The Boomer Rollover Conundrum

Boomers will be retiring en masse in the coming years. And with that retirement comes options. For the first time their lives, they will be outside the comfortable boundaries of their employer's retirement plans and on their own. The choices are many and often confusing. That is why I thought it would be informative to discuss over the last couple of days, an option you may have considered.

Today on the Financial Impact Factor Radio with Paul Petillo, Dave Kittredge and Dave Ng we continue the discussion we began yesterday about self-directed IRAs. While having control over your retirement is important, how much risk is too much and who can handle the increased potential of loss or gain.

To listen to yesterday's show, click here.

Here are some outtakes from this conversation:

Yesterday we discussed a different corner of the retirement investment world when we talked about self-directed IRA. I suggested that “If there is one thing we all seem to be seeking and at the same time, remains as elusive it is control. Our investments often seem to want us to master its fate, as if simply involving yourself is enough.” T.S.Eliot seemed to agree although we all know he wasn’t talking about your retirement plans when he wrote: "Only those who will risk going too far can possibly find out how far it is possible to go."

Jim Hitt of AmericanIRA.com to discuss the IRA that you control. There is a lot left to be discussed it seems and little clarification is needed in advance. Jim is a third party administrator or TPA. We have had a few professionals who ply their trade as a go-between, somewhat detached from the other two parties but necessary in the legal and tax compliant execution of a retirement plan. Sometimes we need to be reminded that all retirement investments, 401(k)s, 403(b)s, IRAs in all their incarnations are essentially parts of the tax code. And I’d be willing to wager that when taxes are mentioned, there is a certain fear, perhaps caution that moves to the forefront. Self-directed IRAs are no different.

On numerous occasions, we have, in advance of a guest appearing on the show prepped the listening audience, discussed what we knew about the next day’s topic and did so in almost every instance, without the guest’s knowledge. Today, we’re going to look back.

Most of us have had out retirement plans nestled safely – and I’ll describe what I mean by safely in a moment – inside a 401(k). The way these plans are constructed give us a sense that someone else is watching over us. They choose the investments. They made the match. They suggested that they had a fiduciary responsibility to us. I asked Jim if he had just such a responsibility and he simply replied: no.

So we began the discussion there as I asked Dave and Dave if they would like to tell us what fiduciary responsibility is?

Now we all know that risk is something we need and knowing how much of a risk you can take is key in the way you execute your goals. But this is no easy task when it comes to this type of IRA. "Trust your own instinct, “ as Billy Wilder once said: “Your mistakes might as well be your own, instead of someone else's."

As Baby Boomers begin this massive wave of retirement, many are for the first time going to get their life’s retirement account to control. I was caught by one thing Mr. Hitt suggested as to the people who come to him: they come in good times and bad.

The risk of self-directing your IRA is there. Jim discussed using this money for real estate investment purposes, business opportunities and other investments such as gold, commodities, etc. And it all boils down to coordination.

Listen to Financial Impact Factor Radio with your hosts: Paul Petillo of Target2025.com/BlueCollarDollar.com and Dave Kittredge and Dave Ng of FinancialFootprint.com

The show is broadcast daily, online at 6amPST/9amEST.

Paul Petillo is the managing editor of BlueCollarDollar.com/Target2025.com and a fellow Boomer.

In 2012: What Boomers Can Expect

"Time is free, but it's priceless. You can't own it, but you can use it. You can't keep it, but you can spend it. Once you've lost it you can never get it back." Harvey MacKay

One of the key elements in any financial transaction is time. If you want to retire, you must consider the amount of time. If you want to borrow, how long you have to pay it back can be translated into dollars and cents. Investing; timing they suggest can't be down but is important nonetheless.

If you are twenty, time is on your side. If you are thirty, there is time left. If you are forty, time is of the essence. If you are fifty, time is running out. If you are sixty, where has the time gone. And older than that, time is no longer on your side. It accompanies us through life like some dark passenger. It reflect back on us from the mirror. And when we look at our retirement plan, it stares at us without guilt or shame. Time is the truth.

When I first began writing these predictions, and I've been churning out these year end ditties for over a decade, many were laced with optimism, some with an urging that we learn the lesson and move forward armed with knowledge of past mistakes, and still others were exercises in reality. In 2012, we have some opportunities and some problems awaiting us, left on the table as we symbolically turn the calendar wiping out 2011. But it won't leave quietly.

So I have a few thoughts about what you can do - resolutions of sorts but not the drastic sort we make and break almost within hours of promising ourselves at midnight.

Increase your contribution I start with this obvious chant for two reasons: you aren't making a large enough contribution and two, I would be remiss in not telling you this right from the start. And I'm not just speaking to those with a 401(k).

There are the millions of you who are forced to (and because of that are not likely to) finance your own retirement through an individual retirement account. We lament at the worker who literally only has to sign up at his workplace and doesn't. And far too often, we say little about the person who has to sign-up (after finding a fund), commit with a fortitude that is somewhat lacking and to contribute some of their paycheck via direct deposit every week or month. That effort, it seems is a much more involved hurdle.

In 2012, the investment world will be little changed. It will roil and confuse and gyrate and possibly even nose dive - just as it has for decades. It will react to news - if not from Europe form China or even the presidential elections (which ironically tend to be excellent years to invest). This will have you second-guessing your investments. But this will only apply if you have no idea how much risk you can take.

Pay attention to diversification You may not be capable of rebalancing, the act of making sure that your investments are directed evenly across many investments. This is much harder than it seems. As long as you are involved - and that is YOU in capitals - the struggle to keep balance will not get any easier.

For the vast majority of us, mutual funds will be the investment vehicle of choice. These investments will see more movement towards fee reductions. Which is a good thing. Fees will and always have been a subtraction of gains. This makes an excellent argument for indexing.

Choosing six index funds across the following cross-sections of the markets will not solve the problem of rebalancing (some will do better than others) but it will provide diversification. Index the largest companies (an S&P 500 fund), a mid-cap fund (the next 400 companies in size), small-caps (the next 2000), an international fund (an index of the largest countries (those with established banking systems even if they are currently troubled and will continue to be so in 2012), an emerging market fund (after international funds, the most risky) and a bond index (one that covers as much fixed income as possible).

Some of you will wonder if exchange traded funds (ETF) wouldn't be just as good if not better than simple indexing. In 2012, ETFs will continue to drill down ever deeper into sectors of the markets that add risk along with the illusion of an index. ETFs will become more actively managed in 2012 offering you more risk at a lower cost. Cheap doesn't mean better. 2012 will be year of the ETF. If you are unsure what these investments are, consider this conversation I had with David Abner of Financial Impact Factor Radio recently to help explain what these investments are and how they work.

Focus on your financial well-being This refers to your credit score. It continues to impact your financial future and will become increasingly harder to ignore. A new credit rating service agency will add to the difficulty in 2012 and not only will the current scoring impact costs such as insurance, it will seek to trace the breadcrumbs of your financial life more thoroughly that the big three do.

There is little likelihood that the job market will increase as many of our returning troops will flood the marketplace, taking numerous jobs from your kids just out of college. Which means another year with your kids at home. The only answer to this problem is to continue to tighten down your budgets in 2012. As I mentioned earlier: "If you are forty, time is of the essence. If you are fifty, time is running out. If you are sixty, where has the time gone."

And you must do this understanding that inflation - not the reported number but the real number in your grocery bill - will still chip away at your wealth. This means you will move in two opposite directs in 2012: saving and investing more for your fleeting future (at least 6% but 10% would be best) and spending less in the present (easy of you don't use credit).

And the housing market will improve for those who have repaired any damaged credit or who have saved enough of a down payment to buy a house. people are still buying and selling. These people have found that while the market is not accessible to all, it is for those that have done right by their personal finances.

Do all of that this may not seem like a new year - but it will be a better year!

The Boomer Conundrum: To Hire a Financial Planner

On the surface, financial planning has remained the same. You are looking for a path to retirement that will provide you with a secure future, a worry-free post-work life. And financial planners offer you their service as a guide on that journey. But choosing the right one seems to have become more difficult as the industry has converted itself into what they think is more user friendly. How do you chose? 

There was time in the not-too-distant past when financial planners were catering to only the elite investor, one who is already versed in the concept of spending money to keep money. These richer clients understood that making money was the easy part; keeping it on the other hand was tougher. The sort of planners these folks hired were asset-based. This means that if you had wealth, for a percentage of those assets, they would invest to keep it.

They had an interest, albeit conflicted, in keeping your money in motion. Not only would they get a portion of your returns, they might also receive pay from the very products they were suggesting you use. Beyond these conflicts, which have obvious pluses and minuses, their interest was in the growth of your portfolio. They did attempt to cultivate a long-term relationship and the way they constructed their business with ease of access to conversations. And they knew that if they did a good job, they wouldn't hear from you until you stumbled across some idea on your own. They might at the point weigh the option against their own self-interest: less money to manage because, for instance you thought a life insurance policy was a good idea for your estate, would be less of a percentage of the total wealth under management.

Until, of course, things go awry. When the markets nose-dived in 2008, not only did economists and financial students miss the event, but so did financial planners. This exposed to some of these wealthy clients the fallibility of their skills. Paying as much as 2% of the net worth of their portfolios and at the same time, losing value the same as someone who didn't pay anyone for advice, brought the industry to rethink their approach.

Enter the flat-fee financial planner. This seemed like the logical choice for those with not a lot of money but the same needs as those who had much more: they wanted to keep it. The question is, without the incentive to make more based on the strength of the portfolio, it seemed as if this was simply window-dressing planning - they charged a flat fee for people who didn't need a lot of ongoing advice and they didn't offer more than was needed.

Storefront financial planners popped up everywhere. They would take your plan, reconstruct it and channel you into other products, some you might not need. They might suggest refinancing (and they could help). They might restructure your life insurance needs (and they could help). They might steer you towards an annuity (and they could help there as well).

And once that was done and you seemed set, they made money on the commissions these product brought in and did so under the guise that it was all in your best interest. Sometimes it was. The problem was that this yearly or twice yearly visit could cost upwards of $1,000. This might be a good investment for those who are in relatively stable shape. But for many who sought this sort of advice, the money might have been better spent elsewhere.

The next phase of advice giving came as a result of the downturn. While many people lost a great deal of investable net worth, some had un-investable assets. the may have had muh of their net worth tied up in their business for instance, an asset but not one that would be considered liquid. These assets, while seemingly under management would be considered when any advice was given. The concept of protection although came at a cost that sometimes is twice that of the fee-based planner.

The advent of the hourly based financial planner seemed to be a good solution. Much like the service provided by lawyers, the concept of the clock-running seemed to be a good idea for some people. They paid for what they received. The relationship was even more important here than in many of the other types of planning scenarios: planners were paid by the hour so they kept that meter running. Call with a question: and the meter clocked the time. Stop by with a concern: and the meter clocked the visit even as they chatted up your personal life.

Removing the asset-based incentive will keep your financial planner working longer on your plan with results that aren't often eventful. None of this suggests that this group isn't without merit. Far too many people equate the time they spend making money as more fruitful than time spent keeping it. They could, in almost every instance, find the same solutions on their own. Ironically, they could save money by investing some of their own time.

Evan Esar, American humorist who once quipped: "The mint makes it first; it's up to you to make it last." Keep in mind, credentials play a role. Start with the certified financial planner designation and move towards the references. Even if someone you know recommends a planner, do your own background check. Ironically, once you satisfied your inner skeptic, calculate the amount of hours you did and the amount of hours after-the-fact that you questioned your decision.

On today's Financial Impact Factor Radio with Paul Petillo, Dave Kittredge and Dave Ng we discuss the role financial planners can play in your retirement planning. Even as the industry surrounding advice has shifted to a more consumer friendly format, it has become more difficult to chose the right financial planner for the task.

Listen to internet radio with

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

An Expert on ETFs

This past week, on the Financial Impact Factor with Paul Petillo, Dave Kittredge and Dave Ng we had David J. Abner. He is the Director for Institutional Sales and Trading at Wisdom Tree and the author of The ETF Handbook: How to Value and Trade Exchange Traded Funds (Wiley Finance) These funds, that trade like stocks have been coming to the forefront of the investment world for almost a decade. But even after all that time, their purpose isn't clearly understood, their benefits less so and the media, suggesting volatility has dampened our enthusiasm towards them. Mr. Abner discusses these products, what they are and why they are important. ETFs will begin showing up in your 401(k) as investor demand and plan administrator's fiduciary responsibility tightens. This increase exposure is good for the funds; but are the good for you?

Listen to internet radio with

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

Are You Thinking Estate Planning?

Boomers aren't considering their estate plans the way they should. Perhaps the costs seem high. Perhaps the language too difficult. Perhaps we don't want to come face-to-face with our own mortalities. But talking about estate planning isn't just for the older ones among us. On the Financial Impact Factor Radio we hosted Deborah L. Jacobs, author of "Estate Planning Smarts".

This was an important show for those of us who may not have taken the important first step and made a will. And you'll find out that this is actually the next step in a good estate plan! Tune in to find out what the first step was. Deborah, a columnist and estate planning expert at Forbes discussed how to approach this topic with your parents, your spouse, your family and your lawyer.

 In the second half of the show, Dave Kittredge and Dave Ng of FinancialFootprint.com and my cohosts discussed the upward challenge of re-educating yourself for a new career, even if you graduated 30 years ago. College doesn't come cheap and when Boomers focus their attention on getting trained for a changing work environment, everyone benefits.

 

Listen to internet radio with

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

On Socially Responsible Investing

Turns out, Boomers are very interested in this sort of investing. On Financial Impact Factor Radio we had Ron Robins, an MBA, founder and analyst for Investing for the Soul to discuss socially responsible investing. Dave K, Dave Ng and myself were curious about what even after decades continues to be a niche investment for many people. The main problem as Mr. Robins pointed out was the lack of recommendation by the financial services industry, even as the need and ultimately the performance of these investments has grown, and the low exposure in 401(k) plans (about 30% of the plans offer them).

Listen to internet radio with

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

An Important Show about Long-Term Care Insurance

On Monday's Financial Impact Factor Radio we had a guest of interest to all Boomers. Jesse Slome of American Association for Long-Term Care Insurance joined us to teach us about LTCI. This is a multi-faceted topic that has long-range implication for the near retiree and their retirement planning strategies as well as someone who is already retired. Jesse was nice enough to stop by and explain many of the nuances of this product and offer some helpful tips on what to look for when buying long-term care insurance, where to purchase it and when.

Listen to internet radiowith

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

On the Radio with Author Mike Egan

Monday on Financial Impact Factor Radio, we had Mike Egan, author of "Your Stronger Financial Future: The Eight Essential Strategies for Making Profitable Investments". This book takes the time to rearrange your thinking about the world of finance around us and in doing so, arrange it so that we can systematically confront fear and presumption and get on with our plans for retirement.

Listen to internet radiowith

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

This Show was for Boomers: On the radio with Steve Cooperstein

On Monday, we had Steve Cooperstein on the Financial Impact Factor Radio show with Paul Petillo, managing editor of BlueCollarDollar.com/Target2025.com and a fellow Boomer. Steve's recent book was the topic for today's show: “Implications of the Perceptions of Post Retirement Risk for the Life Insurance Industry: Inside Track Marketing Opportunity, But Requiring Focused Retooling”.

It may have been written for advisors and academics and the insurance industry, but in doing so it offers us some interesting insights into how these folks think about us: the end user. Did I mention that Steve is an actuary?

 We talked to him about annuities and Long Term Care Insurance, the impact both of these products have on all age groups, what is wrong with them and how they can be improved. We solved a great deal in the hour we had together!



   

Listen to internet radiowith

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

On the Radio with a Behavioral Economist

Think you know yourself, the hidden investor inside? As a Boomer you would think so. On Monday's Financial Impact Factor we had Victor Ricciardi, professor at Goucher College and editor of Social Science Research network eJournal. His field of expertise is risk and the show focused on the numerous biases we as investors use when it comes to making financial decisions. His background in behavioral finance and related fields of investor psychology gave us some curiosity satisfying answers about what we can do moving forward with our retirement accounts, 401(k) plans and investing with skill.  

Listen to internet radiowith

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

Boomers: Do You Know Where Your Money Is?

Every second, a Boomer retires. This statistic alone should be a comforting thought. It is but not necessarily for Boomers. Billions of dollars of invested money will suddenly come under the direct control of this group and many simply don't know what to do. Yes they will want to ensure they don't run out of money. But they will have just as many opportunities to lose it all - in a scam that promises to make sure they don't run out of money.

On the Monday Financial Impact Factor Radio hosted by Paul Petillo we had Pat Huddleston, author of The Vigilant Investor: A Former SEC Enforcer Reveals How to Fraud-Proof Your Investments Mr. Huddleston is also a lawyer and CEO of Investors Watchdog LLC. As a former SEC Enforcer, he has seen more scams than you could imagine. With his new book, he takes those stories and the effect it has had on the victims and gives us the ultimate tell-all on how to spot what the people we may trust are actually doing - often right under our noses.

This is a must listen show for those on the cusp of retirement, those who have already retired and those who have elderly parents who are already retired. In other words, everyone stands to gain when they steel their hard-earned portfolios against a loss.

Listen to internet radiowith

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

Financial Impact Factor: Do You Know who the intermediary of your 401K) is?

Alison Farrin of Innovative Pensions was kind enough to be our guest today on the Financial Impact Factor Radio. She explained to my co-hosts Dave Kittredge and Dave Ng of FinancialFootprint.com exactly what her role is in the 401(k) plan as a TPA or third party administrator. She offered some very helpful insights in how you should use the plans as well as the way small businesses should approach the process of providing retirement benefits to their employees.

Also on the show, a look inside the increasing financial debt faced by college students. Dave and Dave explain forbearance, deference and defaults.

Listen to internet radio with

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio

Our Paul Petillo on Financial Impact Factor: The Annuity Show

Today on the Financial Impact Factor Radio show, we had as out guest, Joe Tomlinson of Tomlinson Financial Planning. Joe is no slouch when it comes to the world of finance, annuities and retirement planning products. He joined the host of the show Paul Petillo, Dave Kittredge and Dave Ng for lively discussion that traveled from a discussion about what planners/advisors/brokers were to annuities and other retirement planning products to a discussion about whether college was worth the enormous cost.

You should give it a listen. Better yet, click on the little iTunes button at the bottom of the player and never miss an episode (you will automatically be subscribed to each show as a podcast allowing you to take the show wherever you go).

Listen to internet radio with

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor

at Blog Talk Radio