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Retirement Investing - Something to Think About

Timeshare Von

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After 40+ years of T/S ownership, I am no longer "an owner"
This is the link to a 9 minute video done by someone I know. He's not selling anything, just trying to inform folks that saving today for tomorrow's retirement has changed. The traditional approach via mutuals in a 401k must be reevaluated!
 

spirits

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He has good points

Three years ago when the market was in real turmoil, I began to educate myself on how our money had been invested. My husband and I are very conservative investors, him more than me:D and even we were shaken to the core.
He tends to have more trust in financial institutions than I do but I have been aware that many of the points raised in this presentation should be of interest to us boomers.
I am not endorsing this person but looking forward to wiser minds than myself on this topic presenting their views.
 

bogey21

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I don't think this is rocket science. 5-10 years (your call) prior to retirement switch half your portfolio into a short duration bond fund. At retirement buy inflation protected fixed annuities. Diversify among annuity providers. Your risks are inflation above your protection (mine is 3% per year); the solvency of the issuer of the annuity, thus the reason for multiple annuity providers; and the US dollar. Other than shorting the dollar vs the Swiss Franc there is not much else you can do about the latter.

George
 
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ronparise

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I remember the days when a conservative safe investment was a ten year tax free government bond paying about 8%, or a US govt bond paying 12%....Imagine the hit to an investors income when those bonds matured and they had to re invest principal at 6%...Those same bonds are paying 2 or 3% now


At age 65 most of us can look forward to 20-30 more years...many folks will enjoy more years of retirement than they worked. That being the case I feel your money has to work as hard for you now, as you worked for it...The old rule of having the percentage of your money in high quality fixed income equal to your age wont work anymore...Its too risky. Sure the principal is protected, but the income has dropped to almost nothing...

A lot depends on your needs...If you dont need your investments to throw off an income (perhaps you are still working or have a retirement income that is enough), your portfolio will look different than the person that needs the interest and dividends to buy groceries. Everyone still needs a balanced portfolio...but the percentages allocated to growth and income will be different for each of us
 

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I agree with Ron - everyone will have their own recipe. There is no one-size-fits-all that I'm willing to wear.
 

zinger1457

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This is the link to a 9 minute video done by someone I know. He's not selling anything, just trying to inform folks that saving today for tomorrow's retirement has changed. The traditional approach via mutuals in a 401k must be reevaluated!

Did you listen to the entire video? Because he sure is trying to sell something. This is the standard sales pitch for variable annuities. All he does in the video is tell you that the old way to save for retirement doesn't work and you need to contact him to find out the details for the 'new' way. He doesn't say it in the video but I would bet he's selling annuity products and he will make a very nice commission if you buy them. Be very careful, I would never use a financial adviser that sells his clients products and makes commissions off of them.
 

Timeshare Von

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Zinger yes I did and if you scrolled to the bottom of the page you would see that this is what he's offering to anyone who wants the info, free of charge:

When you contact me, this is what you’ll get:

1. Dr. David Babel’s white paper, “How to invest your lump sum at retirement,” a report that talks about The Perfect Storm, the simultaneous convergence of five major negative trends that have the potential to destroy your financial future if you don’t do something soon to avoid them.

2. The 2011 DALBAR study analysis, which points out that the average mutual fund investor suffered dismal returns over the last 20 years, even when the markets were producing better returns.

3. The Putnam Institute report summary that shocked the investment community. This report points out that many people have far too much exposure to equities and how that can and will cause severe problems in retirement.

4. John C. Bogle’s white paper, “The Emporer’s New Mutual Funds,” where the founder of the Vanguard Group and father of the modern mutual fund chastises the industry for essentially being parasites on investors’ accounts.

5. You'll also receive my proprietary report that shows you how to grow your nest egg without taking risk. This report shows you how to position your money to have good interest returns when the market is performing well, and keep those returns, even when the market plunges. Sound too good to be true? Well, millions of these account owners are enjoying the safety and productivity – and sleeping better at night. You’ll never know until you check it out for yourself.

6. You'll get another report that shows you how to take your nest egg and turn it into a personal pension plan – a lifetime stream of income that can never run out, no matter how old you live! I will also show you how to position your retirement funds to keep well ahead of inflation, too!

7. Then there's the Bonus Report: If you aren’t concerned about a long term care need devastating you and your family financially, you aren’t aware of the facts. You have more than a 50% probability of having a long term care need. And when you need long term care, the thing you need the most is a big pile of money. I’ll show you how – if you qualify – to take assets you already have and leverage them three, four or five times for long term care. And no long term care insurance policy premiums! Now, not everyone qualifies for this, but if you do, why not take advantage of it?

That said, to each their own. If you don't want to be bothered, don't. I was simply trying to bring some useful info to my Timeshare Friends.
 

pwrshift

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A defined benefit plan is a guaranteed income that lasts your lifetime and possibly your spouse. An annuity is similar...when you die there's nothing left in most cases...and guaranteed 20 year payouts cost you big time in monthly payouts. Annuities are sold by insurance companies and their agents. They give you security for life but at a huge cost if you plan to leave a legacy for your kids. Depending on your wealth invest no more than 1/3 of your money in annuities to give you guaranteed monthly income. Annuities cannot be changed once started...the money is gone and unless you each live to 90 the insurance company wins.

Bonds and dividends are not usually monthly but 1/3 in each might be the best plan with 1/3 in annuities. There are some terrific dividend achievers out there than not only have paid dividends for many years they have increased them for 30 or more years. Check KO, KFT, MCD, KMB, DUK, etc for examples. I got a 27% raise on WMT dividends this year. Bonds are tougher now as are GICs because of low interest rates being factored into the buy prices, but that will change...if you go that route 'ladder' them over no more than 5 years.

Most pension plans today are defined contribution plans...better known as money purchase plans...and offer no security at all. The only advantage is that the company sponsoring the plan may match your investment...but don't count on a DC plan as a pension plan. They were created to save the sponsor money, not you.
 

Passepartout

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I don't know where people get the idea that all annuities are only good for the issuer and not ever for the buyer.

An actual example, mine:

For each $100,000 I get $6,000 per year income. I got an extra 9% on the principal for tying it up for 10 years- that penalty is reduced 1% a year, but I'm way ahead of that. My heirs get every penny of the amount I put into it. If I see a significantly better deal anywhere else, I am free to move my money there.

Obviously, no one should put all their assets into something like an annuity. 1/3 might be more reasonable, but it sure makes a great floor- along with SS income for retirement.

Ymmv.

Jim Ricks
 

ronparise

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Did you listen to the entire video? Because he sure is trying to sell something. This is the standard sales pitch for variable annuities. All he does in the video is tell you that the old way to save for retirement doesn't work and you need to contact him to find out the details for the 'new' way. He doesn't say it in the video but I would bet he's selling annuity products and he will make a very nice commission if you buy them. Be very careful, I would never use a financial adviser that sells his clients products and makes commissions off of them.

I agree and disagree...

Annuities = Bad The insurance companies put together a portfolio of bonds and package them for resale to you...You can do the same thing for yourself. The difference is that they keep the principal when you die...your heirs get nothing

I disagree about commissioned salesmen. My advice was to stay away from an insurance person because that's all they could sell..And that's what they had to sell. When I was active in the business I had my series 3 license, series 7, insurance (fixed and variable annuities). I had sales agreements with over 100 different mutual fund and insurance companies....I didnt care what you bought as long as the portfolio we put together worked for you and your needs. The important thing is that I wasnt limited to one product or family of products...and neither were my clients...And remember, a fee based financial planner gets paid whether his or her advice is good or bad
 

zinger1457

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Zinger yes I did and if you scrolled to the bottom of the page you would see that this is what he's offering to anyone who wants the info, free of charge:

Does Mr. McKee make a living giving away free info or selling financial products (annuities)? Or does he do one to promote the other? In any case I'm sure he appreciates the free advertising you are providing him to all your timeshare friends.

I do agree that not all annuities are bad and can have a place in ones savings and retirement plans. In fact I have a fixed annuity in my portfolio. This topic came across to me as a plug for a specific salesman rather then a discussion of financial products.
 

funtime

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Pension enhancement option-Rarely discussed

A strategy my sister employed that I never see mentioned is she re-activated a government pension plan by joining state service after an absence of 25 years. She had 10 years vested from an early, right out of college stint. Those years were tied to 1980 dollars. By rejoining state service at today's much higher salaries (almost triple) she not only made those 10 years worth more, but added more years by working for the gov thru the recession times. When she retires, all of the years will be pegged to today's dollars since pension calculation is based on top salary. She basically took at $500 lifetime pension and converted it to a $3,000 month pension! And she's still working adding to it, and still boosting her salary thru promotions, so she's adding to it. She has added an extra 5 years and purchased 5 years. There are many people who were former teachers and gov. workers who could enhance their pensions this way. She once mentioned this strategy at her tennis club and the gals that have long since left the work force expressed astonishment that they would ever go back to work! Yet this is not that hard to accomplish and she figures if she draws a pension for 30 years (based on parents longevity) she will have made an extra $900,000!
 

bogey21

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Annuities are sold by insurance companies and their agents. They give you security for life but at a huge cost if you plan to leave a legacy for your kids.

But not everyone wants to leave a legacy for their kids. I cut a deal with mine when they were in their teens. I would pay for all the education they could consume and I would buy them 2 cars each. In exchange they were put on notice that I planned to die essentially broke. I probably spent $500,000 on my end of the deal and my kids (now ages 41, 32 and 31) are content knowing that there is nothing there for them when I die.

George
 

Timeshare Von

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Does Mr. McKee make a living giving away free info or selling financial products (annuities)? Or does he do one to promote the other? In any case I'm sure he appreciates the free advertising you are providing him to all your timeshare friends.

If you had bothered to read his bio, you'd know what he does for a living.
If I had shared info from Dave Ramsey or Larry Winget, would you be growsing as much?

Nuff said from me.
 

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long boring personal retirement strategy

But not everyone wants to leave a legacy for their kids. I cut a deal with mine when they were in their teens. I would pay for all the education they could consume and I would buy them 2 cars each. In exchange they were put on notice that I planned to die essentially broke. I probably spent $500,000 on my end of the deal and my kids (now ages 41, 32 and 31) are content knowing that there is nothing there for them when I die.

George

I agree that not everyone wants to leave a legacy to their kids. I have no kids.

I like "the deal" you made with your kids because: it's simple, everyone knows the deal, and everyone gets what they need. I respect the protected income aspect of your revenue foundation and agree that if someone chooses annuities, use different providers. Part of the reason I don't like annuities is that risk of defunct provider. I have a long distrust of insurance/insurance companies so my bias is strong.

I have to plan only for me. I'm hoping to stall SS until 70, my FRA is 67. No pension, but I have a 401k I've nourished for nearly 20 years, and more than 20 years to FRA, so, 20 years or so to keep stashing it away. My target is $1 mil minimum to consider ditching the day job, and $5mil to be certain I don't need to work. At some point I could cut to partial year contract if I'm between the 1 and 5 mil and still contribute to a retirement plan. Hard to know the future.

Life Changes, part one.

After I was downsized, I rolled 401 to an IRA and took a bit more control of it. Also started a Roth, which I feel is a very important component to a retirement strategy. Tax free withdrawals at your discretion is something everyone needs, no matter your level of wealth. Better than traditional IRAs for inheritance considerations, also.

It was a good place to put the money I would have been putting in my 401k. It's money I can afford to have tied up for at least 5 years, in case I need to pull any back out in an emergency. Also a nice aspect of Roth, getting your bucks back if you need to. An "insurance plan" whose premiums I dictate (up to fed max) and determine for myself what claims are valid!

Life Changes, part 2.

I have to give xHub about 1/4 of 401k/IRA (that part sitting safely in money market) which I hope I can delay long enuf for it to be more like 1/5 of it. Losing that chunk was not part of my plan, so I am cashing in a life insurance policy I no longer need and will live on that cash while jacking up my 401k contribution to max to decrease tax bite for this half-employed year and try to restore some of that lost retirement nest egg. I suddenly have ground to make up. but, I have 20 years to do so. Time is on my side, I'm lucky I got started early, I'm glad I put my research in many years ago. I'm fortunate to know enough to know how to manage my changing circumstances.

I just became eligible for starting the 401k with new job but won't be rolling over to it soon. The larger potential investment landscape is preferable as a rollover; I simply have more options and can control costs. combining them is going to have to happen eventually to have the compounding effect but I'm currently offsetting that "loss" with about 10 div-paying stocks with positions larger than I can swing outside my retirement plan, and I can't get pure stock in a 401k. Don't worry, that's not all I invested in; this account is where I have my risk balancers and some low-expense index etfs.

I come from some long-lived ancestors so must plan for living into late 90s. this is why I am such a proponent of stocks, and div stocks in particular. The growth potential beats any other vehicle. So does the risk, yes. I diversify across market cap and industry to alleviate some of that, etfs and mutual funds get me international exposure.

I carry maybe 10% of all assets in treasuries, tips, bond indexes. I am an aggressive investor in terms of risk, but I would not equate it to gambling since I'm not trying to time the market, just capture growth and the best compounding available to me: dividends. I don't chase trends, don't try to ride a hot new stock to the top. I do my research on companies, their management, track record and of course, history of paying dividends. I wanted to be a drip investor long before I had the money to invest. what's not to like about getting paid to invest in a company?

Dripinvesting.org has a spreadsheet of long-term div payers http://dripinvesting.org/Tools/Tools.asp

my approach is not appropriate for everyone, and maybe very few. I can sleep at night knowing that I am not taking excessive risk although others may think I'm way too exposed to stock. If I were 70, I'd agree.

Sure, my accounts lost value like everyone elses, but those downs bought more fractional shares of stocks that will earn more dividends and the train keeps rolling. And, when/if I want to sell in taxable accounts, I'll be able to control gain/loss because of so many fractional shares at different prices through time.

Hope this isn't too political, but, I believe in American companies and invest in them. I've been through a couple downs and haven't once glanced at the exit. Instead, the downs cause me to belly back up to the bar.
 

csalter2

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A strategy my sister employed that I never see mentioned is she re-activated a government pension plan by joining state service after an absence of 25 years. She had 10 years vested from an early, right out of college stint. Those years were tied to 1980 dollars. By rejoining state service at today's much higher salaries (almost triple) she not only made those 10 years worth more, but added more years by working for the gov thru the recession times. When she retires, all of the years will be pegged to today's dollars since pension calculation is based on top salary. She basically took at $500 lifetime pension and converted it to a $3,000 month pension! And she's still working adding to it, and still boosting her salary thru promotions, so she's adding to it. She has added an extra 5 years and purchased 5 years. There are many people who were former teachers and gov. workers who could enhance their pensions this way. She once mentioned this strategy at her tennis club and the gals that have long since left the work force expressed astonishment that they would ever go back to work! Yet this is not that hard to accomplish and she figures if she draws a pension for 30 years (based on parents longevity) she will have made an extra $900,000!

Your sister is fortunate that she was able to do this since she left service. However, this is not the easy way. There are many variables that are associated in buying back years. First of all, your age, the amount of money you are currently earning and the number of years you are buying greatly impact the amount you have to pay for those additional years to add to your pension. As a teacher, if you were to buy years when you are in your twenties when you are making your lower salaries and have few years it is extremely cheap. If one is forward thinking during those years, particularly women who will have children, it would be smart to buy those years. However, because the salary is so low at that time and money is needed to take care of oneself and probably payoff student loans it's not easy to do. If one is making a higher salary and be in their late 40's it could cost them nearly $20,000/year if their income is around $75,000. If one was closer to retirement say in their late 50's early 60's, it could cost about $30,000/yr or more depending on the amount of money they make.

Younger is definitely better to do this. However, for someone like your sister who was about to have perhaps no pension, but only social security she made a wise choice to boost her earnings. Everyone is different. If she had stayed the whole time there would have been no need for her to buy the years at all.
 

normab

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He's not selling anything, just trying to inform folks that saving today for tomorrow's retirement has changed.

Well my first comment is that he IS trying to sell something...that's the reason for this slide show. There's nothing wrong with that, after all he is a financial advisor, just correcting the OP's statement for accuracy...;)

Getting past that, I would never agree with leaving all one's money in 401k mutual funds. Rolling over your funds gives one so much more flexibility. There are several ways to handle one's money, and not all of them require a financial advisor..

Just my 2 cents worth...:shrug:

Norma
 

GregGH

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I skimmed the video - he mentions the 4% solution ( as being so out dated?? ) ... I had a great bookmark on a web site that let you see impacts of your decision making ( how much inflation - how much growth - your spend rate ) and worked out the results going back to 1870 ( or there about) so you saw the impact of some pretty big up's and downs ...darn ...trashed it a while back I guess ... The 4% sure gave you an idea of how much you NEED to retire at what level of comfort. Real scary for many people.

General comment - there is a lot of poor information and dis-information out there - be a bit skeptical. Confirm. Remember the 'talking heads' on TV you like ( and add to google alerts ) and ... think.

If you want to try a web site - try this .... http://www.chrismartenson.com/ and take the 20 short video clips on his Crash Course on economics ... I was impressed especially when you get to the GDP and CPI parts ... He does offer a subscription service but has lots of no charge info in the open --and the 20 quick video's ( also on youtube ) are a good use of your time.

ok - one more link -- if you have not heard of TED.Com ...try this one ... http://www.ted.com/talks/lang/eng/salman_khan_let_s_use_video_to_reinvent_education.html ( my fav )

Regards

Greg H
 

pjrose

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He loses credibility with me when he uses pictures of dollar bills for his graphs. Here's the comparable image from "How to Lie With Statistics"
frog.worst.gif

http://www.physics.csbsju.edu/stats/display.html

For those who may not get the point, the image isn't just expanded upward, it's also expanded sideways, so the big frog isn't just 4x as big (40 vs 10), it's 16x as big (height expanded 4x AND width expanded 4x), giving the erroneous impression of a much bigger difference. In contrast, using two bars of the same width but different heights (10 and 40) shows the correct comparison.

And if everyone did get it....yay, you all get an A in my Stats class!
 
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