Day Of Reckoning

Day Of Reckoning

Interesting article - who knew?  What I find ridiculous is how 401K participants have to still pay fees even when their portfolio loses money!  For instance, if I'm part of a 401K plan through my employer and the plan loses 15% or more during the course of the year - why should I pay management fees for poor performance?  This just makes my losses greater when you add it all up.

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49% of Americans aren't saving for retirement - May. 10, 2012

Not that surprised about this topic....


49% of Americans aren't saving for retirement - May. 10, 2012

Investing vs. Cash flow - Just two quick thoughts of mine

I'm still bullish towards REITs (Real Estate Investment Trusts) - these are the best investments since sliced bread.  Where else can one get more than a 15% return on their money?  And pay minimal taxes?  Two REITs that I own are IVR (Invesco) and NLY (Annaly Capital Management).  This allows me to use my money and own a portion of commercial real estate.  

Given the volatility swings consistent in the stock market for the last 4 years - REITs have been a steady stream of income for most investors.  The stock doesn't fluctuate as much as other stocks, and they pay a consistent quarterly dividend that provides a residual income to its investors.  Although my REITs may not be as stable as my investments in utility companies, they still have a place in my overall portfolio.  And it generates a pretty good cash flow.

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Had a thought today - what if everyone stopped investing in their 401K?  What would be the outcome if the money we were saving for retirement was instead used to help pay off debts today...?  What if we used our money today to generate cash flow today?  

Would we be better off once we're in retirement?

I'm just thinking of all of the dangers of stashing away useful cash for tomorrow...instead of putting that cash to use today.  Here are some dangers to waiting until you're 70+ to retire off a 401K:

• Most people investing in their 401K will face increased taxes when it's time to utilize all of this money that has been saved over the years.  
• Most people 50+ are not on track to retire and have not saved enough in their 401K
• Adam Smith thought that saving money - similar to how a squirrel stashes away nuts, was ridiculous. Instead, it is better to have nuts (or cash) come to us every day for the rest of our lives.

My theory:

If we used our money today, that we normally and lemmingly send to our 401K plans, to instead pay off debts early, and build up our cash flow - we perhaps could be better off in the long run.  Why?  Because the government will eventually find a way to go after a person's 401K, IRA, 403B, Roth IRA, Pension, etc. sooner or later (got to pay off the multi-trillion dollar deficit somehow, right?).  

Maybe 401K's will be the first to be overly taxed first before they come after the investors with multi-levels of unearned income...after all, the rich stay rich don't they?

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Funny Money....Just two thoughts of mine...

My first thought:

Is it me or isn't it just strange that on February 16, 2007 the Dow Jones read 12,767.57 and the unemployment rate was 4.6% ?  Yet, today, February 17, 2012 - the Dow Jones reads 12,949.87 and the unemployment rate is 8.3%.....quite a puzzle huh?  How can we possibly have a Dow Jones this high when the unemployment rate is so high??  Compared to 5 years ago?  This is evidence of how much money has been "created" into our economy to keep us afloat via bailouts, stimulus, tax cuts, and some expansions of government.  But one must wonder, is this economy really sustainable under the creative financing measures called "quantitative easing"?  Or is this just another house of cards that Ben Bernanke is shuffling in the same manner that Alan Greenspan did?  And it's an election year - here in the USA and in several other countries around the world....the leaders are going to put on their best show of smoke and mirrors to give us a positive illusion of an economic upturn.  But I think after the elections have been decided - we might be in for a wake up call.

My second thought:

Everyone is talking about the Mortgage Meltdownand the harm it's doing to our economy.  But not many are focusing in on another pertinent issue - student loans.  The average student now graduates with approximately $25K in loans that has to be repaid and is not able to be relieved through bankruptcy.  However, with the unemployment rate being as high as it is - several students are underemployed or simply unemployed because they can't find the jobs that they studied for 4-6 years.  Companies simply aren't hiring like they used to.  America has more debt in the form of student loans than we do in credit cards!  This is a bubble waiting to explode.  What I do not understand is how the government is proposing to offer Student Loan Reform?  To make it easier for everyone to attend college?  Did we not learn our lesson from the Making Home Affordable Mortgage Act?  Where the government wanted to make it easier for everyone to purchase a home?  Well we see what happened when we tried to give everyone a home didn't we?  So now we're stepping into student loans?  I cry foul!  

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