Boomers, Markets & Money

A Down-to-Earth Discussion of Financial and Lifestyle Information for Baby Boomers

What is Your Legacy?

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I enjoyed an AAII presentation given by Robert Powell, a well-known writer and editor on retirement topics. Or as he calls it “The most depressing job in America.”

He gave a lot of useful information on the usual retirement themes. But one point that stood out for me was the importance of passing on your values and the lessons you learned to your family.

A Young Woman

A Young Woman

Here are links to two articles he wrote on the subject that I think you will find interesting:

For this post, I’ve included some photos of a scrapbook my mother-in-law, Augusta, put together decades ago. (Click on a photo to see a slideshow.)  I enjoyed hearing the stories associated with the treasures in the collection. It helped me understand some of her experiences and those of her peers.

Below is a transcript of the some brief remarks I made at my father-in-law’s celebration of life service. This was my attempt to pass along some of his life experiences and values to his grandchildren. There were a lot of lessons to be learned from the way he worked his way through college in the Great Depression, and medical school. And as soon as he finished his internship, he was off to serve in World War II as a battalion surgeon on Okinawa Island. I hope you find it interesting.

Joseph J. Lambiase, M.D. Celebration of Life

Like many of you today, I can tell you many stories that illustrate the kindness, empathy, love, and humor of my father-in-law, but I figured you would hear enough of those today.

What I want to share is a very short tale, of a young man who pulled himself up by the proverbial bootstraps. Joe never bragged about what he did but I found his stories of the past so interesting that I would often ask him about his experiences. His life and values, like the rest of his generation, were colored by the struggles of the Great Depression where he learned to work as a teenager and give his wages to his mother to help the family.

I remember I once asked him how he decided to become a doctor and he told me, “My mother told me to be a doctor.” I thought that was kind of funny since you don’t hear of many young men who listen to their mothers. So, the first step to becoming a doctor was to go to college. He went to Brown University. One important reason he went there was that he could walk there because affording carfare was out of the question. He worked during the summers to afford tuition. When he ran out of money, he’d take a semester off until he could scrape together tuition money. The challenges didn’t stop him from graduating with honors.

I found his stories of his medical school training in Washington, DC the most fascinating. To cover room and board during this time, he worked through the night at the hospital every other night after doing his regular duties during the day. He said, “That covered room and board, but if I needed cash for something, I’d sell my blood.” He had a pretty, young sweetheart in Rhode Island for whom he bought a string of pearls by selling his blood.

I remember his stories of being sent out as a medical student into the apartments of poverty-stricken women of Washington, DC to delivery babies while rats scurried across the floor. He told of the streetwise nuns who worked in the emergency rooms “who really knew their stuff.” The sweltering heat of Washington DC summers nights led to many sleepless nights, where he would walk to the river in a futile attempt to find respite. He never complained or bragged about these experiences but just stated them matter of fact manner when he was asked.

Later, he and his sweetheart Augusta married, and together, with old-fashioned values of hard work, frugality, sacrifice, and love contributed in countless ways to the well-being of their family. In the interest of time, I won’t go into detail. But I just want to say how utterly I was affected by kindnesses shown to me by both Joseph and Augusta and how grateful I am that they are the grandparents of my children.

As Malcolm Gladwell stated in the book Outliers, we are who we are, in large part, because of the sacrifices of those who went before us. We never accomplish anything truly on our own. It is easy to overlook a quiet, modest person like my father-in-law, who went about doing the difficult but not very glamorous work of day-to-day life. But all the good, long-lasting things in life are a result of the sacrifices of ordinary people who choose to live an ethical life. As we take time to honor the life of Joseph John Lambiase today, I would like to conclude by asking his grandchildren to follow in his footsteps and live lives dedicated to hard work, sacrifice, humor, dedication to family, and love.

This gallery contains 1 photo.


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Summary of “Boomers and the Great Recession: Struggling to Recover”

AARP also recommends that older workers keep up-to-date with the latest job skills.

AARP recommends that unemployed workers receive government help with job training. (Click to Enlarge)

Here is a summary of points in a 131-page report prepared by the AARP Public Policy Institute on Baby Boomers experiences during the Great Recession and soon after.

Study surveys found:

  • 47% of Baby Boomers who were unemployed gave job loss as the reason for not working.

What the unemployed perceived as significant job search barriers:

  • The struggling economy.
  • One-third to one-half felt that age discrimination was a factor.

Feelings of the recently reemployed:

Fewer than 50% felt they were on target for their financial goals.

Reasons why they felt this way:

  • Pay at the new job was lower and savings were depleted.
  • Debt levels were too high.
  • They were hired as temps.

How Boomers surveyed coped with financial setbacks

  • Most commonly, they cut expenses.
  • They withdrew money from savings accounts.
  • Some postponed medical or dental care or stopped taking medications.

Researchers wrote “More than half of the Boomers surveyed stated that they were less confident of having enough money for a comfortable retirement than they had been before the recession started.”

Biggest worries for Baby Boomers:

  •  Cost of health care and long-term care.
  •  Inflation
  • Unable to leave an adequate inheritance
  • Unable to live in their own home.
  • The surviving spouse might not be able to maintain their way of life.

A selection of the report’s public policy recommendations:

  • Encourage older workers to take advantage of employer training programs. AARP advises employees who are close to retirement to continue to participate in training. They may be forced to stay in the workforce longer than planned or to re-enter the workforce after retirement.
  • Offer financial assistance to cover training costs for unemployed workers. Government data on job skills needed and areas of demand needs to be timely, accurate and easy to obtain.
  • Increase monitoring and enforcement of age-discrimination laws.
  • Let older workers know about government and private programs that offer advice on entrepreneurship. Information should be available about the suitability of considering this as a primary or secondary source of income.
  • “As traditional pensions decline, Social Security remains the only major stable retirement income source. It is critical that this program be protected.”

Source:

SURVEY METHODOLOGY  (Click to Enlarge)

SURVEY METHODOLOGY (Click to Enlarge)

“Boomers and The Great Recession” By the Public Policy team at AARP Public Policy Institute. September 2012. You can find a ink to the PDF of the 131 page report in this article.

Related Posts on Boomers, Markets & Money

Resources for Baby Boomer Entrepreneurs

Summary and Link to Interesting Video on Recent Retirement Study

Review of PBS Frontline’s “The Retirement Gamble”

Resources to Help You Decide When to Take Social Security

A Critical Step in Preparing for Retirement

Save Money and Enrich Your Life at the Library


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When to Trust Your Intuition or Gut Instinct When Making Financial Decisions

How Feelings Can Affect Investment Choices

Feelings and Investment Decisions (Click to Enlarge)

Traditionally, being rational and objective was highly prized in the investment decision process. Emotions were to be controlled and repressed for fear of making bad decisions. However, early studies that combine psychology, the biology of the brain, and investment risk are beginning to challenge that view.

I recently read an article in CFA Institute’s magazine called “Sentimental Journey” that reviewed recent research. Cynthia Harrington referred to research conducted by Columbia Business School professor Michel Pham and associates published in the Journal of Consumer Research. They researched how people’s trust in their own feelings affected decision-making. The exhibit below gives a quick summary of the research.

Why It Is Important to Know How Trust in Feelings Affects Decisions

The researches are trying to figure out if gut instincts improve the accuracy of predictions in decisions in uncertain events with high stakes. This could help decisions made by professionals in many varied areas such as the Pentagon, Wall Street, weather prediction, to name a few.

Methods

Should We Pay Attention to Our Feelings When Making Decisions?

Summary of “The Emotional Oracle Effect” (Click to Enlarge)

People were divided into two groups:

  • People who had high trust in their feelings
  • People who had low trust in their feelings

Subjects were asked to make decisions in the eight studies mentioned in the Exhibit to the right. (Click to Enlarge.)

Conclusions on Whether Feelings Help us Make Better Decisions

People who had high trust in their feelings were more accurate in their predictions in all the studies.

However, this effect only occurs when people have sufficient background knowledge in the decision area.

People who trusted their feelings didn’t make rash decisions. They still took the time to carefully consider the information.

Why Feelings Can Help Us Make Better Decisions

While a more analytical approach with just a few inputs might seem more logical, it could be leaving out key information that your feelings are hinting at. Study authors speculate that when a person trusts their feelings about a subject they have experience with, they access “a vast amount of information that people learn consciously and unconsciously about their environment.” Professor Pham believes that feelings “…tap into all we know about our environment.”

Knowing how and when to trust our feelings when we are choosing an investment can help us improve our choices.

Sources

“Sentimental Journey” by Cynthia Harrington. CFA Magazine, March/April 2013.

“Feeling the Future: The Emotional Oracle Effect” by Michel Tuan Pham, Leonard Lee, Andrew T. Stephen

Related Posts

“How To Handle Emotions When Making Investment Decisions”


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Resources to Help You Decide When to Take Social Security

At What Age Should I Take Social Security Benefits?

At What Age Should I Take Social Security Benefits?

Are you confused about what age you should begin taking Social Security? I came across an article that clearly and efficiently summarizes information about the pros and cons of taking Social Security benefits at various ages. At the end of the post, I include links for other resources.

The article is “When Should You Take Social Security?” by Rande Spiegelman, CPA, CFP at the Schwab Center for Financial Research. It is a bit long but I like the article because:

  • There’s a handy table letting you know “When can you get your full Social Security benefit?” by birth year. Retirees born in 1937 or earlier received full benefits at age sixty-five. If you were born in 1938 or later, the retirement age to receive full benefits gradually increases. People born in 1960 or later must wait until age 67 to receive full benefits.
  • It gives specific figures on how much you will be penalized by the amount of months you retire before your “full retirement” age. It also let you know how much your monthly benefit will increase by the amount of time you delay in taking the check later. You don’t receive additional benefit for delaying past age 70. That shouldn’t be a problem for most people because over two-thirds take their Social Security benefit early.
  • The article gives a list of factors to consider when making this decision.

Here are a couple of other links:

  • U.S. Social Security Administrations benefit estimator
  • Kiplinger’s has an index of articles on Social Security topics. “10 Things You Must Know About Social Security” covers a lot of the same information as the article above as well as some additional tips. Another short article that you might find helpful is “How to Check Your Social Security Statement Online.


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How The Heck Do I Invest My Money?

The crazy, bizarre events of the last few years have had me scratching my head as I tried to figure out how to invest our money.

The older we get, the scarier these decisions become because we have less time to make up for our mistakes. And who has the time to keep up with each new crisis and every speech politicians make? Not to mention the volatility caused by high-frequency trading.

Barry Ritholtz’s article “Keep it simple, avoid the pitfalls” has good suggestions for simplifying investment decisions. These strategies help tame some of the emotions that are involved with investing money.

Ways to Avoid Portfolio Mistakes

Avoid Investment Pitfalls

  •  Use passive investing versus active investing. In other words, instead of investing in individual stocks or hiring an active manager, use index ETFs (Exchange-Traded Funds). My post “Resources to Help Boomers Decide if ETFs are Right for Their Portfolios” details a list of reasons investors choose to use these securities. It suggests articles that give basic information about Exchange-Traded Funds and helpful websites.
  •   Diversify across asset classes and keep expenses low. You hear this advice all the time but it is important—and hard to follow. We all want to pile into to the latest hot investment as the price is rising.
  • The suggestions of dollar cost averaging and “be mindful of valuation” seem to be contradictory but can be used in combination. I try to make myself add a little bit of exposure to an asset class that is underweighted in my portfolio as markets are dropping. I don’t try to buy at the very bottom since who knows when that will happen. I just figure, if a sector is down substantially, on average, I should be OK in five to seven years.
reduce stress of portfolio decisions

Tame Emotions

  • A few suggestions are particularly important for beginning investors:

Avoid venture capital and private equity

“Most IPOs are a sucker play.”

“Avoid new financial products”

Really, do you think the big money is going to give us individual investors a good deal?! These complex products are meant to humble, confuse, and separate us from our money. Warren Buffet is right when he repeatedly says that he only buys what he understands.

I recommend Ritholtz’s easy-to-read article. “Keep it simple, avoid the pitfalls” The Big Picture


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Articles for Baby Boomers Around the Web

Here are a few articles that I found interesting and helpful.

1. Good news for Boomers—we are becoming more content. The New York Times Article “Why Am I Getting Mellower?” Psychology professor Jerrold Lee Shapiro said that as we age we tend to become more accepting of ourselves and more empathetic to others. The New York Times Jan. 17, 2013

2. Baby Boomers are looking for ways to adjust to retirement by working with retirement coaches and senior life advisors. This article talks about the emotions that people experience as they navigate through this stage. One person interviewed earned his doctorate at the age of 60 and is enjoying teaching college at 63. “Baby Boomers Reinvent Retirement to Fit Their Needs” Pressconnects.com January 15, 2013

3. Forbes blog post “7 Steps for Baby Boomers to Take NOW” lists changes that this generation should be making in their financial behavior. Erik Carter suggests that parents put their own needs first. An American Financial survey found that 93% of parents provide financial support to their adult children. He also suggests inputting an early retirement date in your retirement calculator in case you are forced to retire earlier than you planned. Forbes.com Jan. 9, 2013

4. I thought this article did a great job collecting articles about retirement, financial preparedness, and the elderly. Unfortunately, some of the numbers are quite sobering in “35 Shocking Statistics That Should Scare Any Baby Boomer?” For example, number 35 is “A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.” ETF Daily News January 18, 2013

5. A Blast From The Past: “Jane Pauley to Host Baby Boomer TV Specials”. I remember watching Jane Pauley when I was stuck in the house when my oldest was a newborn. She’s teaming up with AARP to produce two programs on the Baby Boom generation –a documentary and a public forum. Hollywood Reporter by Eric Jan. 17, 2013