Financial Planning In Uncertain Times
http://thedianerehmshow.org/shows/2012-12-17/financial-planning-uncertain-times
In recent years, it has become increasingly difficult for Americans to plan for their financial future. The decline of pensions, collapse in home prices and a volatile stock market have created a precarious economy. And this uncertainty has increased demand for financial planners who can make sense of it all. But advice to save more and spend less, and maximize individual retirement accounts has failed to take hold. Three-quarters of Americans have saved just $25,000 for retirement. And nearly half of us now live paycheck-to-paycheck, making it more difficult to save. Diane and a panel of experts discuss planning for your financial future in uncertain times.
Guests
Knight Kiplinger
editor and chief of the "Kiplinger Letter" and "Kiplinger's Personal Finance Magazine."
Tim Maurer
certified financial planner at Financial Consulate and co-author of "The Ultimate Financial Plan: Balancing Your Money and Life."
Helaine Olen
journalist and author of "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry."
Comments
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These are not "uncertain times" for the lower three quarters of American households. These are unjust times of certain austerity for the 99%. The less than 1% is "squeezing the turnip", and their only uncertainty is how much juice they'll get. They demand all, and have mobilized fascism to get it.
Financial Planning is a flim-flam industry, an added household expense like over-priced cable and Internet access. Most people lack the wherewithall to play that game.
Get real, DRShow and talk survival after the social securities are gutted.
You must be very privileged and blind to prevalent circumstances. 50% of Americans are housing insecure and food insecure, unable to access real health care, but hoodooed at the emergency room door.
This topic crys out for David Cay Johnston. Kiplinger lost its appeal in the 1980s.
Diane: perhaps you should have had Willard Mitt Romney on your show as a guest. He certainly knows how to "financially plan" ... especially overseas.
violent crime (except for mass shootings) is down and inflation is near zero except if you eat food and use energy. There are certainly some bright spots.
On a show early this year,guests spoke about the Social Security System. They said that 95% of those on Social Security had no other income.With 50 million folks on Social Security,how could a majority of these people on Social Security vote against their own interest,and vote to end Social Security,or at least end the modest COLA benefit.
UNCERTAINTY for me is what stupid thing will people do to themselves. Yea,I was forced to retire early because of the "Great Bush Recession".I`m on Social Security.The government run retirement program I contributed to for 50 years. I saw in 2000 how many people were living under bridges,that with 4% unemployment. I shudder to think how many homeless there are today,and why so many want to join them.
Social Security is an "EARNED BENEFIT",not a gift or "ENTITLEMENT".
We have become a society in which the way to become financially comfortable is not through hard work, perseverance, and frugality; but through speculation on housing,stocks, or whatever bubble the Fed blows next.
éirígí
THe problem with saving is the low interest rates- Below 1%. How does ANYONE save at that rate?????
Putting aside the group of people who do not EARN enough to make ends meet--based on their needs, there is absolutely a trend increasing bad social and behavioral decisions on spending. Making excuses for the public making bad choices just makes it worse.
I am 26 yrs old, just married, just bought a house. We both save 15% of each paycheck automatically. We only bought a house we could afford with a 20% down payment AND we overpay on our mortgage each month. We don't buy what we can't afford, don't carry a balance on our credit card. To your guest making excuses saying that we shouldn't blame people for their bad financial choices, I ask: What makes me special? I do not work on wall street or personal finance, but I bought a book MYSELF to learn what to do about my college debt. My husband and I are prepared to take care of ourselves, why is that the exception, not the rule?
In the past when there was a looming problem America would organize to solve it. It seems a service program that any community could adopt, where volunteers could earn credits by volunteering in their neighborhoods helping older people to age in place, could easily be adopted. These credits earned could be given to people in need or saved for their own retirement. Let me give you an example:
Tom in Texas gets laid off so he volunteers to cut a neighbor’s grass, he saves those credits for his retirement.
Janis in Columbus thinks her Mother in Lima needs better meals, she post that need and finds a family happy to cook an extra plate and walk down the street to deliver it to Janis’s mom. To pay for those meals she volunteers in Columbus to drive a neighbor to her doctor appointments and transfers those points to her mother’s account.
A church group in Oakville has a lot of service hours banked, they decide they want to donate them to a people in a town that just had a major disaster.
Why is it we can’t capture lost available labor hours with a flexible system like this? It would foster community and would be directed by people who know were the needs are, themselves. Has anything like this been proposed I’m curious?
Your guest state that people should contribute 10% to 15% to 401(k). But have your guest or your audience have read the book "The Great 401(k) H()AX" by William Wolman & Anne Colamosca.
Immigrants model the savings behavior we should all be following. Times are tough but there is so much we can do as individual households to assure financial security. Savings should always come first.
One thought..I know a lot of people who go out to eat 3,4 even 5 nights a week..they admit they will have to work forever. This is just one example. You need to know how much and where you spend your money in order to make changes
So young marrieds should save 25% when there are few jobs and education loans keep them in servitude?
By the way those "peak earning years " the old fogey mentioned are gone.
People invariably tell me that 40 year olds are considered old and expensive in the workplace, are being dumped for low waged entry level replacements, or visa immigrants. I go to offices where the employees are mostly in their 20s and wonder where the "others" went.
A one-legged stool is a top: It has to spin fast to remain upright. So the government and employer legs are sawed off.... I'd just throw the damned thing away if I can't burn it to keep warm.
Immigrants live 30 to a house to assist relatives back home, but that ain't legal. The debt free foreigner working as this man's maid... is she a customer? Maybe he requires a kickback from her meager wage. He's recommending people live an austere existence so they can pay him.
Please remember that those of us who began saving when we were young and single, and continued with company savings plans before they were no longer so widely available, lost a good portion of those savings during the various financial downturns. What was once around $135,000 saved in a mutual fund in the late 1980s is now worth around $60,000, even though the number of shares has grown. And the downturn happened when we were all employed 40+ hours a week, raising families, frantically running day to day, and thus had little time to follow what our shares were doing - and had little choice but to have faith that the market would turn back to a positive direction.
Similarly, our children came of age just before the tax-exempt savings accounts for college, and thus paid taxes on their mutual funds for college use through all the years, duly invested only to find that the value was so reduced that the funds which should have covered through medical school did not cover the entire undergraduate education.
Would someone address the issues from the perspective of the "older worker" (aka baby boomer) who got tagged in the downturn and now cannot get a new job due to age. I keep hearing about younger folks coming into the workforce, the need to have a 401K, save a certain % of their gross, etc. In, sorry, my case, I had real estate and stocks that both tanked to be followed by divorce and job loss. I now work for myself in the group called "underemployed", pay 100% of med insurance and retirement (no match...). Current strategy is cut spending and, when done, cut again.
Does the solution for personal finance conflict with our U.S. economy's apparent need for growth? If people are saving more, they will be spending less. If everyone who needs to save, increases their amount of regular saved income, will not businesses be suffering from loss of sales?
Americans are financially naive, and easily duped by trained sales agents, because they are not prepared at home or at school to understand and analyze their financial choices.
Citizens learn about their nation to be better voters, about biology and health to take better care of their bodies, but very little about basic accounting and finance to understand discounted rates of return, present value of money, and differences in interest-rate structures.
This problem is compounded by the fact that most of the major financial products people buy are regulated by states, and the companies that sell them can effectively "shop" for the least-regulated state domicile from which to operate.
That problem will only become worse with the advent of health insurance exchanges, which will again vary by state within federal boundaries. You can expect health insurers to do everything in their power to misrepresent the types of benefits they provide for a given premium level within the exchanges, with the willing support of the company-bribed state legislators who appoint the people who issue the rules.
In May of 2007 I naively thought my adviser at the credit union and the stock broker at Merrill Lynch were knowledgeable and had my interest in mind. It turned out they were clueless and i lost a bundle in 2008.
Also I've come to believe that mutual funds are the main problem. The mutual fund managers make more off our money than we do and it has taken money away from bank savings account and brought on Fannie Mae and Freddie Mac.
If all Americans were as pennypintching as your guest wants us to be, there would be no economy.Retailers would go belly up. The resession would return with a vengence.
Workers need higher wages with more retirement benefits.
Tim Kincaid
Cincinnati
Are you kidding me? "Young people should be heavily involved in the stock market". One of your guests said this.
I'm 50 years old and when I was just beginning my career I got the same advice and was made to feel stupid if I did not take advantage of my 401k employer match and use my young age to build a huge retirement, etc., etc.
Look what happened: The funds took huge fees, the market crashed, etc., etc. Why on the world should I trust the stock market?
My 401K pan at ATT had 2 choices, 100% company stock or diversified. Diversified investments were dictated by ATT according to the finical institution that managed the plan.
Therefore anything above a match was money the company played with, perhaps investing it in company subsidiaries.
Agree that Banks are not good. Chase tried to get me into a college fund with a 5% fee load. When I pointed it out to the advisor he said he would look into alternatives. That was September and no word since from him.
Question: My two boys, 8 and 4, have $100,000 inherited in cash from their grandfather for college. What might be some vehicles or financial advisors I can seek to invest that money for college tuition?
Because there are no good solutions (structural problem) this show is going nowhere for anyone not inheriting a fortune or enjoying an income above $150K. That's a mighty small audience. Maybe DRShow should air it as a podcast for the wealthy minority, and give us proles something meaningful. But maybe WAMU gets paid (or executives get paid) to air such stuff. Hey, that's commercial media!
Diane:
Listening to your show on savings rate and financial planning and one of your guests said that he was of the opinion that contributions to a 401 K plan with the employer and employee contributing about 15% of the employees income should be mandatory.
In other words this gentleman is saying that the Social Security Contribution should be raised to 7.5% from the employee and the employer. Which is basically what he is saying.
The question is why didn't he say that? Could it be that he thinks an individual is better off betting their money in a 401K plan in the stock market. A place that is little more than a gambling house in Vegas?
The question is why not simply have the present Social Security Retirement Insurance plan expanded to 15% total, split between employee and employer?
If he answers individual choice then he is a shill for Wall Street. Cause the question that the average wage earner should be asked is do you want to bet your money in the Stock Market or do you want to put it into a proven program with a guaranteed return when you retire? That is the only choice people who make less than a quarter of a million dollars, about 90% of the population should be asked. It is the one question no one, and I mean no one, ever asks.
Maybe you would ask it if this gets to you in time.
Sincerely yours
Bill Pellegrini
long time off and on listener.
A person's objective should be to generate enough assets to in turn generate enough passive income to sustain oneself through retirement.
Achieving that objective, however, is incredibly difficult, even for high earners.
Without a federal social safety net in place, it is naive (at best and delusional at worst) to think that we can "take care of ourselves" completely.
islay
Dear Diane,
Throughout one's life, one has to save and pay for a house, save for one's own and their children's education, be prepared to spend on health. Expected to save for retirement in a gambling-like environment where you put aside money you might as well lose, it seems to me the mark of a society not really worth living in anymore.
Why isn't it possible to have a working retirement system? Why does our tax money go toward starting wars instead of being put aside so we, as a nation, can take care of our elders?! We are giving to the society throughout our working lives just to be thrown away when we retire?!
I'm a college student, my parents are paying my tuition this upcoming semester (next year I have free tuition because of my mother's work and her particular job) and at the moment I do work a typical college job, $10 an hour, because I am not in school at the moment. Do you have any suggestions for a basic college student budget to follow? I put 40% of what I make into my savings account so I am saving a good amount. Any tips or suggestions? I don't drink, I play sports, and I have a gas-efficient car, (25$ to fill the 9 gallon tank, 35-43 mpg). I have attempted to follow a budget but I'm just not experienced enough to completely create one out of thin air. Thank you in advanced!
What about Dave Ramsey? He tackles the behavior issues behind financial planning. For instance saving up for something instead of buying it "now" on credit etc etc. He gives very straightforward advice about getting out of debt and having a plan no matter where you are in your financial situation. Can you panel comment on what they think of Dave Ramsey and his advice?
Diversifying a retirement portfolio is not difficult to do, yet most people will not take the time to learn what options are and which ones are viable. It takes time to plan and if you haven't started early in your professional career, your less inclined to do so later in life. I consider myself ahead of the curve investment wise but, I still have problems picking sound investments because of the lack of and obvious misinformation proffered by the financial industry.
If the 22 yr old woman who called in is reading the comments, the book I have lived by since I started college is "Get a Financial Life" by Beth Kobliner.
I saved the maximum amount in a 401k from the time I was 19 years old. At 32 I had a half a million dollars in the 401 k. I was also laid off from my job at 32. I started a business that was successful for 7 years. At 39 years old I was diagnosed with a brain tumor and needed surgery. This drained every drop of savings and then some.
Success in this country is an anomaly an accident. I have nothing and no intention of bothering to save another dime for retirement. Enjoy your time and be happy Don't stress about buying more time and don't bother trying to save money when you don't have enough to begin with.