Updated on 02.19.07

Money Magazine – March 2007

Trent Hamm

Money Magazine logoMy most recent issue of Money Magazine arrived in my mailbox late last week, but when I saw the cover, I almost cringed: it’s an issue devoted almost entirely to the baby boomers, and thus it has the “Oh my God retirement is coming I have nothing saved oh my GOD!” sentiment all over it. I should say that of the boomers I know the best (and I made a list of about twelve of them), a full 75% have so little saved for retirement that they will have to work until they’re in their 70s (at least). Of course, the other three are retired (or in a position where they could retire whenever they’d like). So perhaps the premise of this issue is more spot-on than I initially thought…

Anyway, here are the ten things that really stood out at me from the issue:

People are pretending to be hotel concierges to scam people out of their money. Don’t give your info away, ever. I’m even going to blow it up this time for you to read clearly. Never, ever give any personal information to someone who calls you; if you feel compelled, look up their number on your own and call them back. There are so many clever phone scams out there that you simply cannot trust someone at their word over the phone when it comes to your personal information (p. 24).

Don’t just hire a home builder and walk away expecting a perfect house. Many people got lemon houses in the last several years. You should make sure that your builder is licensed, know whether or not they can handle the job, have a lawyer read the contract (especially parts dealing with arbitration – get specifics or strike it from the contract), and visit the job site regularly and look for things that stand out to you (p. 47).

Rebalancing your portfolio is good. If you started out with a portfolio that was 50% in an S&P 500 index fund and 50% in treasury notes in 1989 and left it alone, you’d believe you were a big winner in 1999 when the stock portion had grown faster than the bonds and filled up 70% of the portfolio. However, from 1999 to 2002, your portfolio would have lost 17% of its value and even today you’d be in worse shape than if you had just rebalanced the portfolio to 50% stocks and 50% bonds each year. In short, rebalance regularly or take it on the chin if a bubble bursts or a market goes south (p. 56).

“Finish this sentence: I always wanted to ___________.” My answer was automatic: I always wanted to write a pile of books. I’m working towards that goal more than ever before – and I’ve never felt better about it (p. 98).

UnitedHealth Group is abysmal for health insurance. They deny 14.4% of claims. The industry average is 4.2%. That’s absolutely unacceptable for anyone – UnitedHealth is apparently in the business of taking people’s money, not helping with medical issues (p. 117).

If you check your email more than twenty times a day, you probably have a problem. Email addiction is a serious problem, and it costs you money by making you less productive because of the constant interruptions. I had to make myself cut my email checking down to a regular schedule during the day because I would get nothing done; now I just have a couple email sessions each day and I feel vastly more productive (p. 28).

If your spouse is suddenly earning more than you are and it bothers you, talk about it. By choosing to keep that feeling bottled up inside, you’re setting the stage for marital problems later on. Set some time aside and talk about how that changes things and how that makes you feel (p. 36).

Morningstar is getting better. Their star ratings on mutual funds are getting better as time goes on. Right now, five star funds at Morningstar are generally low-cost funds with stellar returns and aren’t focused on whatever sector is “hot” at the moment like they used to be (p. 62).

My exact NCAA basketball tournament bracket strategy is now being given away in mainstream publications. So I guess I might as well confess. All I do every year is pick the favorite in every single first and second round match. Then for all of the remaining matchups, I pick the team that won the most of their last fifteen games of the season (the conference schedule) until the Final Four, where then I pick the underdog (based on seed) in each matchup. I am competitive year in and year out with this strategy. And it’s basically in print in this issue of Money (p. 20).

Quote of the month (p. 82):

I tell my students that they should study not for their first job but as if they’re going to have six or ten careers.
– Olivia Mitchell, Wharton School of Business

Whenever I read things like this, I worry about the future. All the time, I visit workplaces where things are held together by an individual in his or her fifties or sixties that has been there for thirty years and knows the whole system inside and out. That’s invaluable human capital and it’s being flushed down the toilet. I realize times have changed, but people that have extensive knowledge of a workplace and a system are incredibly valuable people to have around, and the changing culture is making them into dinosaurs.

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  1. cciesquare says:

    Interesting I am currently taking an economics class and the teacher who looks to be about 50+ was talking about retirment in the coming years.

    He said that the US is running up a huge trade defeciet with places like China and Europe. The dollar is losing value agaisnt other currencies like falling flies. He perdicts that the US will not be able to continue with such high defeciet and it will lead to a market collapse at its going rate.

    His point was that he has no retirement funds invested in ANY US entities. Everything that is set aside for retirement is overseas.

    His caution to students was that if you have retirement money invested in stocks/bonds/mutal funds, without a diversification which includes a good percentage, about 25%, in foreign investments you’re setting youself up for a possible market collapse and losing most of your retirement.

    He gives two sceanrios that can happen.

    1) China is not happy with the US and decides it no longer wants to hold on to the ~$1 Trillion worth of bonds. China threatens to sell most or all. This is possible if China switches to investing in Europe, or the standard is no longer the US $1 but the Euro.

    2) Again the Oil companies overseas realize that with the falling dollar the US is no longer a good investment. They are losing money and decide to switch to the Euro. These oil companies sell all their US shares or investments and switch to European market. Saudi Arabia has a very large investment in the US market, if they were to even pull s small portion of their investments it would be felt in all corners.

    His other caution about retirement and the coming years is this. The current generation which we call generation “debt” is going to hurt the baby boomers. When the baby boomers go to sell their stocks/funds/investments for cash to spend, they will meet mostly a generation debt which has no money to invest which will cause a huge problem.

    If the baby boomers panic and a large percentage of them sell when the market doesnt want to buy its going to cause chaos.

    Again he repeatedly cautions that you should be switching to investments overseas as you are closer to retirement, speaking to our age group the 18-22.

    Not sure if my teacher was just blowing it out of proportions but it seems very real.

  2. Ken thornton says:

    Your instructor is exactly right!!!! The standard
    of living that americans have bcome accustomed to
    is in danger of extinction and soon. I’m 50 plus
    and working hard on a strategy to help soft the
    coming crisis. Invest over seas but be carefull
    that you foreign investments are closely tied to
    the $ US. Do your homework in this matter. READ
    READ READ! Ken

  3. Ken thornton says:

    Correction!!!! I meant to say Make sure investments are not closely tied to the $US.

    Sorry, ken

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