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Retirement Investing Advice (?)

Undoubtedly you see as many financial services commercials on TV, in print and online as I do. In addition, I get dozens of pitches every year to review advice books about retirement investing or to interview so-called experts in the field.

The reason you have never seen any of that reported here and likely never will is that I ignore them all because they never address my two most persistent questions:

One, just who has enough money to do all this investing? According to the U.S. Census Bureau:

”Real median incomes in 2012 for family households ($64,053) and nonfamily households ($30,880) were [not] not statistically different from the levels in 2011.

“A comparison of real household income over the past five years shows an 8.3 percent decline since 2007, the year before the nation entered an economic recession.”

And two, what do these experts really know? After all, none of them warned us about the crash of 2008.

Sometimes I have wondered if I am not being too harsh in thinking that about 99 percent of all investing advice as suspect if not fraudulent. Who am I to make that judgment, I would ask myself. Money management is certainly an important part of aging, something that might be useful to cover on this blog.

So I was relieved to have my reservations confirmed yesterday by an economics blogger I respect and have followed for years. James Kwak is associate professor of Law at the University of Connecticut School of Law and co-founder, with Simon Johnson, of The Baseline Scenario blog.

Here is part of what he wrote yesterday:

”The underlying problem with financial advice - besides the fact that most of it is wrong, conflicted (in the conflict-of-interest sense), or covert marketing - is that, even in the best case, it rarely works.

“The underlying financial problem that most Americans have isn’t that they buy too many lattes or pick the wrong stocks. It’s that they don’t make enough money to begin with, at a time when many necessities like health care and education are getting more expensive.

I laughed at his line about “too many lattes.” I once saw a famous financial guru on television tell viewers in all seriousness that anyone could have enough money for retirement with just one easy change in lifestyle: make all their coffee at home.

Kwak is reporting on a book by Helaine Olen, Pound Foolish which, he says, is

”...a condemnation of just almost every form of personal financial advice out there, from the personal finance gurus (Suze Orman, Dave Ramsey) to the variable annuity salespeople to the peddlers of real estate get-rich-quick schemes to Sesame Street‘s corporate-sponsored financial education programs...

“A lot of what’s going on is just semi-sleazy entrepreneurs trying to make a buck, taking “advice” that is equal parts routine, wrong, and contradictory and packaging it into attractive-looking books, TV shows, and in-person events.”

Given all that, Kwak wonders why personal financial advisers are as ubiquitous as they are. He says Olen “suggests that we live in an age of stagnant real wages and rising inequality” and

”Add that to,” Kwak continues, “a culture that fetishizes individualism and rejects government support programs, and you have a market that is ripe for self-proclaimed gurus or self-interested advertising campaigns that claim that you can get ahead by (insert your choice) drinking less coffee, or going into more real estate debt, or buying a variable annuity, or picking the right stocks.

“The governments (state and federal) that promote financial education are like Marie-Antoinette advising people to eat cake; if they could eat cake in the first place, they wouldn’t need financial education.”

That and the rest of what Kwak reports of Olen's book is why you still won't be hearing about anyone's investing advice or seeing interviews with investing “experts” on this blog.

You can read Kwak's entire blog post here. I also recommend The Wolf Hunters of Wall Street by Michael Lewis from next Sunday's New York Times Magazine that is available online now.

At The Elder Storytelling Place today, Janet Thompson: Pearls and Princess Pumps


Thank you! My goal is to be debt free by 73. I live on a very meager budget and put any extra into paying down my debt, not investing. It takes every penny I have just to pay rent, buy food and pay bills. Everything increases except my income. I've made my simple life work for me, but it does take conscious effort just to stay afloat financially.

I agree with many of your points, Ronni. But I have been surprised by how little basic financial knowledge many intelligent, well-educated people have. Most financial planning is just common sense, but I think people sometimes don't think rationally about money. (Enron always comes to mind: so many people not only lost their jobs when it imploded, but they also lost their life savings because they invested all their retirement money in the company. Common sense maxim: Don't put all your eggs in one basket.) There are good articles, good books on financial planning, and even good financial planners. Like anything, one has to use one's head in determining where to look. (BTW, I don't follow Suze Orman, but the advice she offers in her column in O magazine seems sound.)

I won't be closely monitoring comments today so please note carefully:

Any financial advice in the comments - any at all, any that promotes a given financial strategy, guru, company, TV show, book or anything else - is from a stranger. Someone you do not know.

Do not forget that.

There are many facets to this problem. Banks make people who live on the edge pay big time for overdrafts. If you have money in the bank, you don't gain any interest to speak of. You would be amazed how many people who are unsaved by any bank at all.

But people of moderate means can save if they are extremely frugal and don't have financial setbacks. But where can they put their savings so the money works for them? There just isn't much out there, unless they invest.

Financial advice given by rich people to other rich people is easy. Giving financial advice to people who don't have money to buy food let alone invest takes some skill and I have yet to hear any advice from any of the so called "gurus" on how someone on a fixed income can increase their wealth. Having no relatives to leave anything to and my "final expenses" taken care of, I intend to depart this earth with nothing.

I am comfortably retired, done without the help of a financial advisor, a huge salary, a pension or money from a spouse. I was in my 30's when I got a nice bonus at work and decided to invest after doing a lot of reading, and I continue to do my own research. It's paid off, and because of either luck or some insight, I lost almost nothing in 2008.

I know it's obnoxious, but I've always asked financial advisors why, if they're so smart, they're not extremely wealthy.

Today's post hit a sensitive spot for me. Every time this subject comes up, it renews an irritation from more than four years ago when my husband and I had to suddenly take over the management of his parents' finances. They were not wealthy people, and did not have a lot to manage, but they had been very frugal and had invested about $30,000 in the stock market over the previous 5-10 years, beginning in their 80's. They were both intelligent and practical people, but had never taken financial risk before that, to my knowledge, so they must have felt very certain of what they were doing. They went through a firm that has franchises all over the country, and trusted the person who handled their account implicitly. That was the way that my father-in-law always had been. He truly believed that local people, who acted friendly towards him, would only act in his best interest. Well, the first thing I discovered in looking into their affairs was that the bulk of their investments were in BP. This was about six months after BP's oil spill, and my in-laws had not been contacted by the person at the agency about the advisability of leaving most of their investment funds in that stock. I was livid. The stock at that time had lost a significant amount of its value, so, having gotten POA, I called the office and asked that this be sold. The initial response, after he made sure that I did, in fact, have the authority to do this, was to tell me, "well, it's going to go back up," trying to convince me that it should just be left there. These investment funds were the bulk of the resources for my husband's parents, who were then each 90 years of age, and whom we had just had to move, suddenly and unexpectedly, into a fairly costly assisted living facility. We had already calculated that what they had would cover their costs there for about 18 months, if everything went perfectly. By the time the stock was sold, they had lost more than half of what they had put into it during the years five years or so that they had it. Clearly, the person managing their investment account was not paying attention to their situation and needs, nor had their best interests in mind. This was a huge caveat for us regarding who to trust for such advice.

This is an area of growing older that drives me crazy! I'm at the point where I'm forced to take disbursements from investments made through employment when I was working and I don't know where to dump the money. I don't trust all the people trying to selling me investment services and I've set a goal to figure it out this summer. Thanks for the links.

Right on, Ronni.

My parents were semi-scammed by a "name brand," frequently advertised financial services company which sounds a lot like the one Cathy Johnson described above. After their deaths, I learned more about investing than I ever wanted to know and extracted the funds from the "adviser's" grasp with some difficulty.

The main thing I learned was that a lot of the "advice" is indeed self-interest rubbish. Olen does a wonderful job of showing how this "works." Hint: It doesn't work for you, it works to help them get a nicer Mercedes. Surprise, huh?

The takeaway is, people are right to be suspicious, and none of us are as rich as we once imagined we were.

There is no free lunch. Learn, be cautious, and keep learning--for yourself, not for some clown in a strip mall office. It's your money!

I do recommend Helaine Olen's book, Pound Foolish, very highly. (I have no financial interest in the book; I borrowed it from my local library). I read a lot of "financial advice" type books while I was learning, and this (in this reader's personal opinion) was one of the very best.

I am 69 and have to figure how how to invest what I inherited from my mother's estate. I just may leave it in a savings account at my credit union. The older I get, the more I understand why French peasants were supposed to have left their money in socks in the mattress or under a brick at the kitchen hearth. What's the saying - "Blacker than a banker's heart?" No offense intended to any ex-bankers who read Ronnie's column.

I put any extra cash in a money market, pathetic interest rate but what else is there? the only CD I have pays about 1& 1/2 percent. Meh!

Thanks, Ronni. This needed to be said---it's a variation of "the emperor has no clothes." The conventional wisdom seems to promote the idea that we can all be rich if we just invest wisely (in rich people's corporations). The various crashes should have told everyone that this was balderdash. Unfortunately, once the debris cleared, we always went right back to old, failed ideas. I feel very fortunate to have worked in a state university system which allowed me to retire with a defined pension (plus Social Security), especially since I would have been completely bewildered about investing in one of those---to me---mysterious 401K things. I felt like the tortoise racing the hare, who bragged about the amazing nest egg he/she was accumulating but who had a short memory and limited clairvoyance about what could happen to that treasure. Take my brother (please!) who bragged all the time about his financial acuity---he was actually in the money business---and sneered at my limited state-funded future. Well, Bro went broke and lost his job at retirement age and my mother had to bail him out with the family's Texas oil dividends. After swallowing my resentment I decided I could afford to be generous, jerk that he was, because I, on the other hand, have enjoyed a comfortable retirement with a nice home, enough money to bail out various children and grandchildren as needed and enough extra to give generously to certain good causes and sometimes support political candidates if I care enough. It should be clear to everyone that the reason all the Republican oligarchs are so zealous about getting rid of defined pensions and replacing them with investment-type retirement plans is that pensions work for us and 401Ks work for them.

I just requested Pound Foolish from the library. Thanks!

Personal financial management, mine, is my primary interest and passion. I learned through reading many books, articles, attending seminars, and, finally, the school of hard knocks. I will not dwell on this topic other than to say, if people would not have panicked and sold most or all of their stock low in 2009, it would likely have recovered and continued to grow since then. I do realize, however, that it is extremely difficult for many to have enough money left over to save and invest and this is why I am 100% behind strengthening Social Security.

Our investments are modest, but my husband and I worked in healthcare, not finance, during our working years. Although we consider ourselves financially literate, we don't have the in-depth knowledge to invest wisely. For us, finding the right finance professional made sense.

We've worked with an independent fee-only adviser for the past 20 years. We started with a small inheritance from my mother and, later on, our 403(b)s. We lost relatively little in the tech downturn of 2001 and the crash of 2008-09. (On our own, we'd have probably panicked and sold way low!) Many but not all so-called advisers are scam artists or self-promoters. Even with some investments, we depend on Social Security like most elders do and envy those who still have defined-benefit pensions!

Hi Ronni,

Thank you for this post! Add to the bad advisor hall of shame this story. Our advisor, for what pitiful investments we had, would routinely send us emails touting her great safaris, cruises etc. -- on our dime and the dimes of other suckers like us.

This is stuff we should be taught in school. How to handle your money. How to deal with a bank. How to invest.

I learned on my own and went with index mutual funds. Over time they've done well. You need to stay the course though. Don't flee when the market goes down. It always comes back. Over time the TREND is always up.

For a picture of the market's action over the last hundred years or so, google "Dow-Jones historical averages."

"...that they don’t make enough money to begin with...."

I recall that Marily vos Savant once advised to the effect that saving 10% of $100,000 equaled saving 100% of $10,000; thus, one should do what was necessary to boost one's earning power. That is why I try to donate to organizations that work to empower girls - especially to encourage their interest in and training for employment in the science/technology/engineering/mathematics fields.

The US Administration on Aging funds an excellent National Resource Center On Women And Retirement Planning: http://www.wiserwomen.org/index.php?id=38&page=National_Resource_Center_on_Women_and_Retirement_Planning

I also liked Olen's book. She concluded a January 2013 editorial in the New York Times this way: "So let me suggest another financial resolution, one that will do more for our future financial outlook than simply forgoing a few consumer goods: talk about money. It’s not shameful. Pick a cause, and resolve to fight for change."

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