Costs Matter – The Impact of Fees on Your Retirement
Hidden or in plan sight, fees can have a big impact on retirement
People have spent eternity trying to outguess or outsmart financial markets. Another way of looking at this is to understand that people are trying to control financial markets. However, financial markets are dynamic and resist control at any level. Ultimately, this is a fool’s errand.
Conversely, controlling costs is something that can and should be done. On this program, I run through a study we recently prepared for a company. While simple, it shows the individual and cumulative damage that higher and unnecessary fees inflict on retirement investors.
In the study, the impact on a small retirement plan of $5 million dollars over two decades is striking. While numbers can sometimes be hard for people to comprehend, the resulting impact changes people’s lives for the worse. By controlling costs and paying only necessary fees, it is possible for employers to have a large positive impact on their own employees.
Later in the program, I discuss the three factors that people can use to impact their own retirement:
Funding (wish I could change this)
The timing of your retirement
Change the way you invest
These three factors can have a positive or negative influence on your retirement. Since they are under your control or influence these are the items you should spend time on rather than worrying about trying to outsmart financial markets.
As always, thank you for listening to my program on KNBR 680. If you have questions or concerns about your own investments or would like us to review what you are doing, please contact Gary.
The best way to contact Gary is through email at firstname.lastname@example.org. But you can try to reach him by phone as well at 916.436.8331.
California Employers Facing State Mandated Retirement Program
So far it has remained under the radar, but a major new State government program is rapidly heading towards a collision course with private employers in California. The California Secure Choice Act is a program that states private employers must offer a retirement plan to their employees or the employer will be forced to participate in a new retirement program mandated by the State of California.
California employers with five or more employees must comply with the mandate or face heavy penalties if they do not. Critics of the state program, including myself, have identified numerous issues small and large that plague the offering. My personal opinion is employers face significant potential risk (based on the current version of the regulations (5/22/2016). Further, the program in my opinion, falls short on providing an optimal solution for employees as well. The program design is flawed and incomplete leaving many questions unanswered.
Currently, Secure Choice is on track for a 2017 debut, but could slip into 2018. However, make no mistake about it, this program is coming soon. And even if you do offer a retirement plan to your employees that may not exempt you from the mandate. The State is working on rules that would mandate coverage for part-time or contract workers that are excluded from your existing plan.
There is a much simpler solution for employers to avoid the California Secure Choice Act. Employers can offer a payroll deduction IRA program to their employees without cost or personal liability to the business or its owners. Payroll deduction IRAs have been around for decades and work very well for employers of any size. You can provide your employees with a simple and effective way to save for retirement without cost to you.
I am very concerned that the California Secure Choice Savings Program will turn out to be the equivalent of the Affordable Care Act (ACA) for retirement plans. You can avoid the headaches and the uncertainty by offering a private solution today.
You can listen to more about the California Secure Choice Act in segments three and four of my show this week.
In segments one and two of the program, I discuss the flaw of retirement planning that focuses on building wealth instead of a stream of income for retirement.
Jim Cramer of Mad Money fame on CNBC has popularized fame with his fast paced show that has its roots in the production values of the Jerry Springer show. You may laugh, but Cramer’s Mad Money show is the brainchild of Susan Krakower, the former producer of the over the top Jerry Springer show. If you think about Springer, sports talk radio and a touch of a traditional financial show, you have the secret sauce that became Mad Money.
The show has seen a ratings decline in recent years but the frenetic energy remains. Adding some spice, this weekend a new movie titled Money Monster starring George Clooney has opened across America. But the focus of my story on the show this week is a research report that also was released on Friday. That report from researchers at the Wharton School of Business look into the track record of Cramer’s stock picks.
It may come as a surprise to some, but I was not caught off guard by the results of the research report. Bottom line, Cramer has not done well compared to the S&P 500 with his charitable fund. While Cramer is just one example, he is the poster child for “smart” active management. At this point the numbers are in and Cramer like most of his peers trail the returns of the stock market.
The Living Wage Movement For A Few
Everywhere you turn these days, people are protesting for a living wage. Currently, the living wage benchmark according to the protestors and their supports is $15 per hour. However, the part of the story that most protestors are missing is who will be left working once $15 per hour becomes reality.
Fast food workers are some of the primary protestors pressuring employers to raise the minimum wage to $15. Too often companies are vilified for underpaying their workers and having profits that are too large. Are there companies that take advantage of their workers, of course, but I never remember anyone until now talking about a fast food job being a place to work to support a family of four.
Fast food jobs and most retail jobs have traditionally been entry level positions for young and or unskilled workers to enter the workforce. In my opinion, the majority of the workers currently protesting for $15 per hour will be worse off if they achieve their goal. The reason is simple, automation will replace most of the jobs and they will be unemployed. A fraction of the current workers will be left earning $15 per hour watching customers order and pay for their own meals at self-service kiosks, while a couple folks will be left in the back feeding machines that prepare most of the food. Wendy’s this week became the first major fast food chain that said it will install these kiosks this year at all of its locations.
The problem is not $15 per hour for entry level jobs. The problem is too many low or unskilled workers who do not have access to training or education opportunities to improve themselves.
Gary Allen on Business – Sunday, May 15, 2016 – Podcast
The Cramer story and $15 for the few highlight the show this week. Hope you enjoy the podcast. – Gary
If you would like to contact Gary, the best way is through email at email@example.com. Or you can try to reach him at his office at 916.436.8331.
Communication is such an important thing. Countless books have been written about the subject yet we still struggle to communicate with one another. In the world of financial services, some miscommunication is unintended while some happens to be on purpose. It is hard to question the advice or the validity of an investment strategy when you cannot understand it. The real trick is to know when someone is struggling to communicate with you or if they are purposely trying to talk circles around you. The first is irritating and CAN cost you a lot of money, while the second WILL cost you a lot of money!
I spend some time on the program trying to translate financial speak into common sense. It is hard to translate but well worth it. The difference can mean thousands of extra dollars in your pocket instead of in the pocket of the person trying to sell you a product.
The Active Management/Passive Management Debate (Case Closed)
Later in the program, I provide the basic facts of how active management fails to deliver on its promise of beating the market. I still wonder why so many people believe in the Wall Street Santa Claus of superior performance when study after shows that the Grinch is alive and well in the canyons of Manhattan.
As always I hope you enjoy the show. – Gary
If you would like to contact Gary the best way is through email at firstname.lastname@example.org or you can try him at 916.436.8331.
Human Capital and Financial Capital Equals Life Cycle Investing
Unfortunately, too many people do not understand the interaction between human and financial capital. Human capital is the collective skills, knowledge, or other intangible assets that you possess in order to create economic value. A simpler way to understand human capital is your present and future earning power. Education is an investment in your human capital that pays off in terms of higher productivity.
Our economic life cycle is driven by a balance between our human and financial capital. Early in life we have a lot of future earnings power in the form of human capital. As we work, we have a choice; to either consume our present earnings or save for future needs. That balance between consumption and savings is one of the primary drivers of our economic life. Consumption is spending, while savings is the process of turning human capital into financial capital. That financial capital becomes our investments.
In this program, I discuss the general concepts of human and financial capital and how it is crucial to understand the big picture. Hope you enjoy the program.
Have a question for Gary or would like to contact him? You can reach Gary at email@example.com. Or you can try to call him at his office at 916.436.8331.
Is it a good time to be in the market? What about timing the market? When is a good time to get in or get out of the market?
All of these questions are somewhat similar because they are asking if I have some kind of ability to know in advance what it going to happen. Unfortunately, I don’t have that power and by the way nobody else does either. Although Andrew Bogut of the Warriors predicted a Curry 3-pointer before he dropped one in… but aside from that, no one has the ability to predict the future with any certainty.
Later in the program, I cover the total wealth equation, which is a combination of human capital and financial capital. If you can understand this basic concept, it provides you with a much clearer understanding of the trade offs in life between spending and saving.
Finally, I spend time discussing how Wall Street and most firms have been wrong about your number for so long. Most financial firms talk about building wealth and reaching for some big number. That number represents a nest egg of wealth. However, for retirement, the real number should be income. People need an income to survive. Wealth is not tied to inflation or retirement and is a difficult concept for people to understand. Next week on the program, I will dive deeper into this important concept.
I hope you enjoy the program this week. As always, thank you for listening to my program on KNBR.Thanks to my great product Justine for always doing a great job.
If you have any questions or would like to contact me, email is usually the best firstname.lastname@example.org or you can try to call, but I am often unavailable 916.436.8331.
Internal Revenue Service Provides List of Top Scams to Watch Out For
IRS Issues Annual Tax Scam List
Unfortunately, there are a lot of bad people out there who like to take advantage of others. Tax scams are something that happen throughout the year but especially during tax season. The IRS provides a list of 12 top scams for people to be on the lookout for. Please pay special attention to older friends and relatives who might be more susceptible to falling for scams.
On the program this week I spend the first half of the program going through the annual IRS list. There are some common ones on the list but some others that you may not have heard of.
Later in the program I cover some rollover IRA rules that could catch you or your adviser by surprise. If you are not aware of it, the rollover rules changed dramatically recently and you do not want to get caught up by them. I also spend some time warning you about the very high commissions often associated with rollover business by advisers and insurance agents.
Finally, I spend the last part of the program talking about the recent volatility in the first two months of 2016. I put the recent price activity in perspective to determine if it is unusual or uncommon. You might be surprised by what I found compared to historical financial market volatility.
As always, thank you for listening to my program. If you ever have a question you can email me at email@example.com. All the best – Gary
Gary Allen on Business -Sunday, February 21, 2016 – Show Podcast Now Available
Don’t Leave Your Financial Future to Luck!
It is good to be back on the radio this week. I was off the air last weekend because John and Mitch were providing live coverage from the AT&T Pebble Beach Classic Golf Tournament. Great weather this year and the tournament was awesome.
This week on the program I shared with you the top 12 scams the Internal Revenue Service (IRS) says to be on the lookout for. A great list to make sure you don’t become a victim to a scumbag scammer.
In the middle of the program I spend time going through some of the issues regarding IRA rollovers and how to handle them properly. The rules are constantly changing and they are quite complicated. Unfortunately, most advisers do not know the rules very well and do not keep up with them. You can listen to these two segments and learn about three of the biggest problems or traps under the current regulations.
Finally, in the fourth segment of the program. I take a look at the recent market volatility to see what if anything it tells us about the future. I also compare the recent volatility with historic volatility over the past 90 years to see how things compare. You might be surprised by what I found.
As always, thank you for listening to my program on KNBR. 2016 marks the beginning of my 19th year on KNBR. Amazing how time flies when you are having fun.
HAVE A QUESTION FOR GARY?
Please feel free to contact me via email at firstname.lastname@example.org if you have any questions or would like a second opinion on what you are doing. You can try to give me a call at 916.436.8331 but I am usually pretty busy. Thanks again for listening to my program. I wish you the best.
A large drop in oil prices has been fueling lower prices in the stock market recently. A strong US dollar has been one of the linchpins of this newfangled relationship. A stronger dollar is tough on US exporters and that strong dollar is a drag on oil prices as well. However, short-term market driven volatility is no reason to upset anyone’s well laid plans.
On the show this week, we spend time discussing two persistent myths about main street investors; the panic syndrome and market capitulation. It turns out that history shows that the average person does not panic and market bottoms usually happen with a whimper.
Later in the program, I go through eight points about managing money that our firm follows through good times and bad. It provides a road map for anyone to follow. And finally, I discuss the cost of bad investment advice.
There certainly are many things to be concerned about, but a disciplined investor understands they cannot control nor predict world events. These events make life interesting but are simply noise that can distract us from our purpose. Hopefully, you can ignore the bad advice that is driven by greed, fear and current events and develop a long-term plan that works for you in good times and bad.
2015 is in the books! Like many investment firms, we prepare a report to summarize what happened over the past year. In this report, we take a look around the globe at financial markets and world economies. This report is a simple, handy guide that gives you a summary of what has happened over the previous twelve months.
Also, you will find a short article about risk. The article will help you understand what risks are worth taking and how to get help if you need it. We hope you enjoy this year-end report.
To access the report, please click on the link below.