WSJ Article: Which Way to Retirement?

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MekongTrader
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WSJ Article: Which Way to Retirement?

Post by MekongTrader » Fri Aug 12, 2011 9:43 pm

Here is an excellent article from WSJ from today titled 'Which Way To Retirement?'

http://online.wsj.com/article/SB1000142 ... 95026.html

It's for subscribers only but you can access by googling 'Which Way to Retirement'.
David Ziser, a 62-year-old professional photographer in Cincinnati, this week postponed his retirement, which he had planned for the end of this year. With more than $1 million invested in stocks, he had considered his retirement plan to be solid. That changed this week when his portfolio dropped $50,000 in value. Now, he plans to keep working for at least two more years and maintain his current investments.
I admit that we've been in for a wild ride over the last 3-4 weeks. But having to postpone retirement for two years?

Have a nice week-end everybody!
MT

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Aptenodytes
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Post by Aptenodytes » Fri Aug 12, 2011 10:07 pm

I see articles like this from time to time but I can't figure them out. Take the case of this 62-year-old photographer. The implicit story is "something really bad happened to him," but that doesn't compute. He lost $50,000 in capital so he has to delay retirement 2 years? If the reporter had done his/her job the real story would have been "this guy had a really bad retirement plan." The only way his decision to delay retirement makes any sense is if there are some unstated facts being kept from view, such as: (1) he had almost nothing in bonds, and (2) he was expecting a really large increase in equities between now and January, and then he was going to retire. Without something like that going on his decision to delay makes no sense.

My guess is he isn't actually delaying retirement at all, and that what he claimed was a "plan" to retire in January was just idle speculation (if I keep all my money in stocks and if they keep going way way up I might hit my "number").

I'm not saying that what's going on in the market isn't generating suffering, I just think we need better reporters.

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bob90245
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Post by bob90245 » Fri Aug 12, 2011 10:32 pm

Some of that article is just bizzare! The market drop was not this bad!
Kevin Fitzgerald, a 55-year-old marketing executive in Highland, Colo., says he regrets not hedging his 401(k) investments after watching his account lose $250,000—one-third of its value—last week. [Whiskey Tango Foxtrot ???] Now, he expects to work at least 11 more years.
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.

wishin&hopin
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Post by wishin&hopin » Fri Aug 12, 2011 10:35 pm

Some people nearing retirement had the foresight to dump some stocks in the two weeks leading up to the debt-ceiling deadline and have stayed in cash since. Selling when stocks are high isn't a bad idea, of course, as long as you aren't trying to time the market.
(Italics mine.) You're always in trouble when your second sentence contradicts your first.
Last edited by wishin&hopin on Fri Aug 12, 2011 10:37 pm, edited 1 time in total.

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PaddyMac
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Post by PaddyMac » Fri Aug 12, 2011 10:36 pm

The bit I don't understand was:

"Kevin Fitzgerald, a 55-year-old marketing executive in Highland, Colo., says he regrets not hedging his 401(k) investments after watching his account lose $250,000—one-third of its value—last week."

If $250K was one third of its value, then he had $750K to start with. But I don't think that even a 100% stock portfolio could have lost 33%? How is that possible?

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Aptenodytes
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Post by Aptenodytes » Fri Aug 12, 2011 10:36 pm

bob90245 wrote:Some of that article is just bizzare! The market drop was not this bad!
Kevin Fitzgerald, a 55-year-old marketing executive in Highland, Colo., says he regrets not hedging his 401(k) investments after watching his account lose $250,000—one-third of its value—last week. [Whiskey Tango Foxtrot ???] Now, he expects to work at least 11 more years.
That's a doozy. It is even worse than I thought.

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ladders11
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Post by ladders11 » Fri Aug 12, 2011 11:07 pm

I'm sorry, but I found the whole article funny. I enjoyed it like a blooper reel. The man who lost 250k slipped on quite a banana peel. I also don't get why the camera man (who has $1M but lost 50k a few months from retirement) now plans to work 2yrs longer at age 62. This doesn't make sense.

But watch what happens to this woman:
Joyce Kovacs ... planning to retire in February ... got nervous about her investments after a friend received an email from her financial planner suggesting the friend switch to an FDIC-backed money-market fund.
From this, she winds up with an annuity?
...kept most of her long-term stock investments intact, but moved her savings meant for the first part of retirement from stock mutual funds to a variable annuity with principal protection that should cover her basic living expenses to age 80.
From all advisors, come fees...
She will be charged about 3% of the account's value each year—but her money has more growth potential than it would in a savings account, says Ryan McKeown, her planner.
One financial planner, one lobster dinner?

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muddyglass
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Post by muddyglass » Fri Aug 12, 2011 11:45 pm

PaddyMac wrote:The bit I don't understand was:

"Kevin Fitzgerald, a 55-year-old marketing executive in Highland, Colo., says he regrets not hedging his 401(k) investments after watching his account lose $250,000—one-third of its value—last week."

If $250K was one third of its value, then he had $750K to start with. But I don't think that even a 100% stock portfolio could have lost 33%? How is that possible?
it's certainly possible if kevin fitzgerald held individual stocks in his 401k!

kyounge1956
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Post by kyounge1956 » Sat Aug 13, 2011 12:54 am

muddyglass wrote:
PaddyMac wrote:The bit I don't understand was:

"Kevin Fitzgerald, a 55-year-old marketing executive in Highland, Colo., says he regrets not hedging his 401(k) investments after watching his account lose $250,000—one-third of its value—last week."

If $250K was one third of its value, then he had $750K to start with. But I don't think that even a 100% stock portfolio could have lost 33%? How is that possible?
it's certainly possible if kevin fitzgerald held individual stocks in his 401k!
or maybe even a large amount of his 401k was in his employer's stock?

Wagnerjb
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Post by Wagnerjb » Sat Aug 13, 2011 9:12 am

Aptenodytes wrote: The implicit story is "something really bad happened to him," but that doesn't compute.
I get really annoyed when I read articles like that:

a) Somebody is running out of money because they have been unemployed for 2 years. Only later you find out they refuse to take lower paying jobs or move to another area with better employment prospects.

b) Somebody was badly injured in a car accident. Only later you find out that they were speeding and not wearing their seat belt.

c) Somebody was ripped off by a crook investment advisor. Only later you find out he promised 15% returns guaranteed, and greed got the better of the investor.

d) Somebody had their savings drained by a medical condition. Only later you find out that they chose not to buy medical insurance.


This article presents another example of the same story....somebody is forced to endure the hardship of working later than planned, only to find out their asset allocation was horribly aggressive. Let's give credit to the Wall Street Journal for not making the individuals into "victims" and pointing the blame to others, like banks or Enron or insurance companies or lawyers, etc......

Best wishes.
Andy

dhodson
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Post by dhodson » Sat Aug 13, 2011 9:28 am

i agree with a,b, and d. With C it depends on when in history and how much knowledge the investor had. In today's world, yes a 15% guarantee should raise your eyebrows.

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PaddyMac
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Post by PaddyMac » Sat Aug 13, 2011 9:50 am

muddyglass wrote:it's certainly possible if kevin fitzgerald held individual stocks in his 401k!
Maybe he had it all in Bank of America!

FafnerMorell
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Post by FafnerMorell » Sat Aug 13, 2011 10:02 am

PaddyMac wrote:
muddyglass wrote:it's certainly possible if kevin fitzgerald held individual stocks in his 401k!
Maybe he had it all in Bank of America!
When they told Kevin to put his money in the bank, he misunderstood and assumed they were talking stocks.... :roll:

MWCA
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Post by MWCA » Sat Aug 13, 2011 10:39 am

Don't be so aggressively invested just before your retirement date.
We are all worms. But I believe that I am a glow-worm.

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HardKnocker
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Post by HardKnocker » Sat Aug 13, 2011 1:35 pm

You just have to love annuity salesman.

Aren't they the greatest? Let's give them a hand...c'mon everybody!

:roll:
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett

K'zoo
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Post by K'zoo » Sat Aug 13, 2011 10:27 pm

Agree that these personal stories related in the article cause Bogleheads to roll their eyes and shake their heads.

My question is: which is the more typical investor, the people in the article or BHs? The photographer guy with all his money in stocks and he’s ready to retire? The nurse getting talked into putting a big chunk of her money in a variable annuity? These people aren’t unusual. (They are dumb, though, or perhaps just ignorant, IMO.)

Bogleheads are the ones marching to a different drummer.

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