Saving money is hard. But the earlier it's started, the easier it gets. I was stacking quarters the other night to explain the concept to my kids. Saving money early helps to bring time into the equation. The result is compounding money–a phenomenon Albert Einstein referred to as the 8th wonder of the world. … [Read more...]
What’s Your Lifespan?
I clicked through this lifespan calculator offered by Northwestern Mutual. Just click here to calculate your lifespan. Drawing down 1% per quarter (4% annually) from a portfolio is a good way to help avoid outliving one's money. Take a look at the chart below to see the effects a lower withdrawal rate will have on the lifespan of your savings. A $10,000 investment in 1945 would have lasted 54 years at a 4% annual withdrawal rate, but an 8% annual withdrawal rate would have burned through the nest egg in a mere 16 years. That's not enough for today's retirees who are living longer and … [Read more...]
SEC’s Variable Annuity Special Bulletin
If variable annuities were easy to understand then the SEC wouldn't have to issue a special bulletin explaining them. Not that you'll learn much from the sugar coated document. The thing reads like it was written by one of the biggest lobbies in Washington–the insurance industry. https://www.youngresearch.com/wp-content/uploads/2014/02/ib_var_annuities.pdf … [Read more...]
Heads I Win, Tails You Lose
The promises in some variable annuities are too good to be true–a realization being made by the insurers that made them. You can learn more here: Variable annuities combine a 401(k)-like investment account with the equivalent of an insurance policy. They appeal to investors approaching retirement with a promise of guaranteed regular payouts that could reset higher if the policy's underlying investments fare well. Yet the products usually have higher fees than plain-vanilla "immediate" annuities, which deliver an annual payout in return for a lump-sum payment. (Variable annuities are … [Read more...]
“Besieged” by Variable Annuity Cases
In 2012 variable annuity cases were the only class of security where arbitration cases increased. Recently, Diany Nygaard, a Kansas City, MO based lawyer said she has been “besieged” by investors claims, as reported in The WSJ. “[Brokers] will stand up in front of a room and sell what they tell people are tax free, high income, you-can’t-lose-your-money investments…That’s the shtick.” Investors in variable annuities are at the mercy of the issuing insurance company. Take a look at the chart below. It’s an ETF of insurance companies. It gives you a snapshot of how they performed when times … [Read more...]
Your Personal Financial Security Part II
Every Christmas we give our kids their age in cash—a tradition that began with Becky’s parents—making it fun to get older. Hard cold cash is often forgotten when credit cards, gift cards or your iphone complete transactions. But what happens when the lights go out? You still have basic needs, like caffeine. That’s why carrying some cash and storing some cash makes sense to me. It’s a lot easier letting the cashier keep the change for that cup-of-Joe or 5 lbs. of ice than explaining why he should trust you to pay him next Tuesday. "I'll gladly pay you on Tuesday..." … [Read more...]
A Guaranteed Investment
You know there aren't many guaranteed investments out there today. But If you are a participant in a defined contribution plan, such as a 401(k), you may have access to one of my favorites. It's called the company match. The company match is when your employer matches your contribution up to a certain percent. For example, if the company match is 5% and you contribute 5% of your salary, you have a total contribution or savings of 10%. If you save 2% the company matches 2% and your total contribution is only 4%. As you can see you want to meet that company match each and every year. It's hard … [Read more...]
Your Personal Financial Security Part I
Your personal financial security may not be as strong as it should be. You may be more vulnerable than you think. I called a client yesterday to review his portfolio and his wife quickly said he’d have to call me back because the police were at the house. He was filing a report because his debit card had been compromised. It turns out that over the weekend a waiter had held the card longer than normal (obvious after the fact) and had used the card numbers to make purchases online. Thankfully their bank was able to notify them and quickly canceled the card. I’m sure many of you have been in a … [Read more...]
Quantum Dawn 2
Over the Summer some Wall Street banks ran a crisis scenario in which "bank executives in charge of operations, technology and crisis planning were tasked with detecting how a massive cyber attack was unfolding in the markets - but each one only got to see a tiny red flag waving in a sea of information," Reuters reports. For years we've been recommending Fidelity Investments as a custodian for investor money. For my money no financial institution does technology better than Fidelity Investments. And that would include preparations against cyber attacks. If you don't already have an account … [Read more...]
“Don’t Fight the Fed.” All the Time?
Don't fight the Fed is the mantra of many investors today, but don't fight the Fed is a dangerous strategy late in an economic cycle. In January of 2001 the Fed started reducing rates to head off recession. If you had started buying then based on the Fed’s loose policy, you watched the value of your portfolio collapse by 40% over the course of 21 months before the market finally turned in your favor. The same thing happened in September of 2007 when the Fed decided to cut. If you happily took the signal of the Fed’s cut to indicate a time to buy, you would have been buying through 50% … [Read more...]
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