

.........
I found this a lot with older women whose husbands had passed on, and now were totally dependent upon
their broker. ..........

Sadly this was my mother-in-law. Her broker just churned and churned and churned. Fortunately she didn't outlive her money, but it make me sick to see her being taken advantage of.

 

[dmccarty]

...
I also had one young couple who were just buying CD's, and that was a rare thing. They had some real
budget issues and conceptual issues like feelings of entitlement after one has worked a hard day. Well, that's good, but that doesn't in itself
mean you can go spend three grand on that tv on the wall, and over two grand on that new fish tank. And whatever else you felt entitled to because you worked so hard. And he did work hard. I had to break it to some of these folks as gently as I could that they really needed to
change the rules they lived by...

I may have said this early in this thread but what the heck. Back in the early part of this century, the wifey and I went to a Parade of Homes show. This is where the developers would have a big weekend or two of open houses for people to tour. Were planning our house so we went to get ideas. We were shocked at the size of the houses, their lack of quality, and the prices. We might have seen one house that was under $400k but most were in the $400-550Kish and one was around $750K. :confused3::shocked: The houses were just badly designed and poorly. They were designed to drive up square footage, and thus price, but with no real value. What kid needs a 20x20 bed room? Really bad designs.

We were trying to figure out who could afford these houses. We were not looking one development but in 4-6 different ones. The mortgages on these houses, even with a decent down payment, would require two professional incomes, and even then, you would either have large credit card debt if you ate out here and there, or you would be eating beans and franks from a can. If one spouse lost a job, the whole house of cards would come tumbling down.

I saw a bunch of houses go into foreclosure when the economy went to heck. Driving through some of the neighborhoods you would see streets filled with for sale signs. :shocked:

Too many people buy into this nonsense on TV where they see rich kids/sports figures/music people showing off their large houses, gadgets and cars. What the TV show fails to show is those same people going bankrupt in a few years when the money train derails.....

Later,
Dan

 

[Gator6x4]

I have a friend who has been in banking or the financial market his entire professional career. Shortly after the crash of 2008 and interest rates tanked we were discussing safe investment alternatives for ones money. He advised "Rule 72" will make it extremely difficult to achieve financial "Nest Egg" growth until something changes in the financial world.

He advised prior to 2008 one could divide 72 by the percentage rate being received on, bonds, stocks, CD's or Treasuries and have a good understanding of how long it would take to double ones investment or retirement income. For example he advised if one invested money in either of the aforementioned at 6 percent and did nothing, the initial invested amount would double in twelve years.

Since 2008 and investment interest rate have been below one percent, the doubling of ones investment would take in excess of 72 years. Beyond the lifetime of most individuals.

He advised trying to advise seniors or near retirees on how to have a financial growth pathway was virtually impossible given the current playing field in the financial world. He advised seniors and near retirees were not looking for something speculative or as he said "Las Vegas" with their hard earned money. Holding on and riding it out meant nest egg depletion because income to sustain and increase the nest egg was not and could not be generated.

He advised seniors started turning to reverse mortgages to slow down nest egg depletions.

 

[schoolsout]

I have a friend who has been in banking or the financial market his entire professional career. Shortly after the crash of 2008 and interest rates tanked we were discussing safe investment alternatives for ones money. He advised "Rule 72" will make it extremely difficult to achieve financial "Nest Egg" growth until something changes in the financial world.

He advised prior to 2008 one could divide 72 by the percentage rate being received on, bonds, stocks, CD's or Treasuries and have a good understanding of how long it would take to double ones investment or retirement income. For example he advised if one invested money in either of the aforementioned at 6 percent and did nothing, the initial invested amount would double in twelve years.

Since 2008 and investment interest rate have been below one percent, the doubling of ones investment would take in excess of 72 years. Beyond the lifetime of most individuals.

He advised trying to advise seniors or near retirees on how to have a financial growth pathway was virtually impossible given the current playing field in the financial world. He advised seniors and near retirees were not looking for something speculative or as he said "Las Vegas" with their hard earned money. Holding on and riding it out meant nest egg depletion because income to sustain and increase the nest egg was not and could not be generated.

He advised seniors started turning to reverse mortgages to slow down nest egg depletions.

The rule of 72...good tool. Fed Reserve inflation target of 2% cuts purchasing power in half at 36 years...we all know inflation is much higher...something to think about.

 

[MacLawn]

Hmmm, I'm not sure about this reverse mortgage stuff. How long has this idea been around anyway? I never heard of it until maybe 7 years ago. I would not do a reverse mortgage to increase monthly income. Who's making money off that? Why is it advertised so much - red flags for me.

 

[Gale Hawkins]

Hmmm, I'm not sure about this reverse mortgage stuff. How long has this idea been around anyway? I never heard of it until maybe 7 years ago. I would not do a reverse mortgage to increase monthly income. Who's making money off that? Why is it advertised so much - red flags for me.

Hey it good for the old TV stars that get paid to do the spots.