Вы находитесь на странице: 1из 20

E xtra Lettuce

E xtra Lettuce
Manage Your 401k
Flipping Burgers Later

Now to Avoid

BUTTONWOOD CENTER FOR INVESTOR EDUCATION

GeorGe L. MorGan

Copyright 2013 George L. Morgan. All rights reserved. No part of this publication may be reproduced in any form, or by any means, electronic or mechanical, including photocopying, recording, or any information browsing, storage, or retrieval system, without permission in writing from the publisher.

ISBN: 978-0-9882305-1-4 LCCN: 2012947456

Design and Production by Concierge Marketing Inc.

Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

To Dr. David Hoffman A great man and a great friend

Contents
Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 2 3 4 5 6 7 8 9 10 Would you like fries with your burger? . . . . . . . . . . . . . . . . . . . . . . . 7 In the drive-through lane of life, seventy is the new fifty . . . . . . . 13 Pay at the first window, please . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Do you want a double or triple cheeseburger? . . . . . . . . . . . . . . . . 25 Can I take your order? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Your best choices on the value menu . . . . . . . . . . . . . . . . . . . . . . . . 49 Ketchup or salt? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 What comes with that combo meal? . . . . . . . . . . . . . . . . . . . . . . . . 67 Small, medium, or large? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Super-size me. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Read More . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

A Special Acknowledgment

is the Administrative Assistant for the Department of Finance at the University of Nebraska, Omaha. You may not know Lous, but she influenced this book more than you (and she) may know. Lous is a very positive person and extremely helpful in everything that I do. To me, Lous is the face of the 78 million people who are responsible for making the decisions as to how to invest their retirement funds. While I was writing this book I was often guided by wondering if Lous would understand my explanations. Thank you, Lous. I asked her to write a message for readers, and here it is: I have been working for the finance department at the University for over ten years. I know that I dont do as good a job as I could working with my retirement fund. George tells me that Im not the only one. But there are many people out there who are like me. Maybe you too. Sometimes when I get my statement, I dont open it. Sometimes I open the statement and look at it, but I dont know what it means. A couple of times I have

I would like to say a special thanks to Lous Thomas. Lous

EXTRA LETTUCE

gotten together with the mutual fund people who administer our retirement account at the University. I met with a young lady one time, and when I was done speaking with her, I really didnt understand much of what she had said. I suspect you may be feeling the same frustration. I know that George has real-world experience, and I am optimistic that his advice in this book can help me do a better job managing (and understanding) my retirement account. Lous is no different from any other hard-working American who socks money away in anticipation of her retirement, hoping there will be enough there so she can live comfortably after her worklife. Dont be disappointed that you failed to make the right decisions about your retirement. Dont worry whether youll have enough money. And dont fret that you dont understand your mutual fund statements or index fund investments. I promise that you, like Lous, will be smarter and will be able to ask all the right questions about your retirement funds after you read this book.

Foreword

than thirty five years. We first met as graduate students at the Purdue University Krannert Graduate School of Management. Both George and I were studying and teaching in the economics department there. We became reacquainted about five years later when I moved to Nebraska. George had already left the academic world and had become a very successful financial advisor/broker. I had taken an academic position at the University of Nebraska. We met fairly frequently and often discussed the academic and the real world in the financial services industry. We continue those discussions even now and they have helped me appreciate the importance of financial literacy education. I have utilized that appreciation to expand our Department efforts in the teaching of Personal Finance to University Students and to provide financial literacy programs to the local community. Financial Economists stress two key concepts in the teaching of basic finance the time value of money (compounding) and diversification. Most of what we do in the profession revolves around those concepts. This book does an excellent job of relating those concepts to personal investment decisions. Market movements follow a seemingly random process making it

My association with George Morgan goes back more

EXTRA LETTUCE

extremely difficult to consistently pick winners. To best prepare for retirement, one therefore needs to be in the market over the long run and hold a portfolio that will track the market over the long term. Georges book provides excellent advice on choosing not only your investments, but also the method by which you choose to invest (e.g. discount vs. full service brokerage and active vs. passive fund managers). For most of us, the two biggest financial decisions we will make in our lives are the purchase of a home and the choosing of a retirement investment strategy. This book provides the essence of good investing. Follow the investment advice in this book and you will have great insight into choosing a retirement investment decision that is right for you. Read and enjoy. Gordon Karels Chair, Finance Department Nebraska Bankers Association College Professor of Banking University of Nebraska - Lincoln

Preface

retirement years? Maybe youre nearing the magic age of sixty-five and think Social Security will be all you need. Maybe youre starting your first job and cant even go there about retirement when your first priority is making your rent payment. Or maybe youre stuck in mid-career wondering how the heck youll ever pay your mortgage off, send your kids through college, and save for your retirement all at the same time. You should care how your money is invested because what I write about in this book will have an emotional impact on you and the direction of your future. As you read through each chapter, you will see a caption that says Why do you care? The point is that Im trying to answer why the investment and saving concepts I write about apply to you and why you should care. Now. Not later. You will also run across a number of definitions. The world of investment has its own language. Consider this your Rosetta Stone for learning a new language. Im trying to present the terms used in investing in a way that a complete novice could understand. I hope the definitions are

Why do you care how your money is invested for your

EXTRA LETTUCE

simple enough that youll be able to appreciate some of the basic issues involved in the investment processrather than leave it to others who may not have your best interests in mind (only their pockets). Youll be able to have a conversation with a broker or investor starting at a much higher level if you go into that negotiation with a stronger understanding of the language. In the back of the book youll find a listing of some of the books that will give you a background on this world and some you might turn to next in your search for further wisdom. Most important, it is critical that you understand that the approach I am presenting in this book is not just mine alone. There is also a major body of research to support my views, and these techniques are also being taught in college classrooms across the country. I know, because I am one of those professors. Please join me in the classroom on the following pages.

Would you like fries with your burger?


I have nothing against retirees flipping burgers. By the time you will have reached your golden years, you and the millions of Baby Boomers following you into retirement understand customer service and the value of a friendly smile and prompt, efficient assistance. But do you want to be flipping burgers when your feet are aching, your back is screaming in pain, and you just want to drop a fishing line in the lake with your grandson? There may be readers of this book in the ranks of the Social Security set who are being hired by fast food chains. Good for you, I wish you well. The purpose of this book is to make sure that when you reach retirement years, you can choose whether or not you want to be taking orders off the value menu and handing out shakes and friesor whether you must do that because your retirement savings isnt enough to actually live on. The tools you will learn here can help you do what you want toand not because you need the money and no one else will hire you. Currently, 87 percent of the American workforce does not have a pension to provide for their retirement years. A pension

EXTRA LETTUCE

is a retirement plan that is set up, run and administered by an employer. They are called defined benefit plans because the amount of money you receive as an employee when you retire is set decades before your actual retirement date. Pension holders have no ability to grow or decrease the funds that they will have at retirement. Most of the remaining pension plans are associated with unionized public service workers such as police, fire fighters, and school teachers. The majority of these plans are connected to state and local governments. At the federal level, the only significant pension left is for the military. It currently faces major modification. In the private sector, pensions are almost nonexistent. The largest of which is the United Auto Workers employed at General Motors. It too went through major modification during the recent auto industry bailout. A major issue currently facing pensions in our post-recession economy is the ability of the employer to fund them. During employees working years, employers are required to make regular contributions to the plan in order to ensure that the money will be there when they retire. These funds are then invested. The decline in the stock market in 2008 to 2010 put many of these plans in an underfunded position. The current slow growth economic conditions have added further stress to these programs. If the employer, public or private, lacks the money to pay the people when they retire, employees have no recourse. By that time employees are probably unable to find new jobs. Thus the people who are on pensions are at the mercy of their employer to be fiscally responsible in order for them to retire. What most people have, if theyve worked for the right companies or discovered an astute investment advisor along
8

WOULD YOU LIKE FRIES WITH YOUR BURGER?

the way, is a program where, during their working years, they contribute a portion of their wages to a retirement savings account. The amount of money they save and their ability to grow the dollars they contribute will determine how much money they will have in their retirement accounts, which, in turn, determines how they will live in their retirement years. Retirement accounts are called 401(k)s or IRAs or 403(b)s or TIAA-CREF (a teachers annuity plan). If you have one or more of these, Ill bet you dont even look at the monthly or quarterly statements. And if you do, I suspect you dont understand what you are reading. Most retirement savings programs require that the owner of the account (thats you) manage the account. Your employer is not going to manage it for you. Most participants make these investment choices with little help or training. Then they simply file those statements away in a folder and drag them out at tax time and dump them on the desk of a tax preparer. During my thirty-five years as a stockbroker, I ran across many people whose savings suffered because they lacked the small amount of training required to make informed selections. I also ran across a significant number who put forth the effort to make better decisions. This educated group was much better prepared at retirement than the first. This book is not about fancy ways to make a killing in the stock market. I will show you that it is possible to grow your retirement savings in a reasonable and simple way. It wont make you a billionaire, but it might make you comfortable. The two most important requirements you need in order to successfully manage your retirement savings accounts are motivation and discipline. This book will show you why this approach works and teach the things you need to know to make your money work for you.
9

EXTRA LETTUCE

This book is for people of all ages and those in all stages of their retirement life cycle. Dont think that just because you are already retired or close to retirement that it is too late to make any changes that would matter. You can. The closer you get to retirement, the more it matters. If you are young, time will cover your mistakes. The closer you are to retirement, the less room you have for error. Investing is not a one-size-fits-all activity. Some of you will embrace the program presented here, and others will reject it. That is fine. It doesnt matter if you accept my approach or reject it, but by reading this book you will have a better understanding of how todays electronic markets operate. I think that is a valuable asset. You work hard for your money, and with just a bit of your time and effort you can make your money work hard for you. The process does not require a degree in finance or the special skills of a close relationship with a hot-shot broker. All it takes is a bit of effort and a desire to spend your golden years in control of your own destiny instead of working for the Golden Arches. If you are already retired, you still want to have your dollars working hard for you. Why do you care? You want to do something with your golden years other than flipping burgers.

10

WOULD YOU LIKE FRIES WITH YOUR BURGER?

11

Вам также может понравиться