A Surefire Way to Spend your Retirement in the Poor House

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After speaking to various older coworkers and family members, I’ve come to the realization that it’s not only the younger generations that need a crash course in personal finance — many of the ones closing in on retirement need a refresher course too.

The red flag that signifies this need for a major overhaul of financial planning and education is the fact that people seem genuinely surprised when they’re five years away from retirement and lose 50% of their 401(k)’s because they kept all their holdings in stocks.    I think most people would roll their eyes if someone took $100,000 of their savings and gambled it away in a casino, yet we’re shocked and appalled when a 60-year old loses half of their retirement savings because of having a majority of  stock holdings.  This isn’t bad luck — this is bad planning.

Take for instance my father.  At 62 years old, he’s getting close to the day when he’ll be able to kick back, relax, and maybe play a little golf.  Or will he?  In October, he lost a good chunk of his 401(k) after the stock market plummeted.  Although he had amassed a nice pile of retirement cash and had a strong company match, he neglected to check on where his holdings laid — which turned out to be completely in stocks — and lost half of his savings.  I love my father dearly — he’s an intelligent man, but that clearly wasn’t the smartest of moves.

Over the past 25 years, companies have become varied and (somewhat) generous with their retirement plans, offering a myriad of pensions and 401(k)’s.  And for the most part, I think that’s great.  But someone has to be responsible for educating people in what these plans actually do and what risks are inherent in each of them.  As a country that emphasizes the importance of wealth building,  we are seriously falling short in our ability to educate our citizens on how to prepare themselves for the financial future.

This lack of personal financial knowledge when it comes to the risks and uncertainties of investing, is going to keep hurting uninformed individuals unless we start focusing on financial education.  I think we need to start with our high school and college students and not stop until work our way up to Gen Xers and Baby Boomers who haven’t yet clearly mapped out their future finances.

Stock markets do nose dive, like we recently witnessed, and until we start educating the masses about their investments, the people that lack a basic financial know-how will be the ones who come out of it marred and flat broke.

The Hidden Costs of Investing

We hope you guys are taking full advantage of the bearish stock market right now and buying up bargain stocks for your portfolio. But since stock purchasing can be a confusing maze of percentages and fees, we’ve decided to throw together a list of typical investment fees to be aware of and — in some cases — to avoid. Read more