Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Illusion of Safe Investing

InvestorEducation / Learning to Invest Aug 13, 2013 - 04:23 PM GMT

By: Casey_Research

InvestorEducation

By Dennis Miller

Retirees are often more concerned with the return of their money than the return on their money. It's understandable; after our peak earning years have passed financial safety becomes our primary concern since the opportunity to earn back investment losses is essentially over.


My high school graduating class celebrated its 50th reunion in 2008. Since then I've noticed more and more friends losing their spouses, many after fifty or so years of marriage. As expected, the widows club is growing at a faster pace than the widowers group. Biology and the plain fact that women often marry men a few years older than they are mean that's unlikely to change.

It is hard enough to lose your spouse, but when the more financially savvy partner passes away, whether it's the husband or wife, stress on the survivor compounds quickly. Widows and widowers often feel helpless and vulnerable when forced to handle tasks their spouse had usually managed.

A recently widowed friend mentioned to my wife that her banker had called to say that one of her CDs was maturing and wanted instructions about what to do. The friend rolled it into another five-year CD because her banker said it was safe. After all, CDs are FDIC-insured, and she didn't want to lose her money. In addition, he reassured her it was a very good, competitive rate. Not knowing what to do, she asked one of her children for advice and was told the same thing: a CD is a smart and safe option.

Come on folks, what would you expect her banker to say? "Our interest rates are in the toilet, they do not keep up with inflation, and if you were my mom I would tell you to take your money elsewhere," isn't likely to keep him in a job.

Instead, he did what any banker would do. He pointed out two true facts and assured the new widow she would not lose her money. But notice his lie of omission; while the rate on five-year CDs at his bank may have been very competitive, it's unlikely it was higher than 1.6% or so. That rate won't even keep up with inflation, which is the easiest way to lose buying power.

At the start of the year, we took a totally unscientific inflation survey of readers of my regular weekly column. The results caused a bit of mild controversy, which I don't want to dwell on today. Suffice to say, 98.4% of those polled believed the government is underreporting the rate of inflation with the Consumer Price Index. At the end of the day, however, what really matters for retirees is how quickly their personal cost of living is increasing.

So if rolling over your low-interest CDs isn't the answer, what is?

Unfortunately, there is no one-step solution. To start, both spouses need to know how to manage money. Most couples won't pass away on the same day, so both partners need to be on top their finances. That includes knowing the basics – account locations and balances – and knowing how to research a stock, balance a portfolio, minimize fees, and create a steady stream of income. It includes knowing when and where to ask for help and whom you can trust for forthright answers.

Managing your retirement portfolio isn't a one-time event. It shouldn't run your life, but it does mean setting aside time and resources for research, planning, and education. A balanced portfolio will include a multitude of investments, including cash equal to about one-third of the portfolio's total value. The rest should be diversified across various sectors and may include dividend-paying stocks and exchange-traded funds (ETFs). Including precious metals and investments not denominated in the US dollar can also help hedge against inflation. There can be a lot to learn if one spouse has never so much as balanced a checkbook, so the sooner couples start working together the better.

There is no one way to go about it, no one-size-fits-all investment. But there is one investing maxim that holds true for all retirees: safety means more than the return of our money; it means the return of our buying power. Low-yield investments like CDs, or basically any investment that locks in money without keeping pace with inflation, do not meet that basic standard of safety.

On Thursday, September 5th I'm bringing together leading experts in how we can get the most out of our retirement finances. Guest speakers include John Stossel, formerly with ABC's 20/20 and now with Fox Business News, David Walker, former Comptroller General of the United States under Presidents Clinton and Bush, and several others. Click here to find out more and to register (We expect response to be overwhelming, so you should go ahead and reserve your spot now.)

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in