I watched Frontline’s “The Retirement Gamble” with my wife tonight. It starts with the shift from company-managed pensions to 401K funds managed by all of us — or our financial planners. It is not a feel-good documentary. Many Americans are losing huge chunks of their retirement savings to fees, possibly for little or no benefit (well, not to the savers, anyway; the fund managers are getting plenty of benefit).
This was not a problem in the roaring 90s, when a monkey could make money in the stock market, but it’s a big problem now, when many Americans have seen their retirement accounts fall off a cliff, or at best, go flat.
What’s the root of the problem? According to Frontline, it’s not so much the fees, but the fact that financial advice is mostly doled out by salespeople whose only ethical requirement is to sell you something “suitable.” In other words, the financial products they sell you just have to sort of resemble the kind of product you want. They can’t sell you an insurance policy if you’re looking for a mutual fund, in other words.
Few financial advisors are fiduciaries, a word that means they would be required to put your interests ahead of their own. (Not salespeople, in other words.) It doesn’t seem to matter that most Americans have no idea what that word means or how to identify a fiduciary (hint: ask).
Are there good, well-meaning financial advisors out there who are not fiduciaries? I’m sure there are. I think my financial advisor is one of them. But whether you go with a salesperson or a fiduciary, you need to ask yourself (and your financial advisor, fiduciary or not) some important questions:
How much of your retirement savings are going to fees?
How are your funds performing compared to lower-fee index funds (hint: probably not any better)?
Does your financial advisor have a fiduciary duty to you?
Above all, be involved in your retirement planning. If your investments aren’t growing, find out why — or find someone else to help you manage your investments more effectively.
I picked up a few “Trader Ming’s” noodle boxes at Trader Joe’s the other day, thinking they would be good for a quick lunch. And the image on the box looked pretty great. The product inside does not really measure up to the cover art, though. Check it out:
I can’t say that I am all that surprised. Most food packaging is like Glamour Shots for the contents — which are, in this case, 600 calories and nearly 25% of your fat, sugar, and salt allowance for the day.
The way we file taxes has got to be the least-efficient way possible. Every year, millions of Americans dig through a year’s worth of receipts, year-end statements, and their memories to assemble millions of stacks of paperwork that are processed by hand by an army of IRS employees and contractors.
This is ridiculous, and I’m not even talking about how complicated the tax code is.
We all assume that having things is the same thing as having wealth. You see someone driving a Mercedes, and assume he or she is wealthy. More often than not, it just means that person has a huge loan payment to make each month. Cash flow is not the same thing as wealth. Wealth means having assets — money in the bank, valuable investments, and things unencumbered by loans. If you owe money on all your things, you just have liabilities.
You can have a lot of things and still own nothing. Like the founder of Michigan Brewing Co., who just filed bankruptcy and listed $3,236 in assets and more than $8,200,000 in liabilities.
Very few people are truly wealthy. You cannot judge a book by its cover, and you cannot judge wealth by the number of things someone has. (via Daniel Gershburg)
When you work with a lawyer (or a financial advisor or accountant, for that matter), you almost certainly hand over a lot of confidential information. It may include things like account numbers, birth dates, your social security number, family members’ names — in short, everything necessary to steal your identity.
Instagram is apparently the teen and tween social network of choice. That means parents who want to do the responsible thing and monitor their children’s Instagram accounts may be tempted to demand that their children “hand over the keys” to their accounts. But accessing your child’s Instagram account is — technically, at least — a violation of federal law.
Under the terms of the settlement reached in several class actions against Midland Funding for its (apparently past) practice of employing robo-signers to execute affidavits for debt buyer lawsuits, each class member would receive under $20 — and that’s it. The Sixth Circuit rightly decided this was unfair (pdf).
Unfortunately, the Sixth Circuit seemed to think the settlement was unfair primarily because the named plaintiffs (i.e., those whose names actually appeared on the complaints) would receive $8,000 plus the elimination of their debts. The class members who opted into the settlement just got $17.38 each, and still owed their debts:
It turns out that a comically-large number (26%) of consumer credit reports may have errors. However, 95% of those with errors do not need to worry about them, because those errors do not affect their “credit risk tier.” Or, conversely, only 5% of the consumers with errors on their credit reports were “significant enough” that the consumers affected (about 10 million) might have been denied credit or paid more for it.
Which means there is a good chance that you have errors on at least one of your credit reports (which you should obviously fix), although they probably do not affect your credit.
Of course, being denied for credit or paying more for it are only two consequences of credit reporting errors. Many more people experience other consequences, like incessant calls from debt collectors looking for someone else.
While there are a lot of people you can blame for the state of the US economy, government regulators are at the top of the list. So it’s satisfying that someone has finally taken them to task. Elizabeth Warren, finally on the Senate Banking Committee where she belongs, had some hard questions for banking regulators yesterday, specifically on why they are happy to accept pennies on the dollar to settle claims against banks.
What she got in response was a lot of hemming and hawing by the spineless regulators in question, none of whom seemed to know the last time anyone took a bank to trial.
I’m a little concerned that too big to fail has become too big for trial.