‘Walking-Around Money’ (The ‘Baby-Boomer’ Bubble)

(Disclaimer:  As a recently retired financial services representative, I feel obligated to stress that the opinions; observations and factoids contained herein are the opinions of a private individual….not appointed with any vendor of financial services, and not offering said opinions and/or observations out of any motivation other than the sharing of personal experience with financial risk management)

Is your desired retirement date within the next ten years?

Do you measure “recovery” by the number of foreclosures on your street?

Wondering what will be in the next senate bill and what your senator will think of it when he or she does finally read it?

You are not alone.

As a “baby-boomer”, you have the privilege, (deserved or not) …of observing housing and banking ‘bubbles’  as a member of the largest population “bubble” in centuries.  Your sheer number poses an impending economic tsunami in the increasingly turbulent waters of the world economy.

What to do?   Unless you are ready to put in the hours necessary to “day-trade”, you need to speak with some sort of  “financial services representative”.

As unpleasant as this sounds, it is necessary.  Like your doctor; dentist, or attorney, you need someone to protect your ‘portfolio’ (such as it is) with preventative maintenance.

Let’s cover some groundwork:

1)  You must make the decision to act.  No one is going to take you by the hand and review your portfolio until you decide that it just might be prudent to review your risk tolerance; your time horizon for retirement; your desired lifestyle in retirement; and your legacy goals.  Social Security and Medicare are but supplements to your sustenance in your ‘golden’ years.  The ‘safety net’ afforded by these increasingly stretched government resources definitely cannot be regarded as the “hammock” of your long dreamed-of retirement.

2)  You must acquaint yourself with your ‘portfolio’.  In my practice; it was sobering indeed to note that, most people in fact are unfamiliar with their protection portfolio…..and therefore unclear as to what exactly they might have to work with toward retirement planning.  You need to speak with your human resources people at your job to cover a myriad of topics:

Life Insurance:  Is it convertible to your own coverage if you are terminated or leave the company?  Is your privately owned insurance enough to cover your mortgage; debts; education; and survivor needs of your family?

Disability Insurance:  If you are unable to work for other than a work-related injury or illness,  a)  what is the ‘waiting period’ before short-term disability coverage ‘kicks in”?…b)  What percentage of your average pay is paid? 60%?  (It is definitely not 100%)…c)  What duration of time does your fractional disability income last?…d)  What is the ‘waiting period’ ; amount and duration of  long-term disability coverage (if any).

Medical Coverage:  Know what is covered and what is not, and what the maximum payout is.

401K:  Know what amount the employer matches.  What funds are you in?  How is the performance compared to the overall market?  Does it match your risk tolerance?  Do you know what your risk tolerance is?

Budget/Savings:   Streamline your budget by comparing your income and your cash outflow.  As to outflow……categorize expenditures of income as ‘necessary’ versus ‘discretionary’… (many people are surprised to note that lots more cash than they realized was going to lottery tickets; premium cable channels; tobacco; unlimited cellphone allowances; etc.)

***Save enough cash to pay for at least 6 to 9 months of your monthly living expenses…  This ‘buffer’ is not only common sense and prudence, but it will convince your financial adviser you are committed to reviewing his/her advice.

Now, you can call an adviser for an appointment, or finally accede to allowing one to come over from among the half-dozen or so ‘cold’ calls you probably receive monthly, (which is due simply to demography… your membership in “the bubble”.)

Just as your doctor or lawyer was ‘new’ to you the first time you met, your financial adviser is ‘new’ .  From this writer’s experience, it may be helpful for you to realize that:

1)  The ‘good‘:   Licensing; continuing education; ethical standards; training; etc., are covered at both the state and federal governmental levels to an extent which can equal or exceed standards required of  physicians or attorneys.  You can quickly review the age; experience; license status and disciplinary record of any such representative before you even meet…..State departments of insurance; FINRA/SIPC , etc.,  all have websites which monitor these people down to a regular review of their traffic records; credit histories;  and the proper verbiage on their business cards.

2)  The ‘bad‘:  Since the Madoff debacle;  our learned representatives and senators have reacted with the ‘Frank-Todd’ Act; a plethora of new agencies and regulatory bodies; heightened continuing education requirements; and more rigorous oversight of everything a representative does, down to each and every e-mail sent or received.  The unfortunate result is that your financial representative or adviser has taken the ‘brunt’ of legislative reaction to the crimes of  ‘Bernie’ and the acquiescence of those who had regular and ample opportunity to expose his time-worn ‘Ponzi’ antics.  That this field has become more demanding is borne out by the depressing statistics…most new reps do not last more than 2 years.  And, those who are able to stay in the field due to their marketing prowess or their alacrity at appointment setting, simply cannot afford to deal with clients who are not business owners or professionals.  The regulatory environment, in its’ ‘knee-jerk’ reaction to the Madoff episode, has simply increased  both the cost of doing business for these ‘frontline ‘soldiers in the field, and increased the risk perceived by these ‘soldiers’ of regulatory discipline; fines; and penalties for  things so minute as the lack of  a proper disclaimer at the bottom of an e-mail.  (In my experience, these were updated as often as every two months.)

So, it is a committed individual you will be meeting with.  Just don’t be alarmed if he arrives looking like this:

So….If you can make the decision to act, and can actually talk with some general knowledge of what is actually in your portfolio, you will have done a service to yourself and your family simply by doing your job…..so the adviser can do his job.

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Walking With Foresight By Driving With Hindsight…(A Tutorial for Eliminating the ‘Blind-Spots” in Your Rear-View Mirrors)

Vanishing deductibles“….”accident forgiveness“….”customize your coverage“……Casualty insurance companies  woo you to call for a quote by suggesting you may be being taken advantage of by your current carrier.

And they have ample funding for these sixty-second “come-ons” because, like fools at the circus following the sign to catch a glimpse of P.T. Barnums’ ‘Egress’, we naturally believe that rates may be cheaper on the other side of the fence.  Never mind that:

a)  Rates for all companies are based on vast, common pools of casualty statistics, sliced and diced as to age; sex; credit rating; make/model of vehicle;                physical address; driving record and claim history.  “Actuarial tables’  are naturally more accurate with passing time as drivers and vehicles become more numerous.  As such, a “vanishing deductible”, for example, can only be offered via some adjustment to the overall average rates of all policy holders.

b)  None of these ‘features’ (gimmicks), however, make you a better driver….. or ultimately a safer risk to the insurer.   Like Vegas casino owners, they acknowledge that you will, like all others before you, suffer a casualty loss.  Their concern is to keep you in their ‘casino’.

The only prudent recourse, then,  is to actively reduce the risk that you pose to others (and to yourself) by actively managing your exposure to it.

Several months ago, I learned the value of such ‘active’ risk management when, upon deciding to change lanes to my left, I was alerted to a speeding texter whose concentration on his thumbs made him oblivious to my blinking directional lamp.  Had my drivers’ side rear view mirror not been properly adjusted,  my rates would have gone up by being at fault via an improper lane change, and the speeder would have suffered ‘textus interruptus’.

Proper adjustment of side rear view mirrors involve a ‘leap of faith’ in that it involves discarding long-held assumptions that may have been instilled in you by parents, or even high school driving instructors….

98% of people adjust their mirrors so that, seated behind the wheel, they can glance either way and note the entire side of their conveyance, from mirror to tail.  While this is helpful in backing out of ones’ driveway, it exposes all of us to risk of physical damage and injury.  It does this by widening the “blind-spot” on either side of your vehicle.  (“It wasn’t my fault, Officer……they were in my blind spot!”).

“Blind-spots” can be eliminated by:

1)  Accepting the actuarial fact that over 99% of your driving (unless you are a Hollywood stuntman) is in a forward gear rather than in reverse.

2)  Noting that, driving with your mirrors as they are probably adjusted right now, an overtaking vehicle to your left becomes invisible to you when it leaves the left side of your center rear-view mirror……it does not reappear until you can peripherally see it through your drivers’ side window as it draws abreast of you.   The ‘blackout’ period is that interval of time in which the overtaking vehicle is “in your blind-spot”.  Any impulse you have during this interval to change lanes, or even to swerve to avoid a stone in the roadway….gets you a ticket and an almost certain rate increase by your friendly insurer.

3)  Understanding that, because your side mirrors were adjusted so you can at all times admire the finish of the paint on each side of  your car, there exists two ‘black holes’ in your rearward vision which can be controlled only by you.

So….what to do?…

Park your posterior in the drivers’ seat and close the door.

1)  Adjust windshields’ rear-view mirror.

2)  Adjust drivers’ side rear-view mirror by leaning your head leftward against driver’s side window glass and adjust the mirror outward until you see just a   ‘sliver’ of the side of the car in the right border of the mirror.

3)  Now lean to the right so that your head is in the center of the cabin, directly over the center console, even with the center placement of the windshield mirror.  Adjust the passenger side rear-view mirror outward so that, from this center vantage point, only a ‘sliver of the side of the car is visible in the left-hand border of that mirror.

Now, a drive is in order.

On the road, the ‘texter’ about to overtake you on the left will never be out of your rearward view.  To test your new adjustment, note that:

-When the ‘texter’ leaves the view of your center rear-view mirror, he/she will now be in your driver’s side rear-view mirror.

-The instant the ‘texter’ leaves the drivers’-side mirror, he/she will be visible out your driver’s-side window in your peripheral vision.  (The same will be true for those passing/overtaking you on your right).

No “blackout” period…..No ‘blind-spot’…….No risk!!!!

Congratulate yourself for reducing the risk of property damage and/or personal injury to yourself and to your fellow man.

And, if , like me, you are lazy and use the mirrors to back out of your driveway, simply lean your head left or right to catch the respective ‘sliver’ of the side of your car.  And, on the road, you will find a greater level of comfort and confidence in lane changes or other maneuvers that may suddenly become necessary due to road hazards.

Having improved your hindsight, you are now able to concentrate on the uninformed ahead of you who would rather admire their wax-jobs than worry about your occupancy of their ‘blind-spots’.      Drive safely…..It’s a jungle out there!!!!