How YOU Can Avoid These 2 Big Financial Planning Mistakes

(00:00.536)

Okay, two stories today in the Wall Street Journal kind of shook me up. I’m trying to put together how to go about discussing these things. Now, long time listeners know I really don’t BS around here on the program. mean, Mary Poppins, no spoonful of sugar to make the medicine go down. With that being said, I do have compassion.

for these people that have made poor choices and have been not exactly very good stewards of their money. One story I want to hit on here, and this one kind of blew me away. And they were talking about how all of these investors and the numbers are staggering. Workers missing out on billions of dollars

and investment gains by yanking their money out of the stock market after switching jobs. Now, what happens when people switch jobs? You have 401k there and what they do is you want to roll it over into you can roll it over to an IRA or you can roll it over into your new 401k plan. Most people choose to roll it into an IRA. One of the reasons being you’ll have more choices and control over what you can put your money in. However,

However, what people are doing, people are doing is nothing, nothing. They’re selling out, well, the 401k sells out their account and transfers the cash, the cash into an IRA and people aren’t doing anything with that. A recent study,

here that most people, most people don’t do anything with their money in IRA. They just leave it there sitting in cash. Nearly a third who rolled savings into IRAs still had the balance sitting in cash seven years later. Seven years.

(02:17.518)

Americans with cash heavy IRAs gave up more than $172 billion a year in retirement wealth that they could have generated by investing in stocks and bonds.

Mistake is common and costly, especially for younger workers accustomed to their savings being automatically invested in company plans. They risk missing out on years of potential gains, which compound over decades and build retirement wealth. Yeah.

Well, again, trying to parse my words here as best I possibly can. I get it. get it. Everyone, we all live busy and complex lives and we have a lot of things going on. But this is pretty damn

and you take care of your money and you build wealth over time, that money is gonna take care of you and your family and give you the opportunity to do a myriad of things. Again, there really isn’t, I mean, you can come up with a million excuses. You can claim that you’re a victim. You’re too busy. You don’t have this going on. But come on, man.

It’s your funds you’re letting it sit there in cash for seven years.

(03:48.522)

One interview, they interviewed a financial advisor. Again, anecdotal story and how a couple. Hired her and they found out that they rolled four hundred thousand dollars from a 401k to an IRA and. It sat there for years. Years, years that they couldn’t understand. geez, they get their account statement, but they couldn’t understand why they weren’t seeing any growth.

while the markets continue to go up. Probably lost out on what? $150 ,000 in gains over that period of time if it was just in conservative investments. Here’s the excuses. you go. Some account owners put off making decisions about where to put the money because they are overwhelmed by the thousands of investment options IRAs offer. I get that, but you can get a little bit of help.

with that, that’s what we’re here for. I mean, you go into a restaurant and let’s say you’ve got a menu, you’re not familiar, you go to a nice French restaurant, okay, and you don’t know a lot of things on the menu. Are you not gonna order? You’re not gonna have dinner?

(05:11.029)

Okay, a great deal of IRA investors would be in cash forever. They did a survey of this actually 500 Vanguard IRA clients who completed a rollover in 2023. They were still in cash in June. 68 % had no idea what their money was doing at that point. Again, I’m not going to mention this person’s name. They find another nurse.

Nurse 2016, she switches jobs. 2016 switches jobs. Her funds are rolled over into an IRA. They’ve been sitting in cash that entire time. The funny thing is, is that her husband is a financial advisor. I mean, this is the type of stuff that makes you want to kind of pull your hair out to some degree. again, I’m getting part of my words

as best I possibly can, trying to show some compassion. I was, I popped it in my head. The sub references go. The film Ocean’s 12, there was a scene in Ocean’s 12 where this is, you they’re all having a big meeting. Okay, big meeting. They have to come up with the funds, have to come up with the funds because they’re caught. And I think that they originally all stole $10 million.

And they’re going through and they’re trying to who has what remaining over the few years and one after another. No, I’m missing this amount of money. I’m missing that amount of money. And the character played by Elliott Gould, he said something he you know, they asked who has the money to pay back with interest, with interest that they’re going to have to owe. And when he raises his hand, he says, you know, stock market.

Stock market is this great mystery beyond the realm of all human understanding. I saw the signs. So one person there that was actually responsible with his money, was a good steward with his money. Same day, Wall Street Journal today. again, this is, they had three reporters on this story.

(07:30.062)

Three Wall Street Journal reporters on this story. they, again, I don’t know how they find the various different people, the anecdotes for this story. But again, it’s, it’s kind of like that they’re creating news, I guess, to some degree, a what was me type of piece. And the title of this, again, I clicked on it. I clicked on it. America’s 60 year olds are staring at financial.

peril. America’s 60 year olds staring at financial peril. And they find this this woman out in the state of Washington. And 60 years old just turned 60 years old. And they are. She’s part of her challenge is she’s at the tail end of a baby boom generation that is hurtling towards retirement age in uncertainty. hurtling toward retirement.

age in uncertainty. Can I ask these authors a question? Has there ever been a point in time in life where there hasn’t been uncertainty? You roll out of bed. You roll out of bed, there’s uncertainty. That’s just the reality of life. And you want to talk about retirement. OK, listen, if you want certainty, you want to get a government

Get a government job that still exists. Okay. You get yourself a government job. You know what your pension is going to be. You know how many years you have to put in. That is the reality. You want certainty, go work for the government. You can do that. Born in a mid -century post -war America, brimming with promise, many of the youngest boomers are still sporting financial bruises from the 2007 -2009 recession and the

steady shift away from guaranteed pensions. First off, the guaranteed pensions have been going away for a very, very long period of time. Okay. They keep bringing that one up again and again and again. And let me be honest with you. Okay. 2007, 2009.

(09:46.958)

2007, 2009, if these people were smart, again, you’re putting money into a retirement account, you can’t access it, you’re not supposed to touch it. Stock market drops precipitously over that period of time. You’re continuing to invest and put money away. 2007 to 2009 should have been the best years as far as accumulation is concerned, in regards to the ability to building wealth. And again, this is the Wall Street Journal.

and these reportals, they can’t understand

that the people that actually could have been really hurt had a more difficult time were the ones that said, Hey, you know what? want to retire in

Those are the ones that really hurt. If you were still working in 2007 to 2009, that was a pretty good time to be accumulating assets, would you agree?

(10:43.438)

Most important things for me right now, this is the interview with this person, place to live indoors, water and food. This lady has 3000 in retirement accounts and she’s thinking how she’s gonna provide for herself until she’s gonna drop dead, so she says. She says the birth dates of those in this generation, 70 million strong or one in five Americans cover a 19 year span stretching from the aftermath of World War II to 1964.

Older Americans, including young boomers with retirement accounts powered by a booming stock market remain a major force in the economy. Again, this is

This is the kind of, the article doesn’t make sense based upon a title. Those 55 and up control nearly 70 % of US household wealth. But they’re saying that age group includes older adults with little if any retirement funds socked away or only social security to lean on who are facing a golden years laden with risk.

(11:54.382)

Again, I don’t know what the authors of this article are asking for. Like I said earlier, you get out of bed in the morning, you get out of bed in the morning and you go to work every day, you’re living life risk. You don’t know what’s going to happen on any given day. We’re always dealing with risk.

I mean, you’re talking about a generation that controls 70 % of US household wealth. At the same time, there’s some that do not.

Well, what’s amazing about these stories is they never ever, and again, you always have compassion. You have compassion of people that are in difficult situations and granted, life, life can get difficult. Life can throw curve balls. There can be certain things that can happen to you. Yes, there can be health issues, a lot, many, many different things out there. I get all

And that’s what we have social safety nets for. But you know, the saying now, for millions of younger boomers who could live at least two more decades, a lost job or expensive medical problem could upend their stability while ramping up pressure on younger generations. When in the history of time has this not been

(13:22.988)

When in the history of history of man has these problems not has it not been the case? That’s always an issue. That’s why you save. That’s why you buy insurance. OK, there’s a great great Chris Rock stand up. He was talking about insurance. I don’t remember which one it was. You know, and he put it frankly, he said, you

Insurance is something you buy in case bad shit happens. That’s why you have insurance. You never ever, ever, ever want to use your insurance. I have health insurance. I hope I hope I never have to use my health insurance. I have car insurance. I hope I never have to use my car insurance. I have life insurance. At some point in time, we’re all going to use that. But again, you know, life insurance.

risk, kids move on, policy doesn’t need to be as, but you do a myriad of different things.

Now they’re saying here, they’re saying, you know, their mid -career years when earnings typically start to peak got upended by the 2007 to 2009 financial shock. Everyone got hit by that. But again, hits like that are enormous opportunities because you come out of them stronger.

if you are wise and you make good choices. Now they’re saying, younger boomers with traditional pensions had to shoulder more investment risk while saving for retirement. It’s not greater risk when you’re buying things on sale. Again, this is the fricking Wall Street

(15:10.67)

This is the Wall Street Journal. About a third of younger, one third of younger boomer households lacked retirement benefits beyond Social Security in 2022. Where are the older boomers? Same thing. Smaller amount. One quarter. We’re missing these retirement benefits.

(15:39.9)

Again, choices.

(15:44.856)

Choices, listen, we’ve all done it, okay? None of us are perfect human beings, okay? We’ve all made poor choices throughout our entire life. The key is when you wanna learn from the poor choices and bad decisions that you make and you want to move on and you want to grow from them and not make them again, not perpetually make them.

That there’s, I mean, you’re not saving at all throughout your entire

And here we go, we got the AARP, you know, they gotta step in. More of these young boomers are going to enter into retirement without the resources they need.

For many, making ends meet will likely mean having to work well into old age if they’re able, but they may also have to rely on younger family members as caregivers and for financial support. Okay, that’s what families are for. That’s the definition of a family, it is what it is. Okay, it is what it is. And again, that’s the reality, that’s why you have families, why families are important. Run into that situation, guess what? That’s what families do.

Large number of seniors in poverty could also increase reliance on Medicaid. Okay, we already know that that’s the case and that’s happening anyway. This woman that they’re interviewing here lost half of her $20 ,000 in her 401k during the financial shock of 2007 to

(17:22.764)

No, the market went down. It’s like it went down for everyone. And what she decided to do was to sell everything and then take the money out. Then on not only being down, selling at a low again, what investors do, they buy high and they sell low, sold everything in her account and then paid the penalty and withdrawed that.

10 ,000 which after the penalty it was obviously worth much less than that. Not a good choice.

(18:03.866)

Not a good idea. And I’m sorry, again, there are resources available. Okay, there are resources available that she could have done a little bit of homework. Again, it’s not that I don’t have compassion. It’s not that I feel sorry. I do, okay? But you could have done a little bit of homework on your own. You could have done a damn search about what not to do or spoken to

(18:35.022)

Recent study looking at the roughly 30 million young boomers who will turn 65 between this year and 2030 determined that just over half have no more than $250 ,000 in financial assets. These people have to rely on Social Security after burning through savings as a primary source of income in retirement. was never designed to be the sole source of income. But that’s again, for many people, that’s what it has.

come. It’s become. Again, there’s a growing here go growing disconnect between working and accumulating wealth. Younger boomers were caught in the transition away from pensions. No, they were not. No, no, that was happening well before then. And guess what? All you needed to

All you needed to do is to take that money and put it into a 401k and you could have bought an index fund for crying out loud and you would have had more money than you would have gotten from your pension. It’s peaceful. A lot of times it comes down to just personal responsibility.

It just, you have to, this is an important part of your life for crying out loud. It’s your money.

I’m thinking about the fable, the Aesop’s fable, the Ant and the Grasshopper, and I did. I remembered that.

(20:08.942)

wow, of 2002, this is before my son is born. Before my son was born, I wrote a story titled The Grasshopper and the classic version, you the ant works hard in the withering heat all summer long building his house and laying up supplies for the winter. The Grasshopper thinks he’s a fool and laughs and dances and plays a summer away. Come winter.

The ant is warm and well fed. The grasshopper has no food or shelter and dies out the cold. Well, again, this is 2002. I wrote a modern version. The ant works hard in the withering heat all summer long, building his house and laying up supplies so grasshopper thinks he’s a fool and laughs and dances and plays the summer away. Come winter.

The Shivering Grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others are cold and starving. All the networks show up to provide pictures of the Shivering Grasshopper next to a video of the ant in his comfortable home with a table filled with food. America and the world are stunned by the sharp contrast. How can that be? In a country with such wealth, this poor grasshopper is allowed to suffer so. Then you’ve got the representative of the National Association of Green Bugs.

shows up, again, I’m dating myself, on Nightline and charges the ant with green bias and makes the case that the grasshopper is the victim of 30 million years of greenism. Kermit the Frog appears on Oprah with the grasshopper and everybody cries when he sings, it’s not easy being green. The Clintons make a special guest appearance on the CBS Evening News to tell a concern, Dan, rather than that they would do anything they can for the grasshopper.

who has been denied the prosperity that he deserves by those who benefited unfairly during the Reagan summers. Or as Bill puts it, the temperatures of the 1980s. Again, dating myself. Richard Gephardt explains in an interview with Peter Jennings that the ant has gotten rich off the back of the grasshopper and calls for an immediate tax hike on the ant to make him pay his fair share. Okay, you younger people out there, and I know I a lot of younger people reading watches.

(22:28.238)

Fair share, this is 2002. Finally, the EEOC drafts the Economic Equity and Anti -Greenism Act. Retroactive to the beginning of the summer, the ant was fined for failing to hire a proportionate number of green bugs and having nothing left to pay his retroactive taxes. His home is confiscated by the government. Story ends, we see the grasshopper finishing up the last bits of the ant’s food while the government houses, he’s in.

which just happens to be the aunt’s old house as it crumbles around him. I can go on and on and on. And again, I’m not trying to be funny here, but there’s some truth, obviously, to this.

we all make choices in life. So I’m good. So I’m bad. How quickly we learn from them. Okay. There’s younger people out there listening to this program. You know what? You don’t, you do not want to make poor choices and you do want, do not want to be a bad steward of your money. You don’t, you don’t need, you don’t need to, you don’t need to be making a million dollars a year to become a millionaire. You

You know, you just need to be smart. You need to be prudent and you need to work your ass off. Watchdog on wallstreet .com.