Saving early and often is always a great idea. One of the biggest obstacles to long-term peace of mind and safety in your retirement is: You. If you realize that, then you’re on your way to realizing the retirement you deserve. The good news: Academics are finding ways to make the future seem more immediate and demanding of attention in various contexts, including saving for retirement. The new techniques—hailing from the field of behavioral science—have been shown to motivate people to save more and earlier, advantages that give money more time to grow. The bad news: The savings crisis is … [Read more...]
Are You one of the 22% Making this Sinful Mistake in Your Portfolio?
According to the Employee Benefit Research Institute, 22% of people in their 60s have more than 80% of their 401(k)s allocated to equities. With only a few years left until retirement, an 80% allocation to stocks is asking for trouble. An 80-20 mix of stocks and bonds can experience crushing losses that are difficult to recover from—especially if one is already taking an income stream from the portfolio. Our chart shows the drawdown of an 80-20 portfolio invested in the S&P 500 and the Merrill Lynch Government and Corporate Bond Index and rebalanced annually. The drawdown is the … [Read more...]
Once Frightened Boomers are Now in a Hurry for Retirement
During the years following the financial crisis Baby Boomers held on to their jobs. Either loath to abandon their good pay or to draw from their beaten down savings, they delayed retirement. Now, perhaps emboldened by the stock market hitting new highs, Boomers are more inclined to head for the exits. Bloomberg reports that 800,000 Boomers opted to retire in the fourth quarter of 2016. For more than five years, the six-month trend for this figure — a significant demographic source of downward pressure on the headline labor force participation rate — had been heading higher, before plateauing … [Read more...]
Hedge Funds turn Frugal after Years Long Crisis Nightmare
After years of playing the markets like casinos, hedge funds are facing pressure from clients to avoid risk. After a number of recent failures (read here, here and here), this pressure has increased. This pressure hasn't gone over well with some managers who are fighting back, while others are accommodating their new clients. Laurence Fletcher writes at The Wall Street Journal. An industry once known for maverick traders and huge profits—from George Soros’s $1 billion profit betting against the pound in 1992 to John Paulson’s $15 billion profit from U.S. subprime mortgages—faces a … [Read more...]
Have You Lost a Valuable Part of Your Life Savings?
It turns out that many Americans are missing out on parts of their retirement savings. With frequent job changes, and confusing enrollment practices, Americans are leaving 401(k) plans and other retirement vehicles that they might not even know exist behind them . Anne Tergesen writes at The Wall Street Journal: As Americans jump from job to job, they are leaving more 401(k)-style accounts and pension benefits with ex-employers. Some lose track of the money, forfeiting a piece of their retirement security. While no one keeps exact tabs on the number of lost retirement accounts, … [Read more...]
Are Blind Trust and Greed the Two Worst Qualities in Investing?
On Monday I told you about a former public employee losing $25 million when he left to work at a hedge fund. Here is another completely separate case of a failure in trust. Both are examples of the blind trust and greed that are the undoing of so many investors. A businessman who is a focus of a federal corruption probe into the New York Police Department and Mayor Bill de Blasio’s fundraising helped arrange an investment of at least $10 million in a hedge-fund firm by the city’s correction officers’ union, people familiar with the matter said. Jona Rechnitz, a Brooklyn real-estate … [Read more...]
How to Become a Millionaire, Part II
Originally posted April 21, 2016 The two most important words in investing, as I have been writing in Richard C. Young’s Intelligence Report for decades, are compound interest. Albert Einstein described compound interest as the greatest mathematical discovery of all time. Ben Franklin wrote on compound interest, “Tis the stone that will turn your lead into gold.” Charles Munger, longtime partner to Warren Buffett has often said, “Understanding the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things.” Richardcyoung.com … [Read more...]
Be Sure to Take Your MRD to Avoid Tax Penalties
Year-end is coming up fast. If you are over 70 and 1/2 years old, don't forget to take your minimum required distribution from your retirement accounts. Fidelity has the scoop on the MRD rules. Beginning when you turn 70½, IRS regulations generally require you to withdraw a minimum amount of money each year from your tax-deferred retirement accounts, like traditional IRAs and 401(k) plans, or pay penalties of 50% on missed MRD amounts. This is why it’s important that you understand how MRDs work, and the timing of distributions. How the amount is determined Minimum required distributions, … [Read more...]
Is Your 401(k) Plan Cutting Your Retirement Short?
A study by the GAO says that 401(k) plans with outdated rules about when employees become eligible to participate and how they receive matching funds could be shortchanging participants by over $400,000 during their retirement. Bloomberg reports: A number of longtime 401(k) plan designs fail to reflect a new, more mobile workforce, hurting employees’ ability to save, according to the report (PDF). Among the arguably outmoded practices: a requirement at some plans that workers be 21 before becoming eligible to join a 401(k), that employees finish one year of service before being eligible to … [Read more...]
No Surprise here as Pension Losses Mount
Public pension managers are coming to the realization, too late I might add, that retirees don’t belong in hedge funds. I’ve warned against this misstep for years (see here, here, here and here for starters). Today, The Wall Street Journal rings the alarm bell on the issue as well. In the U.S., the country’s largest public-pension plan is struggling with the same bleak outlook. The California Public Employees’ Retirement System, which handles benefits for 1.8 million members, recently posted a 0.6% return for its 2016 fiscal year, its worst annual result since the financial crisis. Its … [Read more...]
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