Wikinvest Wire

Investors have learned few lessons

Monday, November 16, 2009

For the weekend edition of the newspaper, the folks at the Wall Street Journal put together an interesting quiz called Have You Learned Your Lessons? based on a recent report that included surveys of those planning for or already in retirement.

It's now available online in the public area and it provides a valuable insight into how little has really changed over the last year despite all the talk of lessons having been learned. The quiz is also a fair test of your own knowledge on this subject, though I wouldn't get too hung up on your personal tally of correct/incorrect answers since it's really not important that 43 percent, not 53 percent, of households aged 65 to 74 carry mortgage debt.

The point is that it's way too high and, unless, somehow, policy makers can inflate another stock market bubble and another housing bubble, financial planning will be increasingly difficult for most individuals who aspire to a life of leisure in the years ahead.

Anyway, here are the questions and answers that, in my view, were most disconcerting:
IMAGE While that may not be so bad when considering that some of these people have pensions, those ranks will continue to dwindle every year until only gubment workers have a guaranteed income for the rest of their lives.

Unfortunately, it gets much worse regarding how individuals handle their nest eggs.

While many save too little, those same individuals probably don't realize that the odds are not in their favor for making up for their savings shortfall by working longer.
IMAGE This next one is just plain sad when you think about it, particularly when you consider the case of individuals who have followed the conventional investing "wisdom" regarding asset allocation (heavy on U.S. stocks) and have been in their prime earning years over the last ten years, a period when U.S. stocks have risen no higher than where they were in the late 1990s.
IMAGE And, of course, many people continue to think that they can make up for not having saved enough by taking on more risk. I wonder how people would answer the question below today, after the events of the last year.
IMAGE There are other categories - health, saving and spending, social security, looking ahead - but the answers above, found under the "nest egg" tab, were most troubling to me.

Perhaps others might find the final question under the "looking ahead" tab even more troubling, "What's the single best cure for a battered nest egg?"

The answer?

Working longer (see question #2 above).

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6 comments:

Anonymous said...

That accursed central bank discouraged people from saving, and now they are doomed. The central bank is the enemy. Bring the troops back home from overseas, and have them protect us from the real enemy (central bank).

Stop printing. Stop inflation. Let retirees keep what little they have managed to save.

Anonymous said...

I hate to dog baby boomers, but it is the ME generation after all. They lived it up and fully expect to be taken care of. It's the baby boomers that have ruined this country IMO, as they are the ones in charge of the government, wall street, banks, GM, etc. They outsourced everything to China and India for short term live in the now profits and have ruined the country as a result.

I'm generalizing of course, but it's true.

As a gen-x, I'm screwed. Here is how it will play out:

1) Government will print so much money the dollar is destroyed over the next 3 years.
2) A new currency will emerge (world currency?) all backed by the baby boomers that are in power.
3) The current working age will be taxed like crazy to take care of the elderly.

The ME generation retires and enjoys a poorer but less stressful retirement.

The working class is totally screwed.

Tim said...

Twice in the last six months, I've been asked how old I am before someone a few years or so younger than me went off on a rant about how they're getting screwed by the baby boomers.

According to Wikipedia, I'm technically a Gen Xer, though, a relatively old one.

Anonymous said...

First off, if I take my money out of stock, where am I going to put it, that has inflation protection?

Secondly, if I make it to 65, statistically, I should make it to 85. So, my money should stay in stock to grow.

But, Is the market overvalued? Will the market grow? What will grow better then stock?

Anonymous said...

Sorry about my baby boomer rant. Every couple a months I lose it and get so pissed at our "leaders" and how these hippies have totally screwed everything up.

Sorry, I know all older people aren't to blame. Just the ones with power.

Anonymous said...

Anon at 5:41, you have stated the catch 22 situation US savers are in. Because of constant inflation, everyone went into stocks and homes as inflation hedges. Both went to bubble valuations, which made them very bad investments.

Stock market dividends are simply not large enough to support the entire population. The dividend yield was down to 1% in Y2K, which almost no one could live on.

The average person simply cannot save for their retirement in an environment of constant inflation, and after tax interest rates held below the rate of inflation. The central bank has prevented an entire generation of Americans from saving for their retirement. Its policies have led to disaster.

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