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Punishing retirement savers

By Jennie L. Phipps · Bankrate.com
Monday, April 4, 2011
Posted: 3 pm ET

Anyone who has diligently saved in hopes of being able to live off the income from their investments is being punished in the current economic environment.

Retirees living on savings used to rely on income from easy to understand sources: U.S. Treasuries, bank certificates of deposit, municipal bonds and stocks whose returns were predictably positive year after year. These days, it's hard to find safe, predictable returns that are higher than 3 percent -- a rate that is below inflation. And that makes managing money in retirement a serious challenge.

Will it get better? Probably, but there are no guarantees. Japanese retirees have struggled with the same problem for the last 20 years.

Because the returns are so meager, my accountant husband, who has a lot of experience managing money in a corporate environment, nearly gave up on the idea of managing our retirement nest egg and went searching for help.

We've interviewed several investment advisers, and we certainly haven't been wowed. Two of the people we interviewed had complaints against them in the Financial Industry Regulatory Authority, or FINRA, database, a trade association that arbitrates disputes between financial advisers and their customers.

And no one was very straightforward about fees. One adviser, who is no longer in the running, said, "You won't have to worry about fees. You'll never see them; they're buried in the transactions."

My frugal husband nearly fell off his chair.

Today, I received from ING Financial a copy of a study about people's concerns about retirement planning. The study found that 89 percent of respondents want help allocating their investments; 86 percent want guidance calculating their financial needs in retirement; and 84 percent say they want help calculating and creating retirement income.

Clearly, there is a business opportunity helping people with retirement planning. And there seems to be no shortage of people who claim to be experts and who are willing to do the job. But take it from me, finding the right people and the right plan is no slam-dunk.

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4 Comments
Robert Copeland
May 01, 2011 at 10:04 am

I don't trust anybody since my trust of government ran out. It seems the whole country is a scam of one type or another. Five years ago I took the penalty and cashed out my 401K and Ira and put it into gold and silver. I retired early and have more the doubled my savings even after buying a beautiful motorhome to see the country in.
I'm waiting to take SS until I can get the maximum which is in 4 years. I show very little assets. I live off of a $50k bank account and this year has been beautiful using ETF's like AGQ etc.
I say do it yourself unless you can find a multi-millionaire to guide you. If they have to work what do they know about making money? Call me stupid but I wish I had taken charge years ago.

Mike
April 19, 2011 at 8:38 am

A diversified portfolio of *dividend-paying* international stocks in sectors like consumer staples, energy, and minerals, as well as carefully-selected REITs, has been super-safe over the past decade, no matter how many idiots fail to realize it. The market price has, of course, been volatile, but only the stupidest really cared all that much; the rest of us have just watched as the dividends continued to grow. Look, for example, at what has happened to the dividends of McDonalds (American), Nestle (Swiss), and BHP Billiton (Australian) over the past decade. If you bought a single share of BHP at the beginning of 2007, you got US$.94 in dividends for the year; if you have held on to that share, you're going to get double that in 2011, i.e., close to $1.90 in dividends. If you bought a single share of McDonalds in mid-2003, you made $.40 for the year in dividends; if you still own that share today, you'll make SIX TIMES that amount for 2011-- that's right, that share that paid 40 cents in 2003 will pay more than $2.40 in dividends this year. Etc., etc., etc.

Um, yeah, the daily share prices will certainly fluctuate, sometimes by a lot, but so what?

Michael
April 09, 2011 at 4:14 pm

As far as those who did not sacrifice, you should be looking at the Banks and at corporate welfare itself. I don't like to see people who made irresponsible decisons, or the financial agents who encourged them to do that, get bailed out either.

However, if your concerns were focused upon the root of the problem here, it might eventually be more productive and positive for actually changing it for the better.

There is no reason for the Banks to pay higher interest on Funds they don't need, due to hoarding of the bailout money, and using it to acquire other banks. Too big to fail is too big to provide any incentive to change.

Kathryn
April 05, 2011 at 9:48 am

I am FAR less concerned about the punishment of fees and low interest rates on savers, than I am about the punishment of the twin demons of the national debt and those who have chosen not to save on savers.

In both cases, the problem is out-of-control lifestyle spending versus real income. In both cases, savers will be punished by having their resources decimated for the benefit of non-savers.

We will see inflation go through the roof as our desperate government prints more money to try to pay off the debt without actually cutting spending, and savers' dollars will be worth less and less as a result.

In addition, those who have money saved will be forced in years to come to surrender it via higher taxes for the retirement, medical care, benefits, etc. of those who spent every dollar they made during their lifetime and then some on overblown consumption... and then wake up at 65 and say "Time to retire!" and discover that the government "safety net" is insufficient to maintain their current standard of living.

THIS is my concern: that no matter how much we save, most of it will be taken to benefit non-savers. And we are helpless against it, and the only real reason to keep saving instead of throwing up our hands is that the alternative is to place ourselves on the mercy of others - of people like me who are pissed off at the very idea of having sacrificed so long only to have to sacrifice even more for those who didn't.