Retirement preparedness of Baby Boomers

Alicia Munnell, writing in Smart Money, discusses the retirement preparedness of the Baby Boom generation.

The highlights:…while the boomers have been accumulating wealth at much the same pace as their parents, the world has changed in four important ways.

1) The prevalence of defined benefit pension plans has declined dramatically over the last 25 years.
2) Real interest rates have fallen significantly, so a given amount of wealth will now produce less retirement income.
3) Life expectancy has increased, so accumulated assets must support a longer period of retirement.
4) Health care costs have risen substantially and show signs of further increase, indicating a need for greater accumulation of retirement assets.

So, yeah, it’s somewhat discouraging to think that you will have to save even more since the onus of retirement has now been put entirely on your shoulders. It just points out the need to find a competent advisor early and get cracking. It might make a good resolution for the New Year.And this is why you really need to pay attention to your 401k . You can't afford to take big hits. Most of us have already taken 2-3 big hits over our lifetime

How bad were the market predictions?

These are the predictions of the "top" people at each firm on where the s&p would be at year end.

This is why I believe predictions are worthless. You have to have someone that knows what to do no matter what the market throws at you.

Is your investment professional right for you?

this is one part of an interview between Josh Brown and Lee munson-you can read it here:http://www.thereformedbroker.com/2011/12/21/the-return-of-lee-munson/

JB: Let's say I'm an investor, what's the number one sign I should look for to tell me whether or not the investment professional I'm working with is wrong or right for me? LM: Do you want an advisor that just farms things out to any wholesaler that provides steak dinners? Do you want an advisor that is old and outdated? What about a ‘nice guy’ that goes to your church? Screw all of this. The person in front of you needs to have some exposure to the actual process of running money. People who actually touch the stuff are not always the nicest guys in the room, you and me being a case in point.The bottom line: you have to find an advisor that sees you as the prime fit, not the other way around. Don’t hire someone that isn’t a specialist in what you are looking for. Both parties need to have a similar view or philosophy or the relationship will not work. You need an advisor that will succeed when you succeed, not when he suckers you into buying an expensive product.

Investor Sentiment during market cycles

So where are you in the cycle?

International trouble in your 401k

I've been harping on why I think you should be out of bond funds for quite some time now.
Here's something else for you to consider.
Do you have any clue how those international funds you're in have been doing?
Well let me clue you in...

On January 28, 2011 the
relative strength of EEM, which I use as a proxy for emerging market funds, went
negative against the S & P. EEM is the iShares MSCI Emerging Markets Index.

Since that time EEM is down 20.47% and VWO, which is the Vanguard MSCI Emerging Markets ETF, is down 19.45%.

The S & P during this same time period is down 3.23%

My point is that if you are not paying attention to your 401k and have money allocated to the
International sector, you are down around 20% in that part of your 401k just since January.

Doesn't it make sense to pay attention?

What I like to do with a sector like International, after having pulled my clients out back in January, is to have them start putting in their monthly contribution, which is a small
amount, into the International funds on their 401k platform.
That way, you are building up exposure to International on a small scale until the time comes to
redeploy money into that sector.

Reduced 401k exposure

Ok,the s&p hit 1230 today and we trimmed portfolios of around 25%.The s&p closed at 1236.47 so we'll see what happens.This is totally about capital preservation,my main indicator is still favoring stocks over moneymarket or bonds.The game plan for 401k's is to redeploy the money if we reverse back up,which at this point would be at 1260.If the relative strength changes to where moneymarket is favored we will move to total cash.

URGENT

An URGENT email was sent to subscribers on action that I wuld recommend for today.

If you didn't get it please email me

3rd bubble for your 401k?

You remember the dot com years where deep down you knew that aol wasn't worth $100 a share. And more recently you remember the financial crisis and deep down you knew that houses in your neighborhood were way overpriced. So you've seen 2 so called bubbles one in tech stocks and one in housing.

Do you remember what happened to your 401k during those bubbles?

So do you think you'd recognize another bubble when it comes along?

Well if the majority of your 401k is in bonds you could be moments away from another huge bubble.

Do you honestly think that interest rates are going to stay at zero forever?

Do you know what happens to the value of your bond funds if interest rates go up?

If you don't know the value goes down, as interest rates go up. So let's take it a step further, if interest rates are practically zero now they obviously can't go down much lower. So the value of your bonds has no where to go but down.

Are you savy enough to know when to get out of bonds? How savy were you during the last 2 bubbles?

More 401k advice on a 200 point down day

As per my last post i had some new clients that were totally out of the market put some money back in today. The dow was down 198 back below 12,000 and the s&p was down about 27 to 1234

So with these new people the plan is to at least hold this 25% until my main indicator which is a comparison of the relative strength of the s&p and money market turns to favoring moneymarket

With my other clients that are close to being fully invested the plan is to reduce their holdings by at least 25% if the s&p hits 1230 which could happen tomorrow.

This is how I manage a 401k. There is no tax consequence to moving the money around and the object is to grow my clients money and avoid the big downs.As I like to say smooth out the ride for them.

Any subscibers reading this need to be on the lookout for an URGENT email tomorrow in case the s&p hits 1230. Since I have started the subscription advice I won't post anything on here until next week sometime.

For informational purposes the s&p closed at 1238.16 back on 4/18/2001 approximately where it is today.So if you are a buy and hold type congrats, after 10 1/2 years your pretty much even

My 2 cents worth if your 401k is all in cash

I have advised a few new clients that have been totally out of the market that this is a good place to put at least 25% of their money back into a stock mutual fund. The s&p is at 1240.96 as I type this . They will be back in at the close so we'll see where the s&p closes.

401k advice

A lot of people either are afraid to ask for advice or just try to ignore the fact
that they need advice when it comes to their 401k
To help people make some kind of decision on whether they should be in stocks bonds
or cash I have started a generic recommendation service The cost is $50 per
month or if you pay for a year it's $500. There is a paypal button on the bottom of this blog.
When I say it's generic I mean I don't know your individual situation I don't know
what funds are available on your 401k platform. What I am recommending in this
format is something to at least give you a little guidance. If you go back and
read my blog posts. On 11/17 you will see where I recommended that you take defensive measures . I was recommending that you take some % out of your stock funds and temporarily put that money in moneymarket.
Than on 11/28 I recommended you redeploy it.
That's the kind of info I will email to you. I will also
send an email each week giving you a generic asset allocation for your 401k or IRA.
An example might be to have 80% in stocks 35% of that in small cap 35% in mid cap
and 10% in large cap the other 20% I would leave in moneymarket.
Since this is generic it is up to you to do with it as you feel comfortable
The real value is it will help when the market tanks like during the dot com years
or like the financial crisis years which we are sort of still in. You won't sit
there paralyzed not knowing what to do. You will get an URGENT email from me recommending you take some kind of action long before you suffer a 20% hit to your 401k.

Eating fish and Alzheimer's

http://www.rsna.org/Media/rsna/RSNA11_newsrelease_target.cfm?id=571

What a Market

What a crazy market.

My main indicator has been on a buy signal since Oct 21. My canary which is the s&p chart flashed danger when it broke down at 1220 and I took some money off the table. When the s&p chart turned back up at 1190 on August 28 I wrote that I was redeploying the money. And than yesterday we're up over 400 points. Now I know from talking to people about their 401k's and from the mutual fund weekly reports that there is a ton of money that has been pulled out of stocks and a ton of money that has gone into bonds(fixed income) The main problem is that the average investor doesn't trust their advisor because they've been screwed to many times in the past. And the average investor is pretty much clueless about what to do with their 401k So they are sitting in a bond fund or in moneymarket and will either miss the entire rally or finally get in right at the top and will swear never to invest again. Read my blog posts. I know the grammar sucks the spelling sucks the punctuation sucks but I think you'll see that I know what I'm talking about.