Check out this video "The Retirement Gamble" by Martin Smith at Frontline.
This is a very thought provoking and well done documentary by Martin Smith. It touches upon many areas that are at the foundation of taking control of your own retirement and understanding how to invest for your safe and secure financial future while not being misled by big, bloated Wall Street Firms whose seemingly only interest is to gouge you with fees (like the ones seen in the documentary with company representatives stumbling over their words poorly trying to defend what they do).
This is a very thought provoking and well done documentary by Martin Smith. It touches upon many areas that are at the foundation of taking control of your own retirement and understanding how to invest for your safe and secure financial future while not being misled by big, bloated Wall Street Firms whose seemingly only interest is to gouge you with fees (like the ones seen in the documentary with company representatives stumbling over their words poorly trying to defend what they do).
You're in charge of your retirement, so how do ensure you have a safe and secure financial future
- Live below your means by spending less than you take in.
- Don’t get into credit card debt, pay your credit cards down to zero every single month.
- Keep track of your expenses and know how much of your money is going out the door every month and to where it is going, then build up a savings account with 3 to 6 months’ worth of your living expenses (more if you have dependents).
- Consistently invest in a portfolio of low-cost mutual funds that give you exposure to big, medium, and small sized companies from the US and foreign markets (Vanguard and Dimensional Fund Advisors are two great and investment firms offering low-cost products). To learn more about the benefits of a diversified portfolio click here.
- As the documentary points out FEES MATTER! It’s simple math, the less you pay in fees the more money you make. And why do you invest? To make money. Keep your fees as low as possible, to read more about how fees impact you, click here and here.
- Embrace the miracle of compounding. When you have several decades until retirement properly investing $50 a month and leaving your investments there to compound over those several decades will get you a very nice nest egg come retirement. Saving and investing is a snowball effect - doing a little bit early on doesn't seem like much, but it will continue grow and you will see the benefits when the snowball keeps rolling. If you're in your 20s I recommend reading this and if you're in your 30s I recommend reading this.
Additional thoughts about this video's content
Yes, fiduciary duty should be extremely important to you. When you hire someone to plan for your financial future it only makes sense that s/he should legally and ethically have your best interests in mind at all times. Pensinger Financial is proud and honored to be in the small minority (15% as the video points out) who have fiduciary duty to their clients.
Don't be afraid to ask your investment advisor "How are you compensated?" Compensation should be as straight forward and as transparent as possible. Your advisor should be able to tell you within 30 seconds how s/he gets paid. We gladly lay it out very simple for our clients and our prospective clients - this is how we are compensated, and nothing more.
You should be investing with a Registered Investment Advisor firm whose advisors are licensed as Investment Advisor Representatives for the simple reason that it is much safer for you and you won't be getting sold. Ask your advisor "Are you licensed to advise or are you licensed to sell?" Hopefully you get an answer like this "I am licensed to _____." That way you know if your advisor is advising you or selling you; if you don't get a straight forward answer, then be very cautious with whom you are dealing.
With regards to 401(k)s there are “so many choices it’s hard to understand.” That’s right, fortunately I understand the choices and provide people with in-depth and detailed 401(k) and 403(b) reviews. In my reviews I assemble a specific portfolio that helps you to understand what you are investing in, why you are doing it, and how much it is costing you. I do this for $250, but mention this blog and I’ll knock $100 off the price. I have done reviews for people where by switching them to less expensive investments what they save on fees more than pays for what I charged them to do the review. As the documentary points out saving on fees now can mean having tens or even hundreds of thousands more dollars come retirement time.
“Fund names tell you nothing.” A good rule of thumb is to look for the word “index” in a fund’s title. This doesn’t guarantee you a low-cost fund, but it does mean you’re in an index fund instead of an actively managed fund. This typically means your costs will be lower, because…FEES MATTER! Consider how the documentary offered this opinion: “the role of actively managed funds in the marketplace is to make fees off of investors.” By definition actively managed funds are designed to generate returns for their investors by picking stocks that beat the market, whereas index funds mimic the returns of the market. Actively managed funds try to beat index funds, but at a significantly higher cost than their counterpart index funds, and the higher costs means less return for you. Over time we’ve seen actively managed funds return about the same as index funds, but the investor gets less of that return in his pocket because of the higher fees he’s paid out to be in that fund.
Sadly, there is a lot of misinformation out there and a lot of bad practices as well. Just recently Edward Jones was fined $20 million dollars for overcharging their clients. That shouldn't happen, but part of the reason that happens is because Edward Jones and similar firms (like JP Morgan Chase in the documentary) are licensed to sell you products and are held to the "suitability standard" of investment advice instead of being licensed to advise you and being held to a fiduciary duty.
There are firms out there that help their clients invest the right way, they do it at a low-cost (because it saves you money and therefore makes you more money), they put your interests ahead of theirs at all times (this is fiduciary duty), and they don't see you a revenue generator, rather they see you as individual or family who wants to be led to a safe and secure retirement. I'm very proud to say, and stand by the fact that Pensinger Financial is one of those firms.
- Live below your means by spending less than you take in.
- Don’t get into credit card debt, pay your credit cards down to zero every single month.
- Keep track of your expenses and know how much of your money is going out the door every month and to where it is going, then build up a savings account with 3 to 6 months’ worth of your living expenses (more if you have dependents).
- Consistently invest in a portfolio of low-cost mutual funds that give you exposure to big, medium, and small sized companies from the US and foreign markets (Vanguard and Dimensional Fund Advisors are two great and investment firms offering low-cost products). To learn more about the benefits of a diversified portfolio click here.
- As the documentary points out FEES MATTER! It’s simple math, the less you pay in fees the more money you make. And why do you invest? To make money. Keep your fees as low as possible, to read more about how fees impact you, click here and here.
- Embrace the miracle of compounding. When you have several decades until retirement properly investing $50 a month and leaving your investments there to compound over those several decades will get you a very nice nest egg come retirement. Saving and investing is a snowball effect - doing a little bit early on doesn't seem like much, but it will continue grow and you will see the benefits when the snowball keeps rolling. If you're in your 20s I recommend reading this and if you're in your 30s I recommend reading this.
Additional thoughts about this video's content
Yes, fiduciary duty should be extremely important to you. When you hire someone to plan for your financial future it only makes sense that s/he should legally and ethically have your best interests in mind at all times. Pensinger Financial is proud and honored to be in the small minority (15% as the video points out) who have fiduciary duty to their clients.
Don't be afraid to ask your investment advisor "How are you compensated?" Compensation should be as straight forward and as transparent as possible. Your advisor should be able to tell you within 30 seconds how s/he gets paid. We gladly lay it out very simple for our clients and our prospective clients - this is how we are compensated, and nothing more.
You should be investing with a Registered Investment Advisor firm whose advisors are licensed as Investment Advisor Representatives for the simple reason that it is much safer for you and you won't be getting sold. Ask your advisor "Are you licensed to advise or are you licensed to sell?" Hopefully you get an answer like this "I am licensed to _____." That way you know if your advisor is advising you or selling you; if you don't get a straight forward answer, then be very cautious with whom you are dealing.
With regards to 401(k)s there are “so many choices it’s hard to understand.” That’s right, fortunately I understand the choices and provide people with in-depth and detailed 401(k) and 403(b) reviews. In my reviews I assemble a specific portfolio that helps you to understand what you are investing in, why you are doing it, and how much it is costing you. I do this for $250, but mention this blog and I’ll knock $100 off the price. I have done reviews for people where by switching them to less expensive investments what they save on fees more than pays for what I charged them to do the review. As the documentary points out saving on fees now can mean having tens or even hundreds of thousands more dollars come retirement time.
“Fund names tell you nothing.” A good rule of thumb is to look for the word “index” in a fund’s title. This doesn’t guarantee you a low-cost fund, but it does mean you’re in an index fund instead of an actively managed fund. This typically means your costs will be lower, because…FEES MATTER! Consider how the documentary offered this opinion: “the role of actively managed funds in the marketplace is to make fees off of investors.” By definition actively managed funds are designed to generate returns for their investors by picking stocks that beat the market, whereas index funds mimic the returns of the market. Actively managed funds try to beat index funds, but at a significantly higher cost than their counterpart index funds, and the higher costs means less return for you. Over time we’ve seen actively managed funds return about the same as index funds, but the investor gets less of that return in his pocket because of the higher fees he’s paid out to be in that fund.
Sadly, there is a lot of misinformation out there and a lot of bad practices as well. Just recently Edward Jones was fined $20 million dollars for overcharging their clients. That shouldn't happen, but part of the reason that happens is because Edward Jones and similar firms (like JP Morgan Chase in the documentary) are licensed to sell you products and are held to the "suitability standard" of investment advice instead of being licensed to advise you and being held to a fiduciary duty.
There are firms out there that help their clients invest the right way, they do it at a low-cost (because it saves you money and therefore makes you more money), they put your interests ahead of theirs at all times (this is fiduciary duty), and they don't see you a revenue generator, rather they see you as individual or family who wants to be led to a safe and secure retirement. I'm very proud to say, and stand by the fact that Pensinger Financial is one of those firms.
