New Book - Coming November 2010

New Book - Coming November 2010
Help! My 401(k) Has Fallen - And Must Get Up!

Friday, October 23, 2009

Wipe Out The Fear in South Bend

Feel like you are drowning in today's economy?
Shaky stock market?
Sinking dollar?
Staggering debt?

Watching the news may seem like an ongoing care wreck - especially if you watch Glenn Beck, who always looks like he will suffer a breakdown right on camera - but as horrifying and overwhelming as the news is, you can't seem to pull yourself away.

We don't suffer from a lack of information - rather TOO MUCH information. Its all so confusing and you can feel like the rag doll being pulled apart from all directions.

How does all of this affect your ability to save for retirement? Is it possible to still have goals and dreams? Can you still retire with dignity?

Dan Rather was once quoted as saying "If all of the difficulties were known at the outset of a long journey, most of us would not start out at all."

Nothing great was ever achieved without hardships along the way. As an advisor, my job is to help you resolve your fears. Let's wipe them out and provide some peace of mind.

This year, when I became an iindependent advisor and opened my own office, I've been learning that most people would rather "not lose anymore" than to win with their long term savings. To quote another great American, Will Rogers - "I'm more concerned with the return OF my money than the return ON my money."

With that in mind, my purpose has been to focus on helping people to find a vehicle that would "not lose" and still let you win. What if I could toss you a "Life Preserver" for your savings? Remember when you first learned to swim? Those kickboards or noodles came in handy, didn't they? You learned eventually that the water is your friend. Once you stopped fighting it, and let it help you, swimming became more fun, right?

Russell Pearlman recently wrote an article titled, "Problems? What Problems?" from the November 2009 issue of "Smart Money" magazine. His article focused on annuities, which have become much more popular with investors as a life preserver for long term savings.
"Don't tell that (regarding annuity cost) to baby boomers looking for retirement security at a time when their 401(k) plans are still hurting; they just keep buying annuities. Through the first six months of the year, total annuity sales were almost $127 billion, only a 3 percent drop from 2008." he writes.

Again, the message I get from my clients and others I meet is "We want SAFETY and Peace of Mind."

Can we get "Guaranteed" growth for our long term savings?
Will it be better than current CD rates?
Can we get "Guaranteed" income when I retire - also better than current CD rates?
Can we make sure the income never goes down?
And lasts for a lifetime - even if we live to 100 or beyond?
And when that lifetime does end, can we leave something for our family and loved ones?

In short - YES! Mr. Pearlman goes on to write "Are annuities for you? Experts say the peace of mind may be worth it."

Another of my favorite articles this year was written by Leslie Scism of the Wall Street Journal. "Long Derided, This Investment Now Looks Wise". "Because of such guarantees, many holders of variable annuities actually saw their accounts increase 6% or more in value last year, when the Standard & Poors 500 stock index dropped nearly 39%." Ms. Scism writes.

Contact me today to learn more about how to get a life preserver (or noodle if you prefer) for your savings. Treat yourself to some Peace of Mind!

You can contact me through my website, and follow me on Twitter at I also host a weekly internet radio braodcast, "Improving Your Financial Health" at

Wednesday, October 14, 2009

Cut The Fat in your 401(k)

Last week, we asked “Where’s the Beef?” Today, we ask “Where’s the Fat?”
Its very important to trim the ‘fat’ in your 401(k) plan – or fund expenses. Today on my Blog Talk Radio program, I had a listener ask about fund expenses. These can really affect your long term return on your retirement savings.

Expenses come from managing the mutual fund. The fund family charges a percentage of the assets invested to manage the fund – deciding what to buy, what to sell, and how much to buy or sell and when to do it. Less trading = lower expenses. Also the advisor on the plan may be paid from these expenses.

Knowing this, it would make sense to look for funds in your plan which have a lower expense rate. If its about 1%, that isn’t too bad, much more than that can negatively affect your returns over time.

To give you an example, I did some figuring on my financial calculator . Let’s look at a 22 year old college graduate, starting their 401(k) plan. Of course you would expect them to bump up their contributions over time, but lets say they put in $300/month with an 8% average return until age 66. They would have saved $1,340,048 in 44 years.

What if they were using a fund with expenses that were 1% more? In other words, the fund may have averaged 8%, but the real return was 7% due to higher expenses. With all the other factors being the same, we now have a total savings of $993,985, which is a difference of $346,063. OUCH! If you figure on taking 4%/year of the nest egg at retirement for income, that means we would need to live on less income -$13842 per year less. See where 1% can make a big difference?

So look carefully at your statement. Don’t just look at ‘performance’ but also fund expenses, which do affect long term performance. Have an advisor help you with this and also help you determine how much to save, so you can have the type of retirement you want.

You may contact me through my website at You can also follow me on Twitter at I also host a Weekly Internet Radio Broadcast “Improving Your Financial Health on Blog Talk Radio

Friday, October 9, 2009

Where's The Beef?

During the 1980’s there was a very popular commercial by Wendy’s. An elderly lady ordered a burger at a generic fast food counter. Upon seeing how puny and pathetic her tiny burger was, she grilled the sales clerk repeatedly - “Where’s the beef?” The commercial was a huge hit and “Where’s the beef?” was a well known catch phrase.

These days “Where’s the beef?” could easily be applied to the 401(k)s & IRAs of many people. In Daniel R. Solin’s book, “The Smartest 401(k) Book You’ll Ever Read”, he points out that “the typical twenty-something only invests 50.4% of his or her account in stock mutual funds.” You can’t keep up with inflation that way! Mr. Solin goes on to say that as we get older, that figure is also pretty timid. “The typical worker in their forties invests only 54.3% in stock funds.”

It doesn’t matter how old you are. Even people on the verge of retirement should be invested in stock mutual funds with a good part of their long term savings. After all, you could be retired for 20-30 years.

Stocks have been the only investment which has beaten inflation over the long term. And we NEED to prepare for inflation! Did you know that in 1989 (20 years ago), a loaf of bread costs an average of 0.67? And a postage stamp was just 0.25?

Mr. Solin also points out that “If you invested $1.00 in blue chip stocks in 1926, it would be worth $3077.33 today. That pencils out to a 10.42 average yearly return.”

Don’t be too fancy trying to pick the “right” fund. Look for mutual funds with long histories (10 years or longer) and low expenses. High management fees can really affect the return on your investment.

We will be looking at a few other ways to put some “Beef” back into your 401(k) in a future article.

You may contact me through my website at You can also follow me on Twitter at I also host a Weekly Internet Radio Broadcast "Improving Your Financial Health on Blog Talk Radio

Friday, October 2, 2009

Digging A Hole

Do People still invest in CDs anymore? (Don’t answer that.) I know that they are the “investment” of choice for a number of folks and for banks. Let’s be honest though – Rates are TERRIBLE!!
As of today, Oct. 2, 2009, according to, the best rate on a 12 month CD in the USA is 2.05 at India Bank. For a 3 Year CD, the best available rate is 2.97 at Flagstar Bank.
When I called banks in the area, I actually had to keep a straight face when Diana told me about their “Special Rate” of 1.5% on a 13 month CD – only for current customers, though. Woo-Hoo!!

CDs do appeal to those who want “safety”, which means the FDIC Guarantee. That means your money is guaranteed by the Federal Deposit Insurance Corporation (i.e. the U.S. Government) OK, I feel MUCH BETTER about THAT!!

About a year ago, as part of the new financial legislation, the FDIC raised its limit on the maximum amount guaranteed from $100,000 to $250,000. I’m not sure exactly how that helps Joe Lunchbucket, but there was quite a bit of fuss made about it last October.

Dave Ramsey has often referred to CDs as “Certificates of Depression” and with good reason. Did you know that for 11 of the past 20 years, CDs actually have a “Real Return” that is Less Than 1%? Once you consider inflation and taxes on the interest, it is really about the same as burying your savings in the backyard.

As a retiree, wouldn’t you like to get a better return on your savings? What if you could have your nestegg generate income for you of at least 5% of the principal – and have that income paid to you for the rest of your life?
Often when I meet with clients, I learn about their situation and their goals and suggest an appropriate solution which will help them with their long term savings. Clients normally can see the value, but may get hung up on time frames with CD money. A common response may be “That sounds great. I’ve got a CD due in a couple of months. Call me back then, and we will get back together. I can’t touch it until then.” (The Early Withdrawal Penalty looms overhead like the ‘Grim Reaper’.)

So, being a good guy (I don’t want to see anyone lose money.) I mark the date on my calendar and follow up with them as they asked me to. Except now the situation has changed. The CD was renewed. OR the due date was different from what they thought. OR the dog needs braces. OR….. Bottom Line - EVERYONE (most of all the client) LOSES.

Soooo, this being October, I called 3 leading banks in South Bend to see just how “scary” the Early Withdrawal Penalty is. At Wells Fargo , I was told that the penalty would be forfeiting 6 months of interest on a 16 month CD and 3 months of interest on a 12 month. First Source Bank had the best rate locally on a CD – 1.5% on a 13 month CD, which also came with a penalty of 6 months of interest for early withdrawal. National City Bank (soon to be PNC) told me that you could lose 1/2 of your interest for the remainder of your term or 3 months of interest, whichever is greater.

OK, lets do the math. Let’s say you have a CD of $10,000. You have about 3 months left on the term. Let’s give you the BEST rate (a whopping 1.5%) and the stiffest penalty for taking it out early (6 months interest). $10,000 x .015 x .5 (6 months is 1/2 of a year) = a loss of $75.

But what do you gain? There are only 2 types of money – liquid cash (you need it NOW) and investment savings (you need it LATER). What if you invested it into something that gave you an average return of 5% or more? $10,000 x .05 = $500 after 1 year. Last time I checked, $500 – $75 = a GAIN of $425. And I want the best for my clients. So let’s leave the “scariness” to the little ghouls and goblins on Halloween.

Remember to invest for the long term!

You can always contact me through my website, You can also follow me on Twitter at My weekly Internet Radio Program is “Improving Your Financial Health” on Blog Talk Radio at