Ages & Life Stages

Retirement planning has always centered around age. A 40 year old would often invest "100 minus their age" in equities. This rule of thumb for investing is still practiced today, but is certainly evolving. (In our example, 100-40 = 60% in stocks. The remaining allocation can be disbursed amongst bonds, real estate and alternative investments.)

This is all being challenged as American demographics are changing. Gone are the days where people married in the 20's, bought houses in their 30's (don't forget the white picket fence!) and had 2.1 kids. Recent reports indicate marriages have decreased 3.2% since 2000. Fathers 50+ are more common place. And, the biggest increase (%) in demographic age groups is the 100+ seniors... aka 'Centurion's'.

Just last week, we learned of the passing of 114 year young Eunice Sanborn. She was considered to be the world's oldest person by Guinness Records! No worries... triathlete and Sister Madonna Buder appears to be on her way to 100 and breaking a few records along the way (see above)!

What does this mean for retirement planning? Well, a number of things have changed. I've often penned my thoughts on limited availability of pensions. Individuals now have to provide for their own retirement. Living longer may require you to work longer. If Social Security keeps increasing the age for maximum benefit payments, there's a reason! And, being more aggressive in your investments may be required. Maybe "110 minus your age" should become the norm?

For many Americans already behind in retirement planning, a peddle-to-the-metal approach is often viewed as appropriate. Financial Advisors... like myself... are sometimes deemed to have a direct connection to Wall Street and thus will recognize when to push and when to sit in cash. Unfortunately, a short review of Financial Planning 101 will reveal this type of strategy never works. It involves market timing AND requires flawless executing on when to exit the capital markets and when to get back in. Getting both correct has probably has the same odds of winning Powerball. Basically, they're not in your favor!

A better approach today may be asset Asset Allocation Models or Target Return Funds. Both are tied into your risk tolerance and prospective retirement date. For example, a 2020 fund will offer a diversified portfolio and become more conservative as you approach your date. However, as previously mentioned, this may now be adjustment based on your lifestyle, time frame, career and current savings. A more aggressive investor may choose a 2040 portfolio simply because they plan on working longer, have longevity in their family and simply want to be more growth oriented.

Everyone is different when it comes to investing. Don't get painted into a box, but rather seek the advice of a Financial professional to determine your ideal retirement portfolio.

The Silent Inflation

Inflation is hazardous to your wealth! Our government is doing it's best to avoid a deflationary scenario - and for good reason - but, the inflation NOT being acknowledged is going to be problematic at some point.

The consumer price index (CPI) continues to lead us astray. If we consider the source, we should question the #'s. The government providing the data is akin to the 'fox in the hen house.' Report the actual # and they are forced to increase both social security and short term borrowing rates. With an exploding budget deficit, I'm confident real #'s won't be reported anytime soon.

The United Nations reported this week food prices are up dramatically from a year earlier. And, they are causing riots in certain parts of the world. Commodity prices increased 30% last year and continue to move higher in early 2011.

Many of us don't remember the 1970's, but history often repeats itself. If we go back in time, we can see the biggest asset winner during the '70's was commodities. Inflationary pressures hurt stocks & bonds, but oil, natural gas, gold, silver, wheat, cotton, etc. all skyrocketed in value during the decade. You can argue we are now in a similar situation.

The reported #'s from Washington continue to hover around 2% per year. This is both misleading and inaccurate. We often hear, 'if we discount food and energy' from the reported CPI due to volatility... if both categories came back to earth in due time, this may be acceptable. However, it's not very likely - nor realistic.

Last week, Sherman Williams announced paint increases of 8%. Kimberly Clark announced a 5% increase on certain paper products and McDonald's announced they will have to pass along higher food prices to consumers in the near future.

The American consumer is certainly capable of handling some price increases. The difficulty arises when prices rise faster than salaries. Many companies are opting to reduce product size and charge the same price. A back door kind of inflation... less stuff, same price. This is why your favorite coffee cake snack is now the size of a quarter!

Financial Resolutions 2011

Yup, we've been here before! Turn the calendar and everything changes. There's something magical about adding '11 to the date. We all resolve to lose weight, eat better and exercise more. For many of us, we'll follow through on these resolutions. For others, it's simply a thought that fades in a few weeks.

Let's try something new this year... financial resolutions! They're not painful. They don't make you sweat. And, they may actually improve your financial well being over time!

Let's get started:

1. Get your budget in order and STICK to it. As the 'credit card nation', we're good at buying things we can't afford. Unless you can pay off your monthly credit card bills in full with income - hold off on your purchase. As my friend's dad always says... "Make do."

2. Get your FREE credit report and make sure it's accurate. Almost 2/3 of Americans don't check their credit. Don't be one of them. Go to AnnualCreditScore.com and print your free copy.

3. Increase retirement savings! The days of a pension are over for most people. Whether you have a 401k plan or an IRA account, increase your investments this year. Time & growth are your biggest assets.

4. Get some exercise! Not for the reasons you think though. Healthier individuals have lower medical bills and are more productive @ work. Several studies have confirmed this fact. So, get moving! Walk, bike, run, ski, rollerblade, etc.... or go to the gym!!!

Happy New Year!!!

Holiday Book List 2010

Each year, I get a few requests for book recommendations. Sometimes it's with a current theme in mind. Other times, it's simply a good book to read to better understand the financial markets.

Let's face it... with a dwindling supply of companies offering pensions these days, understanding your investments is a key component to your retirement. I'm flattered many people don't want to put the time, effort and energy into learning, so I will always have a job. Thank you! However, I do encourage everyone to learn about the capital markets. What was that commercial from years ago, "An educated consumer is our best customer!" I couldn't agree more.

So that being said, this year, I'm simply going to revert back to my holiday book list from 2009 and add a few more selections. As always, they are business AND non-business.

New additions for 2010 would include:

1. Coming Back Strong - Unleashing the Hidden Power of Adversity - Drew Brees

2. S*it My Dad Says - Justin Halpern

3. Decision Points - George W. Bush

Happy Holidays!!!

Changing Times...

Evolution is a funny thing. It's generally considered good. Indoor plumbing, baseboard heat, automobile and of course the internet are a few great examples. If it wasn't for the latter, I wouldn't be sharing my thoughts with you @ the moment.

But, with everything good, there is often a side effect. Taking cholesterol drugs is great for lowering the bad stuff in your arteries. Unfortunately, you could experience muscle pain as a result. If my cholesterol was around 210, I think I'd skip the medicine altogether and maintain a healthy lifestyle.

Skis, boots and bindings have made huge advancements over the last decade. Broken bones are almost a thing of the past. On the flip side, skiers experience more knee injuries than ever before. Hmmm... broken bone or knee problems? Tough decision.

The real estate boom of the recent past allowed all citizens to 'afford' the American Dream. Barry Ritholtz of "The Big Picture" showed a great google map(s) this week displaying the measle epidemic spreading across our country. The 'hot' spots or cluster of foreclosures shows the devastation in certain regions. We can only speculate how long it will take to fix this problem.

Today's federal deficit news is another warming shot of sorts. Our lifestyle as we know it will be changing at some future date. This week, next month or over the next decade? Not sure. But, we owe a LOT of money. If the government followed the bankruptcy laws that individuals follow, we would have filed chapter 11 a long time ago.

People don't like change, but we've been living the good life on borrowed money for decades. Now that we collectively owe more than $1 trillion... read that again... trillion dollars - it's time to scale back.

What comes next? Higher income taxes, less municipal services, older social security eligibility, higher real estate taxes? Probably all of the above. Oh yea... and less international travel. The dollar will probably continue to lose strength and make travelling abroad too expensive. Sad, but true.

Bob Dylan may have been a prophet of sorts when he stated in his classic 1964 song, "Times They are a Changing"...

And that's the final word from 'doom & gloom' central. I'll try to be more cheerful next time! Promise!!

Rethinking Daily Life

Andy Rooney of 60 Minutes has a great approach to his journalism. It's simple, pure and direct. Everyday items are looked at with his unique perspective.

With this approach in mind, I'd like to examine our daily lives on a few different levels.

A recent trip to Colorado provided a wonderful time to relax & reflect. Visiting my good friend Anthony, we enjoyed the Rocky Mountain altitude, shared a few laughs and went to two football games as well. Go Buffs!

During the weekend, we discussed how his lady friend doesn't have cable tv? Yes, she has a television, but only uses it to watch movies. The more we talked, the more I realized, maybe this isn't such a bad idea! It seems a little contrarian to a certain extent. But, how many times do we simply turn on the tv for background noise or music? We're not watching anything, but filling the quiet void.

Personally, I now watch the majority of my favorite tv shows on my PC (aka: entertainment center) these days on my schedule. "Two and a Half Men" is a great example. Simply go to http://www.cbs.com/ and 'tune in'. You'll have a few spot advertisements, but it's less than you would have if you watched the regularly scheduled program.

Also, I recently noticed my daily routine of gathering morning news had changed. My favorite source is now USA Today - not the print version, but rather the online version. Great layout, content and it's free. I Fire up the PC each morning with a cup of tea and read the Money section. Life is good!

We all have daily routines. Some habits are useful and others are simply... well... habits! They may even be costly ones as well. How many days do you stop @ Starbucks during your morning commute for a mucho expensive grande latte (or something similar)?

Perhaps examining your daily habits could lead to positive changes. It may also improve your financial situation as well!

Moral Dilemma - Where Did We Go Wrong?

What happened to personal responsibility?

Everything from brokerage accounts to mortgages and from Little League to Pop Warner football are in play.

We seem to be building a nation of bad decisions. Some may call it morals, others ethics. Call it what you like, there's something wrong with this trend. People are walking away from personal commitments & responsibilities when things don't go there way.

Parents are letting their children quit their sports program in mid-season. Why? The parent and/or child didn't feel they were getting enough playing time. Correct me if I'm wrong... aren't 9 players a minimum requirement to field a baseball team. Due to injuries, vacations, family obligations, etc. every child is needed plus a few extras. There's a reason it's considered a 'team sport'. Everyone relies upon one another. Here's a novel idea: Let your child finish the entire season and then decide if they want to play next year.

In the grown up version, we can discuss mortgages. Everyone wanted to own real estate in some capacity from 2000-2007. It didn't matter if you were buying a primary residence, flipping properties or rehabbing for profit. People were blinded by dollars and real estate was the "It" investment. The herd mentality was running wild.

Unfortunately, when the music stopped, thousands of 'investors' were left holding properties they couldn't afford. When times were good and everyone was making money, nobody complained. Now that the winds of profit have turned, everyone was quick to point a finger for their financial difficulties. Very rarely did you hear, "I made a bad decision." But, rather "The bank took advantage of me." "I didn't know what I was signing." I'll be the first to admit, the banks weren't angelic in this whole process. But, let's cite the facts. They simply made money available. They didn't contact you! Further, for the individuals who borrowed money, didn't you have an attorney representing you during the entire process? I don't see how the banks are the bad guys in this scenario. When you went to closing, you had the option of signing your mortgage documents or not - with legal counsel present. What am I missing?

Our moral compass has gone astray in recent years. Personally, I tend to think it started with the dot.com era and day trading. A similar scenario unfolded with brokerage accounts and margin requirements.

I'm not sure how we get back on track, but I tend to think our economic recovery is going to have a direct correlation to our moral standards.