What Retirement is Really Like

New York Times reporter Paul B. Brown reviewed a book on January 13th that got me thinking. He didn't especially enjoy the read because, in his words: "Retiring early and successfully requires two things, she argues: knowing what you will do with your life without a paying job, and a lot of money to live on. Ms. Hester is terrific in explaining the first part; so-so on the second."

That got me wondering what he would write had he reviewed my book(s). But in light of that oversight by the NYT, I felt as though I should add these thoughts to the conversation and update one of the few remaining blogs I had authored - for you. So here is the second part of Building Wealth in a Paycheck-to-Paycheck World - the retirement part.

The last post I entered on this site happened almost six years ago. Since then, I have retired the site that would be considered as the main location for all of my financial thoughts. BlueCollarDollar.com (this link takes you to the Wayback Machine - my other work literary resume can be found at paulpetillo.com) was officially deleted for a number of reasons: 1) It was entirely written in html, which meant that I could not, as Google requested 2) secure the site and 3) make it mobile friendly. Because the site was hand built and WordPress was not available, the process of updating and recoding 1989 urls simply proved to be too much.

That, and I was still working in a job that was ramping up to take in excess of 60 hours of my work week. So something had to go and the BCD was shutdown. It closed with a Google Page Rank of 4 (SEO folks will understand what that means - the New York Times according to one page rank checker available for free is only a Page Rank of 5.)

If I had known what I know now, I may not have "retired" the site - because another retirement came my way just a couple of months ago. I have not written a word about it since the day I actually left - a post on Facebook garnered quite a bit of support, with the obvious exception of a single person who worked with me posting a word. It could be expected though considering the fear that surrounds everyone who is left working in that establishment. I will address this condition throughout this post.

So what is retirement really like from a person who wrote about how to retire for almost twenty years. The following post will be broken down into the following segments: Fear, Guilt, Assessment, and Conditions.

Fear
Most people who know me well enough to consider me more than an acquaintance know that I tend to hurdle forward without much in the way of fear. Psychology Today describes fear as :"an emotional response induced by a perceived threat, which causes a change in brain and organ function, as well as in behavior. Fear can lead us to hide, to run away, or to freeze in our shoes.

fear /ˈfir/ noun

an unpleasant emotion caused by the belief
that someone or something is dangerous,
likely to cause pain, or a threat.

Fear may arise from a confrontation or from avoiding a threat, or it may come in the form of a discovery." And while my lack fear is often seen as cavalier - just ask my former employer - it is really rooted in my inability to allow emotion to enter into the equation.

That does not mean that the emotional response of everyone around me would not be impacted. It was and is an ongoing issue, even if it after a number of months it has subsided somewhat. I have described my exit as inelegant however, compared to the way I was treated in the closing months of my employment, my reaction to the incredibly spineless offer made to me to "stay in the job and get fired or take a demotion and get fired later" on the Friday after a weeklong trip to the farthest reaches of the company. The third option in this increasingly hostile environment was to retire - without the cake.

Keep in mind, this job commanded almost 70 hours of my week so the withdrawal from the demands of assisting 132 locations in an almost innumerable amount of small-to-large crises, creating cost savings where there were previously none and advancing the most ambitious sustainability programs that the company (not just the division I worked in) was not going to be easy.

I was incredibly successful at everything I undertook or was assigned - with one exception: I could not converse in any meaningful way with the person who would ultimately determine my fate. This particular VP of Hair-on-Fire was a volatile and close-minded individual who seemed to discharge someone from her service based on each time she was passed over for promotion. Yes, age and gender also played a role and I do get that this is the time when women need to take a commanding role in leadership (which was a very white male forward operation - and in many ways still is). It is their time. I get it. It is long overdue.

And despite my unwavering commitment to the company, I failed at bowing down to her in the manner she expected. (I had no idea how to!) Nothing I did was unsupportive however successful I seemed to become in my own role. Nothing I did was for my own advancement - I was simply trying to do my best in a role that few understood in an environment that could have cared less how much money I was saving for the company in the execution of my duties. I was apolitical and that is not a good survival tactic. I'm also a man and we are inherently stupid. I did see myself as the best middle manager a company could hope for - too old to shoot for promotion and too close to retirement to discard my own self-described ambition to leave the company better than I found it.

So I spent the weekend online tidying up what I could, calling all of my directs (except one incredibly disloyal subordinate that I inherited from a previous supervisor) and reaching out to specific vendors to thank them for their help and patience.

On Monday morning, at 5am, I entered the office with just my laptop, credit card and ID badge - I knew there would be footage so the wearing of shorts and t-shirt helped dismiss whatever questions might arise - crafted a note to my direct supervisor, an ambitious self-determined person who I believe could have cared less about anyone but her own gain and in it, outlined the hostile environment in which I was forced to retire from earlier than I had intended. In my mind, I needed another four years just to shore up the financial aspect of this process. But I had been preparing for this moment for over a decade.

I was fearless.

However I did not accurately gauge my wife's own fears as well as I should have done. She had grown up in a household that had suffered financial instability and had a focus on money that went beyond the planning stages directly to the worry. I had no fear because I believed in my plan and followed my own advice.

So how financially prepared was I to walk away from a good, benefit-laden position? While I had managed to lock in a pension from another career I had retired from almost a decade earlier, which, if I lived to be ninety would be worth well over a million dollars.  Certainly nothing to sneeze about ad as far as pensions were concerned, it was well-funded and very well could last my whole life without interruption. My wife was drawing her Social Security. However, in my mind, this combination of income was my wife's retirement and the income I would provide to the mix would come in the form of my Social Security (which if I wait long enough will be substantial - in the $2200 per month range) and from my 401k, which is another $200k. We have a home worth a million dollars, which was to be sold as part of the retirement plan. This downsizing or whatever you want to call it will create a paid for house and an additional $400k in investable, nest egg cash. And we are incredibly healthy for our ages.

I was fearless. And yet, it is not about me.

So if I have a flaw in the plan I designed and wrote about for all those years it was the kids, all grown and yet somehow still dependent. The economic downturn in 2008, which prompted me to save even more despite the rash selling of assets that my coworkers were doing - even after they asked me what to do, coupled with the incredible rise in popularity of the Pacific Northwest that pushed the equity of my home higher also pushed the overall cost of living to untenable levels for those offspring. Two returned to the nest. And this has created a financial drain on the system I had in place. This was difficult to predict twenty years ago when we formulated this plan. But it is not a deal breaker by any means.

So my wife did worry and rightly so. She was angry with my (previous employer) and rightly so. She was all the emotion and that included fear that I was so comfortably devoid of. If you are planning for retirement, I do not believe you can anticipate this type of overriding anger even if the money is in place. She was pissed but I was grateful. I was fearless.

Guilt
Retiring means transferring to a new tribe. During the day, you are likely to encounter your fellow tribe members walking their dogs or simply strolling if the weather permits. As a young member of this new group, I am unaware of the language of retirement. I am not prone to complain, so that interaction will be limited to listening rather than sharing. That's fine; I'm a relatively good listener even if I tend to suffer when encountering stupidity.

This tribe is noticeably older looking than me. I know this because when I tell people that I am retired (which in concept I am; in principle I have only left my previous job), they say you look too young. They say the same about my wife when she reveals her age. So while the tribe is ours, we still feel as though we are fringe members.

The guilt I feel is not really guilt. I didn't do anything wrong nor am I offering an apology for anything. I imagine this feeling of doing something that I probably shouldn't be doing - enjoying my wife (I do have an intense regard for time and feel as though, if anything could be drawn from my early exit, it was getting these precious years to call our own), enjoying my big brain (I have novels to finish and a new business to run - more on that later in the Assessment section) and actually getting the house staged for sale - or for future comfort if we decide, for whatever reason, to hang in for several more years.

I feel guilty for having lived a really good life and for having followed my own (published) advice. I am an optimist and I have always felt guilty being one. To be an optimist according to Tali Sharot, writing in his 2011 book "The Optimism Bias: A Tour of the Irrationally Positive Brain" is to allow ourselves to allow rational reasoning to be taken hostage, "directing our expectations a better outcome without sufficient evidence to support such a conclusion." So how does one view retirement if not as either an optimist or a pessimist?

The question that always made me most concerned - and plenty of colleagues continue to ask, pulling on an emotion that is both morbid and incalculable - was will you outlive your money? The answer should always be yes. Or as it is quickly redirected, will you have enough money to leave your heirs?

This is a source of guilt. If I retire, you might ask yourself, will you have done so:

• too soon;
• too late to enjoy;
• at the wrong time market-wise;
• or will I continue to work so long as to have my health threatened;
• where will I grow old;
• can I age in place.

These are all viable questions. However, they have no answers. You will never know until you are actually faced with the decision and its fortunate/unfortunate consequences. I might have retired too soon but I feel as though I am incredibly marketable (more on that later) and because I have done a good job with my health, I am physically able to do most jobs. This doesn't mean I will get one if I applied or that I will need one to achieve some sort of benefit (health insurance premiums are still moderately low at this point and although a job with benefits would alleviate those costs, the time spent to access this benefit does not seem worth it). It simply means that I can.

The second question focuses on what you enjoy and how this activity should be engaged. Some people have expensive hobbies and toys and that bears a certain cost. I do not have these expenses. Give a library and I will be happy.

Allow me to walk around town and I will be content. And let me find things that make my wife happy. The last expense could also be an unknown and you will never know whether you worked too long to fully enjoy your loved one(s). And because I have found the time I am spending with her now the best benefit of being retired, her retirement wishes need to be calculated as well.

Retirement is often broken down into three spending arrangements. Retirement is not about you, it is about the cost of you. For the first 35 years of our marriage, we traveled and visited many of the places we wanted to visited, often with kids in tow. I came to the marriage a world traveler and she came to it as an ex-stewardess for United. We've been around. But what would happen when we have time - and can afford to take our time when we do travel, unbracketed so to speak? She says she'll go anywhere with me but she doesn't really have the overarching desire to travel. Her domestic approach to this time in her life makes her happy. She laughs. A lot. So this cost does not really exist in our house. Dining out in this foodie-rich area of the world is travel enough - at $100 a trip. We don't eat that much these days so this is a reasonable night out at the best places.

The market-wise timing should not be a thing. It is however, a thing. It is often touted amongst financial types that the withdrawal rate of your retirement plan should be done with percentages - 4% a year is often used - so as to never run out of money.

Some experts break down the retirement years as go-go, slow-go and no-go. My wife and I are already in the slow-go stage and ready to take either exit ramp should there be any financial changes. I say slow-go due to the aforementioned lack of need to travel, an expense that is often among the first dollars spent at retirement age, the extended vacation in a bucket list sport somewhere worth bragging about and posting endless pictures of on FB. However, the fact that we skipped that stage should not matter either. 

At age 55, I began removing profits and shifting them into cash. The contribution I made to my 401k was increased with each pay raise so my involvement continued to grow. And this meant I was socking away 15%. (I am still surprised at the lack of involvement most people have in these plans, contributing only what the company might match.) The last time a raked off profits was at the beginning of 2018. This now amounts to 27% of my total savings and it will remain there. (I did get lucky as the market peaked at exactly the time when my rollover was taking place. I waited a couple of disaster market weeks before I put that money back in. This was NOT timing, just a series of events that worked out in my best interest. 

If you regret getting up in the morning to go to a job you more-or-less dislike, your health is being impacted. And even though my health is in good shape, I was not aware of how much that job consumed some valuable brain power and was not being appreciated. That is important and although my body was doing fine, my head was possibly waiting to break. I only know this after-the-fact and how good I actually feel these days.

My wife was asked when she retired four years ago whether she wanted to retire in place. She said she did. She has since changed her mind. Now the house is too big, too cold. We're in no hurry but we will be moving, and when we do so, it will be in an equally nice but newer home/condo and probably nearby. The house we live in currently does carry a mortgage and although many people feel as though you should own your home at retirement, our situation was different. We purchased this incredibly large home in what was not the most desirable neighborhood at the time for $72k - 3500 square feet at an interest rate of 14% in 1984. Numerous refinances brought the interest rate down to 3.5% and we now carry just the remodel costs of making the house worth a million. Remove those costs and you can see why the house is part of the plan.

Assessment

As I mentioned earlier, I spent the weekend - no, make that the week prior to my unplanned/planned exit - debating what I would do. The question of "what's next" often plagued my day-to-day activities. I cannot tell how often I sat at my desk contemplating what exactly I did. And even more importantly, how do I market these skills. I'm not sure others do this type of reflection. Seems to me that everyone I worked with within the organization had a clear idea of exactly what they did and how to vocalize those talents. Not me.

If you were to bump into me on the elevator, perhaps introducing yourself for the first time, I might describe my job as "saving money so someone else could spend it." Hardly an elevator pitch but it did sum up the complicated nature of the three words in my title. I managed expenses - which means straddling the fine line between bad daddy and giving stores what they need. Often, they did not know what they needed and responded to the daily trials they faced trying to run a business (that some leaders in the company suggested that they could not and would not do) and please those chaotic leadership directions. Calling me for help was the beginning of the juggling game - one request meant that another request would have to wait. In the budget I managed, we were the most profitable division - and, without sounding as if I was looking for a kudo or two for the way I did this job - no one said a word.

I managed sanitation. This involved ensuring that all the vendors responsible for the clean and safe operation of each location did their contractual job, often to the subjective reports filed by earnest store level employees trying to make their voice relevant. This part of the job dealt with everything from janitorial work to landscaping to pest control and literally everything in-between. Searching for objective reporting on the ground about these wide ranging functions was almost impossible. And god forbid a supervisor arrived at the exact same point some manager was having a subjective tantrum (often an overreaction and often an execution of that manager's team), the problem escalated in a very curious way. It went over my head and then back down to me. An easily solved problem became a shit-rolls-down-hill message from VP of Hair-on-Fire. Emails dinging my phone would arrive at nine or ten at night and require an answer within minutes. We were also among the top five cleanest division in the company and when you consider that our volume was three to four times the volume of other divisions, this was also worthy of a "hey, nice work." My wife tells me I have a martyr syndrome - and she is right.

However, when it came to sustainability, I was king-of-the-trash hill. There had been some semblance of a zero waste initiative in place prior to me taking the helm. It was almost simultaneous; the company introduced a cost reduction plan the would address fourteen lines of the thousands I was responsible for as a way to garner vast reserves of cash. They were right. I saw nothing but long hanging fruit when it came to the trash removal line. However, what I did not anticipate was the informational void I was about to enter, a place where anyone with a merchandising background, and this is the experience most everyone in this business has risen from, knew little about what happened to the waste they produced in pursuit of sales.

Each time I tried to update a supervisor, the blank look I received was noteworthy insomuch as it became a farcical report. Why was explaining the nuances of trash removal in terms of diversion, compactor upkeep and leak remediation - not to mention the pest issues that could and sometimes did enter the picture. I was not encouraged or discouraged. I was simply left increasingly to my own devices, reporting numbers on a periodic basis and experiencing disbelief as these costs dropped. I tried to coach my comments for those less versed in what would become my personally authored Zero Waste 2.0, a living document that was updated each month with new procedures and protocols, each vetted at store level for feasibility and executed with two green focuses in sight: Green for the profit via savings I was achieving and green for the environmental impact we were removing from the landfill. 

It was complicated.

Waste removal companies were not happy as their revenue dropped, at one point as much as $160k in one 30 day stretch. Businesses who had never seen an opportunity with the company were now vendors: styrofoam recovery involved two trucking companies and a recycler, hangar recycling meant finding resellers for discarded mixed materials that, before China decided that the U.S. was not sending recyclable material in the condition we agreed upon and stopped taking our "trash" and was conveniently deposited into a commingle compactor, waxed cardboard, plastic bags and film, and whole host of other materials. However, organic recovery was the lowest of hanging fruit.

If 60% of what my industry discarded by weight was not finding a different path, I was given no help in trying to fix that issue. I'm not sure anyone knew it was an issue. We had some compost compactors, expensive and prone to leaks. But not for 132 locations. I had exactly 12 stores doing something akin to removing the waste from the trash. My goal was 100. Why not all? Because despite living in a part of the country I sometimes referred to as the granola belt, organic recovery was not available.

I'm not going to share the successes that might be viewed as a release of information that should be kept confidential. What I did, almost unwittingly, was push FM to the forefront of the sustainability quest in almost every region we operated. We were becoming green heroes, the business that could be emulated, placed on a pedestal. Except, as I mentioned earlier, no one knew or understood or cared what I was doing. Saving money, saving the planet, promoting the greatness of the company did not matter to the people (VP of Hair-on-Fire) that mattered. And even though the hostility was palpable, I moved forward. Even as I was beginning to feel as though my age and even my gender might be an issue, I still advanced the projects, worked with the community and internal business partners in both PR and marketing to do more as leaders and allowed myself to become the corporate pioneer in this category.

There is an old saying: Once you do not matter to the people that matter, you no longer matter. And I had to walk away from the job of a lifetime. Or perhaps this analogy is better: I was discarded.

Conditions

Last night I met with two people who have made a significant impact in the world of sustainability. One helped me with the styrofoam project, the other was referred. And this is how it began. Recall how I regularly discussed with myself what and how to market this wildly diverse set of skills. Seems as if the ability I possessed in significant quantity, despite what appears to be an inclination to be a protean, was the most marketable. Zero Waste Consultants LLC was literally opened the day I left. The site was bought and built before noon of the same day I dropped off the last vestiges of a career that was driven by a consistent fear that each misstep was a step closer to the door. I suppose this is the case with most businesses but this one, where being replaced was always an option, as if every meeting was shadowed by someone' resume looming over your shoulder, someone not so much better qualified as a person who had not pissed anyone that matters yet. Building a site such as this in hours might seem daunting however, business on the web was nothing new to me. (I have an online resume here at paulpetillo.com).

And because I inherently dislike Facebook and prefer the LinkedIn environment, I began taking my thoughts on a wider, more diverse journey designed to attract clients. Due to the fact the vast majority of my online experience was delivery relevant, SEO friendly content. I did it for myself over numerous websites I owned over the last 20 years. I did it for other businesses as diverse as paddle boards and real estate. I did it for other sites that had an interest in the financial thinking I was espousing. In these posts, I took on the previous roadblocks I had encountered and began to formulate my ideas to improve the overall world of recycling.

What was amazing was how many people from my former employer's office were paying attention. I get it.

A screenshot of some of the analytics provided by LinkedIn on
who viewed what I posted.

I did some amazing things in my previous position - so much so that when I did strike out on my own in the same field, people reached out. In fact, the concept of bridging the gap between the people who control the purse strings and the people tasked with a company's sustainability in the form of consultation was proving viable.

This has not completely settled and there is still quite a lot of determining how to proceed. My services are needed in the organic recovery effort that some businesses feel as though they are participating in even if they are still failing to remove as much as 40% of the recoverable wasted food (I do prefer the term wasted food over the popular terminology of food waste - because this product is not the end of the line by any means) that is still headed to the landfill. Also, these businesses are tempting fate and lawsuits by sending unexamined food stuffs to animal farms. There is a liability there and the food industry has not embraced this issue - and consumers have not either.

My experience is also needed in the plastics industry. This particular area has an image problem, a logistics issue and a lack of governmental support to achieve a circular economic model. I wrote in a recent post that the price of oil - drill baby drill, or frack baby frack - will be a headwind for this industry and our landfills and our oceans and worse, for future generations. But I have an idea how to fix that as well.

And then there is the novels. I have self-published two of the three books in a trilogy that explores a person's moral dark side. The third is awaiting editing and will be ready to publish in the next month of so. Now that I have a few free hours to devote to selling the idea - and the fourth novel that kills the protagonist in a made for Netflix conclusion to that journey is waiting in concept and is two hundred pages in draft.

Will I go back to work? Possibly. I know what I want to do know moving forward and it will not involve being a martyr for another VP of Hair-on-Fire. There are people who want to change the world and there are people that want to enrich themselves. I want to find people to work with that want to do both.

However, if I was to draw a conclusion from the long essay - one that could be the germ of a follow-up to my first books. Who knows? I have followed my own advice and I have the whole world in front of me and it is mine to do what I want. And I did it without ever earning six figures in any given year - ever.

I will say though, that having my wife with me, someone who laughs and cries freely, my emotional muse who feels things that I do not, jumps at scary movies that do not seem to phase me, acts independently of what others think but somehow at the same time, cares what others think. She is as real people as a person could hope for, fully formed and fragile and strong. I have dedicated every book I have written, every breath I have taken and the reason I rise in the morning.

So that is what retirement is really like. At least what mine is.

The Argument for Dividends

Suggest dividends to someone and watch their reaction. Depending on their age, they may seem put off by the concept (if they are young) and willing to embrace the notion (if they are near to retirement). For one group, dividends imply old age; for the other, dividends suggest steady income. Are either one of these two groups of investors correct in their assumption?

Both are wrong to some degree. Dividends are the result of company profits. To appease shareholders that wonder what a business plans on doing with the profits they have made, the company awards a share of those profits to its shareholders. This is called yield.

The word yield, often associated with bond investing can confuse both the younger group and the older. The youngest believe that yield might be fine and a nice return on their investment. But they also look to the stock to move as well. Older investors believe that yield means safety when in fact, the strength of the yield is still calculated against the performance of the stock.

Companies who pay dividends are under no obligation to do so. But these businesses may have reached a point in their life cycle where they can no longer grow. Their market share may be all that they need to achieve those profits. So the stock price may languish in one spot for long periods of time, giving the investor the feeling that the risk is no longer present. It still is but the dividend can mask that health. Too high a payout (in relation to the stock price) can suggest increased risk that the dividend may need to be reduced or eliminated. Too low a dividend may suggest that the stock price is moving too much.

In a down market, dividend paying stocks can outperform the overall market (in part because of the dividend yield). In a market on an upward path, the dividend paying stocks and the mutual funds that invest in them, will lag behind, even lose more money that the index that is benchmarked to them.

Older investors might confuse them for bond funds. They are not. They appear to be fixed because of the trading range of the security, but bonds are different in several ways. The yield on a bond is fixed. 

The yield on a dividend paying stock is not. Bond investors are always first in line should the company default. Dividend investors, like equity shareholders in non-dividend paying stocks, get nothing in that situation.

The question is: should you buy a dividend focused mutual fund? Yes. But you do need to be cautious and understand that what you hold in your other investments and mutual funds may cross over and that we all know is the first cardinal sin of investing: all your eggs in one basket. These types of funds can cost more in some cases than the index funds you may own that pay dividends as well (S&P 500 returns are driven by dividend paying companies).

There is also the chance that your dividend paying mutual fund has gone overseas looking for yield. In 2012, this is a risky bet as the European crisis continues to unfold.

And because of that risk overseas (and any market downturn), the risk in these investments, the risk the dividends will need to be cut, is still there. The key is time. No equity investment performs as good in the short-term as it does in the long-term. Funds that invest in dividend paying stocks tend to have steadier performance results over a five or ten year period.

Looking for dividends should have no age barrier. Young people with time on their side, could actually benefit more than if they simply sought securities that grow without dividends. Older investors could see some better yields than a simple bond investment. There is and always will be risk. But dividends pay you, often handsomely to take it.

(this article was reprinted by permission from bluecollardollar.com)

The importance of a mutual fund portfolio

There are three things to consider when building a mutual fund portfolio. First, the most respected investors in history believe in what a mutual fund portfolio provides the small investor. Second, the most respected investors in history may never advocate for a mutual fund only portfolio. And lastly... You can read the full article here.

Mutual Funds: investing in fixed income

Mutual funds are numbered in the tens of thousands investing in every conceivable investment opportunity. They range from equity (stocks) to fixed income (bonds) to money markets, commodities and beyond. And they break down even further to investments focused on domestic offerings to international, emerging markets to total global coverage. You can read the full article here.

What is an Index Fund?

Before they downturn in 2008, now commonly referred to as the Great Recession, indexed mutual funds were used mostly by the conservative investor and the investor new to the experience. These two groups found the experience of investing with other mutual funds disconcerting. Read the full article here.

Index funds: The mutual fund for most investors.

Recently, Etrade began advertising their mutual fund selection. They boasted an inventory of 8,000 mutual funds. Choosing among those available mutual funds can be a daunting task for even an experienced investor. You will need to know not only who you are but what you hope to achieve. You can read the full article here.

Mutual Fund Investing: Buying a mutual fund for the first time

For millions of investors, finding the right mutual fund is as easy as tapping your company's retirement plan. For millions of other potential investors, the mutual fund can provide a unique investment opportunity to build your own retirement plan. You can read the full article here.

What is a mutual fund?

For decades, mutual funds have been a part of the investing landscape. They are easy to use, are available in a wide range of investment options, and are generally accessible to everyone. Mutual funds offer a safety in numbers approach that benefits the investor in numerous ways by spreading risk, offering diversity, and for better or worse, a mutual fund manager to guide the process. Read the full article here.

Reduce debts or save for retirement – Which one to go for?

You should be concentrating on paying off your debts. It is important that you pay off your debts as soon as possible to get your financial condition back on track. Well, things are always not that easy. There are issues that crop up as you age. This article is going to focus on the necessity of saving for retirement and how your idea to payoff debt first could be a good one.

Factors that will help your judgment

Should you focus on getting rid of debts or start investing money in some retirement plan? This may seem to be a recipe for confusion when it actually isn’t. All that you need to do is consider a few points that will help you decide on something that would actually work for you. You must not forget that requirements vary with individuals and there is absolutely no need to panic if a particular option doesn’t fit your profile. Mentioned below are a few questions that will help you make better judgments. Try to consider them to make sure you end up on the winning side.

Debt amount – Try to draw an estimate of your total debt amounts. It is important to consider the interest rates on your outstanding debts as well. This is the primary requirement when you’re planning to sort out the retirement plan that suits your profile.

Age – This is the most important part. There is no need to worry as a lot of people would like you to. Age should be considered not just while you’re choosing a retirement plan, but when you’re making debt payments as well.

Roth IRA – Go ahead and open a Roth IRA if you don’t have a 403b plan, business 401k plan or a SEP retirement plan. You won’t need anything to be eligible for the Roth IRA plan. Most people usually have the eligibility for this plan. You’re going to get a lot of benefits as soon as you start with one. Make sure you do this only when your debt amounts are low enough.

Employment – You need to have a stable source of income to be able to give these plans the right shape. It is important that you don’t plan to quit your present job in the near future and even if you do, make sure you’re earning 20% vesting annually. Don’t pay attention to what people have to say. Focus on the reality and move ahead with the right choices.

Daily expenses – There is absolutely no need to go for a retirement plan if that requires you to have a tough time living your life. Food and groceries are way more important than anything else. If your present is not good enough, chances are that your future is also not going to hold bright prospects for you. Focus on your priorities and things will sort themselves out if they have to.

It is always important that you consider your finances before investing in a retirement plan. Always remember to pay off all of your debts before you go for any investment in the future.

The Plight of the Rational (Investor)

For those of you who may not know what rational choice theory is, the behavior of picking what is right for you when it comes to your retirement plan creates what many are seeing as the greatest hurdle. The leap between what is right and what is most cost-effective, is the result of how we compare one move to another. This thinking which gave rise to behavioral studies that made Daniel Kahneman famous has proven to be less reliable than economists previously thought.

Consider the annuity. There is no doubt in anyone's mind that the concept of a steady stream of reliable income in retirement is what we all want and stive for. Knowing what we can expect gives us the much needed push to place a single monthly amount as the focal point in our plans for a post-work life. From a rational point of view, knowing what we can live on should drive us to pick this sort of product over any other method. But this is where rational choice theory fails.

If you knew you could determine the amount of income a certain investment could provide the logical (rational) choice would be to gravitate towards that choice. But those that do buy annuities are not governed by that thinking. And those who don't choose annuities for even a portion of their retirement investments seem to be ignoring what would be considered the most rational choice.

Perhaps we should first look back on the way we used to think. There was a time when pensions dominated the landscape. This sort of plan, referred to as the defined benefit plan had its drawbacks: it wasn't portable (you couldn't take it with you if you decided to change jobs) and it was at its most beneficial in the last years of employment (essentially a trade-off for years of sweat equity which became capital equity at retirement). The introduction of plans such as the 401(k) or defined contribution plan changed that thinking giving workers greater mobility (you could take your contributions and any matching employer contributions with you when left provided you worked for a certain amount of time called the vesting period) and of course the much advertised ability to self-direct your investments according to who you are.

These pre-401(k) days also saw a focus amongst workers of paying down mortgage debt in order to gain home equity. While this is still a good idea, it has fallen out of favor over the last three-to-four years for what could be called obvious reasons. Economic troubles aside, we view the pension as prohibitive and full ownership of our homes as all but unattainable.

Three decades later, after numerous bull markets and more bear markets than we feel should have occurred, we are back to thinking that this pre-retirement knowledge of how much we will actually have at when we stop working is not such a bad idea. And while paying down your mortgage hasn't gained the same attention, our thinking about retirement income is gradually shifting.

This shift is based on knowing how much you will actually receive rather than continually trying to calculate how much you can withdraw. But does the annuity provide the best offset between worrying about drawing down your retirement savings too fast and potentially outliving your "nest egg" or learning to live within the confines of a set amount paid to you year-over-year. Some of the decision is based on the ability to adjust spending while you are working, usually with the adoption of a "spend what you make" thinking which upon retirement become a "spend what you can [afford]". Neither work well.

While we are working, our spending increases to meet our income. That option disappears once you are retired replaced by spending that adjusts to you ability to optimize your portfolio to meet the needs you might have. You have no way of knowing what those needs are when you are working and only a slightly better idea what they are once you retire.

According to a recent paper titled "Annuitization Puzzles" Schlomo Bernartzi, Alessandro Previtero and Richard H. Thaler, the the conceptually difficult question of how much is available to spend is answered with the annuitization of retirement savings. In other words, annuities take the calculations out of the mix. Studies have revealed a certain type of withdraw (or drawdown mentality) that many attribute to two basic ideas: fear of health costs and the wish to bequest. These 401(k) retirees focus not so much on how much they will need to spend but how much they will have left to spend should something happen medically and if that doesn't occur, how much they will leave to their estate once they are gone.

The paper makes it clear that conservative withdrawal rates at retirement are usually attributed to wealthier retirees and quicker drawdown rates that are mostly done by poorer retirees are not the problem: it is the calculation of how much is enough. The bequest motive, the authors point out is confusing considering most of those who focus on leaving money behind live on less to leave more for children who quite possibly don't need it and in more instances than not, are more affluent than their parents. Poorer retirees entertain the bequest motive as well but usually find that they need the money in greater quantities sooner than they anticipated.

Can annuities fix this "hard" calculation? Possibly but there are some psychological hurdles. One is the focus on retirement at 65. The less educated you are, the more you focus on this age even if you know that by waiting you will gain even more spendable income in retirement. But also ironically, the better educated retiree is more focused on leaving something to their heirs and in doing so, underspend.

While the choice of annuitizing is difficult, in part because our biases are so strong, the benefits of knowing should come to the forefront. Researchers suggest that if annuities were part of your retirement options in a 401(k), we would use them. Research has also pointed to the pivot point, when we retire and how the markets are doing at that point, as playing a role in the decision. If markets are robust, we don't buy annuities. When we feel less confident in the markets, we tend to purchase annuities.

Annuities do have cost hurdles with a great many people suggesting the fees and expenses as a reason to look the other way. Perhaps the best way to beat these biases is to plan with an annuity long before you make the decision to retire and having the choice inside your retirement plan at an early age could make your future plan more clear. It is no easy choice and it certainly shouldn't be your only choice, but for a portion of your retirement savings it could be the single easiest idea to take the worry out of retirement. Knowing also by default, focuses your savings as well.

Learn more. You can even get approved for no credit loans.

Is it Time to Rebalance Your Portfolio?

We are all familiar with the most popular stories from “The Tales of a Thousand and One Nights”. But what you may not know is that this expansive collection of stories has no named author or authors, no dates or places of composition and no single national tradition. In Marina Warner’s new book “Stranger Magic” she offers this guideline to the stories: “I think,” she writes, “that the reader should enrich what he is reading. He should misunderstand the text; he should change it into something else.” She believes that the reality of magic resides at two poles: one the poetic truth and the other bound in inquiry and speculation.

We as investors are guilty of wishing for, even trying to conjure magic for our investments and the portfolios in which they are nested. We attempt to make the leap from the known to the unknown, to embrace the magical thinking of a thousand different storytellers. And like this tale, there is always another story left incomplete at dawn.

So I thought today on the Financial Impact Factor Radio with Paul Petillo, Dave Kittredge and Neil Plein we’d discuss the magical thinking around the portfolio rebalance. We have watched with great amazement, our investments rebound and take on new life in 2012. Markets are up and this is one of those rare feel-good moments. Unfortunately, feeling good isn’t something you relax with when it comes to how you are invested. In fact, the maintenance these portfolios require is often counterintuitive. If your car, for instance is running and performing as it should, we are not inclined to look under the hood for potential problems. Rebalancing a portfolio however requires you to do just that: look for a problem where you might not have thought one exists. As I mentioned earlier, there are a thousand and one ways to do this. So let’s start there.

A quick glance at your statement might reveal a strong move to the upside. Why should we do anything?

How do we know when to do this and I have asked numerous guests who come on the show how do we pick our risk level, which is essential in the rebalancing?

How do we get beyond the concept of funding our losing positions and selling off our winning ones in an effort to adjust our portfolios?

Listen to Financial Impact Factor Radio with your hosts:
Paul Petillo of Target2025.com and BlueCollarDollar.com,
Dave Kittredge of FinancialFootprint.com and Neil Plein of InvestnRetire.com

Insuring Your Home: A Focus on Mortgage Insurance for Boomers

On a recent episode of Financial Impact Factor Radio, we discussed the topic of insurance. If you have never tuned into this show, I think you will find it interesting and topical. We have a wide range of guests and often discuss the very questions that concern Baby Boomers, their children and their parents. Because being a Boomer is more than just being a certain age. All of our shows on Financial Impact Factor Radio can be found here.

As a Boomer, I am always intrigued by the offers that begin showing up in my inbox/mailbox. Although they don't on the surface seem to be age related, one can't help but read between the lines. Are they talking to me? Are they worried about whether I will make it to the end? That "end" involves satisfying the largest debt any of us will ever own: our mortgage.

Last week I received a letter in the mail from the bank that holds my mortgage that would make most mortgage holders think twice. It was the offer of life insurance. My bank might think there are good reasons for offering this product that is different that many of the other types of insurance offered with these types of loans. For instance, PMI is private mortgage insurance the bank makes you buy if you are putting less than 20% down on a mortgage. The sole beneficiary in this instance is the lender, who knows that if you are going to default, this riskier loan covers their interest in the transaction. Known as PMI, its cost has begun to weigh on borrowers who find their loans underwater. Once you pass 78% mark because the value of your house compared to the amount of your initial downpayment, you can cancel the policy.

There is also mortgage insurance which for some borrowers seems like a good option as well. Essentially the lure of this product is to pay-off the mortgage in the event of your death. The insurer doesn’t pay you directly instead writing a check directly to the mortgage company or lender.

The letter I received offered a term policy that would last until I turned 80 years old, which is about 26 years from now. Like all insurance policies it plays on your fears and comes at a time when the typical term policy is about to expire if you bought insurance in your thirties, which is typically the time when most folks consider coverage. But it isn’t cheap. In fact, this sort of policy has a seven year flat rate, just a few medical questions without an exam and of course the tug-on-your-heart-strings assurance that your loved ones will be taken care of.

So today I thought we’d talk about late in life insurance coverage and whether we should consider it.

Listen to Financial Impact Factor Radio with your hosts:
Paul Petillo of Target2025.com/BlueCollarDollar.com and Dave Kittredge and Dave Ng of FinancialFootprint.com

A Boomer POV: Retirement

This is the point where two facts collide. You hear a lot of white noise about the so-called delayed retirement, the I'll-have-to-work-longer-because-my-plan-was-undone tales. Those headlines create anxiousness amongst even those who are prepared to retire as planned. This group second-guesses the plan they have in place even if it is viable. And then you also hear the unbelievable number of retiring Boomers that do take the leap, a number that doesn't seem real: 10,000 Boomers are reaching retirement age each day.

Who are these people? The unprepared and the prepared hurtling headlong into older adulthood. They both had expectations of retiring based on what can only be considered now as unrealistic math. They set goals and they weren't met as planned. A few got it right. Remember, there's no shame in that miscalculation. Folks have been doing it for decades. But your plan is all you really care about and if it hasn't met your expectations, which in many instances were a bit lofty, you resign to work longer. This is where the facts collide.

You know all too well that simply working longer will add to the amount of retirement income you will have but only if you significantly increase your contributions. Few resign themselves to do both.

But the other half of the equation, the Boomers who do retire, are often caught in the same anxiety ridden place. They question whether they made the right choice and more importantly, whether the money they have amassed will serve their purpose, remains hanging over every plan as an unknown.

That purpose is often clouded with not only the unpredictable cost of longevity but whether they might have enough to take care of their heirs - a serious consideration among a wide swath of retired adults and those about to retire. This last consideration is entertained by women more so than men, statistics have uncovered, which is often surprising. Why? This same group of women approaching retirement has often saved less, another unfortunate statistic concerning women and retirement.

Those that do retire should consider where they retire. And while there are many suggestions as to what to do and how to go about it, but a quick survey of your current surroundings will offer a great many answers to your dilemma.

For instance, seniors or those about to become seniors often fail to inventory the services they may need. Once retired, your daily life will require things you had previously not considered. More than just the availability of medical services, more than the infrastructure of city services such as public transportation and well-lit and well-patrolled neighborhoods, your current location needs to stimulate you or at least have accessible stimulation to keep you mentally sharp and involved. This is not how many American cities were designed. Far too many cities and their suburbs require a car. And while this may be seen by many older Americans as a freedom, not being able to drive can imprison some seniors if they find where they live too far away from these activities. Only vast sums of retirement income can change that one item and few seniors, who essentially are on a fixed income, want to reach for their wallet or purse to pay to go shopping.

To pre-Boomers or those who are still working, where you live is not often what you can afford. If you live in the city, chances are you rent. If you live in the suburbs, chances are you have a mortgage. If you have a mortgage, chances are you can't afford it. That's a lot of "ifs" but they are an approaching nightmare for those about to retire.

While many of believe that the cities we live in should adjust to us and our current and future retirement needs, it probably won't happen soon. So retirees look to communities that cater to their needs. This ghetto-izing of seniors, much like Florida and Arizona is not only unappealing to many Boomers, it is not as healthy as it first appears. Sure, these senior-only communities do provide like-minded companionship, concentrated services and accommodations that cater to gradual aging, but they are often culturally void of the stimulation that all walks of life can provide. Being isolated is not the answer.

So what is? Cities are struggling with their finances and as a result are cutting back on services that once were taken for granted. We might be living longer but in far too many instances, your health may compromise that statistic or impact the quality of that longer life. And the cost of where you live - assuming your mortgage is paid off before you retire - is not getting cheaper. Add inflation into the mix and you have eliminated all but the most obvious choice: you have fewer options.

Of course, you can stay put in a house that might be too big and too costly to maintain. This will gradually eat away at your fixed income and reduce your opportunities to engage with the outside world. Now one plans on spending their day at McDonalds sipping bad coffee with fellow seniors, no matter how well-lit, no matter how inexpensive the house brew and no matter if the loitering rules don't apply. But take away any portion of that spendable income and you limit the choices.

Where is the right place? While there is no firm answer, you do have options. For instance, if family is important to you, be sure your family shares this thinking as well. The dynamic of marriage - and I am speaking of your children's marriage - can create some confusion. Deciding that you can rely on your children and their spouses for the help you might need is something you need to discuss well in advance of retiring.

At some point, one of your kids or their spouses may find you in their care. Perhaps not in the day-to-day sense or even the long-term care situation, but in the need to check-in, help with errands or assume a financial role. This needs to be discussed in advance, a discussion that should be instigated by you. This is no easy discussion.

You do need to tell your children what you expect from retirement, even if you are unsure. Answer the hard questions (can you afford to stay in your house for instance) and when the time comes, unfold your finances for them to see. Let them know where you stand and what your plan is.

Boomers will be sold a retirement that is unlike any other before them. If you live longer as the statistics suggest you will, what do you expect of your surroundings? What role does your community play in the decision? What role will your kids have? Retirement is much more than simply amassing cash. It is amassing support. And believe it or not, that is old school thinking, a throwback to the time when retired family members depended on their kids for everything. But those kids, who may not be thinking along the same lines as you need to be involved now, rather than later.

Leverage and Retirement

Over the years I have written about the topic of retirement planning, I have witnessed some incredibly crazy thinking. Many of those thoughts have come home to roost often too late for the investor to do anything to fix the situation. We plan, we tell ourselves, to retire at a certain age with a certain amount of money based on a certain withdrawal rate.  But those plans are often dashed by unforeseen events that, in hindsight we should have anticipated.

Recent reports have pointed towards an increase in employee contributions to their 401(k) plans. These upticks, however slight lead many to conclude that we are starting to get the message. But which message are we holding on to? Is it the need to simply save more because we know the chances are we will need more or is it the result of some other encouraging news? I'm inclined to go with the second choice.

Retirement planning is a whole package endeavor. In other words, simply putting money away for retirement is not enough. Numerous other pieces of the puzzle come into play and this is what is often ignored. The effort is noteworthy only if you have developed a budget that is actually less generous, forcing you to face the reality of an income in retirement that is not the same as the one the you had while working.

This income reduced budgeting is practiced by too few close-to-retirement planners. At no time in the history of retirement planning - and I'm going way back to the generous days of the defined benefit plan or pension - was the payout at retirement designed to replace 100% of what you live on now. The number was actually closer to 70% replacement and that was only if you had worked within the confines of that pension for thirty years or more (and it was not impacted by changes from the company). The remainder was to be supplemented by Social Security.

But with advent of the defined contribution plan (401(k), 403(b)), with the responsibility for funding your retirement placed squarely on your shoulders, we were forced to face the possibility that 70% of our current income would not be replaced. In order to get those kinds of post-work rewards, we would have had to invest 12-15% of our pre-tax income, every year without fail, in good markets and bad. For too many people with this plan, that sort of budget-busting restriction was simply too much to embrace.

We are to be forgiven for our human-ness however. We make mistakes and follow the herd - when they sell, we sell and when they pile in, we follow. In both instances we turn our backs on the whole concept of retirement planning: steady and ever-increasing contributions without consideration for what the overall market is doing.

Our employers didn't help much either. They gave us matching contributions, took them away or reduced them, and when they re-introduced them, they were far smaller. And we misinterpreted this as a sign that they knew something we didn't and mimicked their actions: we reduced our contributions when the matches were lowered and increased them when they were raised. As I said, we can be forgiven this tendency but we won't be absolved of this sin of remission when we begin thinking about retirement.

One of the other keys to the seemingly good news about an increase in contributions in 2011 is backlit with some additional news. Auto-enrollment helped to raise the account balances of the overall plan (and as employment improves, so will the news that we are using the plans in a more robust way). But those auto-enrolled new hires were placed squarely in the plan's target date fund of choice.

Long-time readers know about my reservations with these funds. New readers should note: target date funds are often less transparent than stand-alone funds, the underlying portfolio can be suspect, the target date may not be far enough in the future to be realistic and to date, the rebalancing implied in the fund is not determined by any specific guidelines. In other words, those who are put in a target date fund via auto-enrollment would be wise to get into an index fund (or four raging across a variety of markets) as soon as possible.

Those folks, the youngest among us who are the most likely candidates for these auto-enrollment options can make changes that will get them much closer to the goal. Older workers, however don't. And they know it. But they have some advantages, at least in their mind that the younger worker doesn't: equity.

And that equity in their homes, combined with the historically low interest rate environment has given many Baby Boomers a second option: to borrow against their homes and take the refinanced money and put into their retirement accounts. Is it a good idea or one that is bound to backfire?

Three things make it risky. One the equity in your home may not recover. Older homeowners who tap their home's equity are doing so at the risk of increasing their mortgages at a time when additional debt, no matter how inexpensive is not prudent. Two: They are eliminating a safety valve that could be used if retirement got too rough: the reverse mortgage. And third, if they are forced to or simply want to sell, the equity in their property is not there to give them a downpayment for new housing.

Leveraging your home to finance your retirement account does come with some tax advantages though. Just because one account increases as one is leveraged doesn't necessarily give you a balanced approach. In other words, there are "veiled risks".

You will still need to allocate your portfolio to perform better than the cost of the new loan and the interest rate you pay. This means that year-over-year, you will need to do much better than you may have calculated. A four percent mortgage added into the cost of the refinance (another one percent) added to the rate of inflation (another three percent if it holds steady) means your portfolio will need to return north of eight percent year over year - without fail.

The only way to give your retirement income any sort of sure footing is to increase your contributions by a much wider margin than what has become known as the average - 8% - and pay down your mortgage.

Fifteen percent is still the optimum contribution rate and even that number will give you only 75% of your current income in retirement - provided you saved for twenty years or more. Paying down the mortgage reduces your overall cost of debt service while increasing your equity.

How Going Back to College Impacts Your Retirement

When you send your son or daughter off to college this year, the person sitting next to them in that lecture hall is more likely now than ever before to be your age, or close to it. If the rates of college borrowing are any indication, forty year olds and older are finding themselves back in school. While attending college has been touted most recently as a way to add ten-years to your life, or at least your mental health, these students are more interested on improving their chances at getting a job. Not a better one; any job.

The stress facing an older worker or recently unemployed person turned student can be monumental. There may be numerous reasons why you didn't complete college in the first place or find yourself with a worthless piece of paper from your previous go-around. None of those matter. You have decided, and the experts suggest that this is correct, that getting more training is better than not.

But college at forty or older comes with its own unique problems. Not the least of which is the worth of the education. College tuitions are increasing as parents of children in the typical age group know all too well. When you make the decision to return to school as an older worker, the cost may be offset by some prior attendance experience or work-life experience.

One of the easiest ways to offset the tuition cost is to challenge the course, suggesting to over 2,900 accredited colleges that you know what that course offers and don't need to take it for the credit. This challenge not only save money but time that could be better spent getting the education sooner to allow you to get back in the hunt for employment.  CLEP, the College Level Exam Program, is the most widely accepted "life experience" challenge exam program and the one every older student should use. The CLEP program features 32 single-subject college exams and five general exams. (For more information about CLEP exams, contact: The College Board, 800-257-9558.)

There are other ways to help in getting your degree quicker and for less cost. Your employer might have in-house programs designed to finance higher and continuing education. If you are not employed, research and study what you know as much as possible before taking these tests.

You have three things that are to your advantage and three things working against your success.

The three things in your favor. First: you probably have the focus to do well. College isn't your first experience with independence. Of course I'm not suggesting that all-students entering or in college aren't focused; they just have a higher degree of potential available distractions to take them off course. Two: you know how much this is really costing. You have a better concept of what these dollars cost against what they can return. Three: Your work ethic comes from actually working and should be transferrable, at least in your head, to a better framework of organization. In other words, you can place the most important tasks first and that ability to prioritize is probably something you didn't even realize you possessed.

The three things working against you. One: Your focus to do well may actually overload your ability to do as well as you would have hoped. Taking on too much will find you in conflict with the rigors of what your daily life has become. This is certainly not insurmountable. Experts agree that you should get as much sleep as possible and find a scheduled time to study and prepare. That advice is given to twenty year olds as well. But it is doubly important for the older student.

Two: You have a much firmer grasp of time and the time you have left to not only pay back the loan but to do so with enough of an income to make it worthwhile. And like younger students, you need to balance the loan to potential income. According to the STudent Loan Network: "By keeping your borrowing to one year's salary, you're effectively dedicating 10% of your future income to repayment, which is a manageable amount of debt. Statistically speaking, graduates who have 10% or less of their income dedicated to debt repayment are able to manage their debts; those who exceed 15% of their income tend to default." And for the older worker, this calculation is incredibly difficult to make. There is no guarantee that you will get adequate compensation when you do get a job upon graduation.

Three: Your work ethic will actually work against you. You may have previously sleep-walked in your previous job, focused on  the daily grind with the least amount of energy. Re-prioritizing your life will come without the usual support groups afforded the younger student, you will need to build a self-centered support and wedge it into your regular routine. College for the older student requires an enormous amount of focus. There are some things that can help you keep the objective in reach and not lose your forward momentum. They include: staying organized, getting more sleep than you afforded yourself when you were working, and studying. The last may take a little re-learning so be sure to give yourself time to learn how to learn again.

If you are still working, don't become complacent. Continue to improve your chances and opportunities even if life has become somewhat complicated. Spending a little at a time is far wiser than borrowing a huge sum to attend college full-time. If you aren't working, keep in mind that even the best degrees don't always end up in the best paying jobs. Get as much counseling as you can before picking a course of study. Some job choices are fleeting or don't return in salary what you expect them to pay.

The popular notion is that we will work longer than our parents, postponing retirement beyond the age of 65. If that's the case, choose a career that gives you longevity in the workforce and not just something that provides a paycheck. And even if all it does is add ten-years to your mental health, it might be worth considering.

Will you self-direct your retirement?

Today on the Financial Impact Factor Radio with Paul Petillo, Dave Kittredge and Dave Ng we continue the discussion we began yesterday about self-directed IRAs. While having control over your retirement is important, how much risk is too much and who can handle the increased potential of loss or gain.

To listen to yesterday's show, click here.

Here are some outtakes from this conversation:

Yesterday we discussed a different corner of the retirement investment world when we talked about self-directed IRA. I suggested that “If there is one thing we all seem to be seeking and at the same time, remains as elusive it is control. Our investments often seem to want us to master its fate, as if simply involving yourself is enough.” T.S.Eliot seemed to agree although we all know he wasn’t talking about your retirement plans when he wrote: "Only those who will risk going too far can possibly find out how far it is possible to go."

Jim Hitt of AmericanIRA.com to discuss the IRA that you control. There is a lot left to be discussed it seems and little clarification is needed in advance. Jim is a third party administrator or TPA. We have had a few professionals who ply their trade as a go-between, somewhat detached from the other two parties but necessary in the legal and tax compliant execution of a retirement plan. Sometimes we need to be reminded that all retirement investments, 401(k)s, 403(b)s, IRAs in all their incarnations are essentially parts of the tax code. And I’d be willing to wager that when taxes are mentioned, there is a certain fear, perhaps caution that moves to the forefront. Self-directed IRAs are no different.

On numerous occasions, we have, in advance of a guest appearing on the show prepped the listening audience, discussed what we knew about the next day’s topic and did so in almost every instance, without the guest’s knowledge. Today, we’re going to look back.

Most of us have had out retirement plans nestled safely – and I’ll describe what I mean by safely in a moment – inside a 401(k). The way these plans are constructed give us a sense that someone else is watching over us. They choose the investments. They made the match. They suggested that they had a fiduciary responsibility to us. I asked Jim if he had just such a responsibility and he simply replied: no.

So we began the discussion there as I asked Dave and Dave if they would like to tell us what fiduciary responsibility is?

Now we all know that risk is something we need and knowing how much of a risk you can take is key in the way you execute your goals. But this is no easy task when it comes to this type of IRA. "Trust your own instinct, “ as Billy Wilder once said: “Your mistakes might as well be your own, instead of someone else's."

As Baby Boomers begin this massive wave of retirement, many are for the first time going to get their life’s retirement account to control. I was caught by one thing Mr. Hitt suggested as to the people who come to him: they come in good times and bad.

The risk of self-directing your IRA is there. Jim discussed using this money for real estate investment purposes, business opportunities and other investments such as gold, commodities, etc. And it all boils down to coordination.

Listen to Financial Impact Factor Radio with your hosts: Paul Petillo of Target2025.com/BlueCollarDollar.com and Dave Kittredge and Dave Ng of FinancialFootprint.com The show is broadcast daily, online at 6amPST/9amEST.

On the Radio with Lynnette Kalfani-Cox

I believe it was Einstein who suggested that “we cannot solve our problems with the same thinking we used to create them”. And with us today, we have a very special guest who has done what many of us might think impossible, taking something as abstract as credit and money and turning it into a reality that we can all relate to.

Lynnette Khalfani-Cox is known as The Money Coach® has done more than just expose the soft-underbelly of everything financial – she has performed surgery. Her efforts as a personal finance expert, television and radio personality, and the author of numerous books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom has created a wealth of information for those who face the incredible hurdle of mastering the income they earn. Lynnette once had $100,000 in credit card debt and in three years, did what many of us might consider impossible: paid it off.

Listen to internet radiowith

Paul Petillo of Target2025.com/BlueCollarDollar.com

and Dave Kittredge and Dave Ng

of FinancialFootprint.com

on

The Financial Impact Factor