I just read a column in the Australian newspaper where it says the Government is considering increasing the compulsory superannuation contribution to 12% or even 15%.

Nick Sherry Minister the “Super Minister” is not sold on the idea fully yet but I think he has it under consideration.

There are major problems with the current compulsory super system not least of which is the stated annual $860 Million paid to the wealth industry in fees just for taking 9% of our money by government decree. This in itself is criminal and makes a large dent in the end retirement amount over 40 or so years.

If the wealth managers lobbying hard in the corridors of Parliament House Canberra get their way and the compulsory contribution is increased to 15% that will increase their “take” of our kids annual contribution to $1.433 Billion. That is effectively a 40% pay rise for doing no more work. Does that seem fair to you?

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I emailed my financial planner in August of 2007 about my concerns for protecting my nest egg. Subsequent event show they were well-founded. Between the letter, this email and several other emails asking more and more questions to which I really didn’t get any answers I could rely on, I waited until the November 12th before asking for my money to be redeemed. I thought 3-4 months was enough time for them to satisfy my concerns. I really got nothing from them.

This Post is the last one I’ll do showing I was trying to get answers to my questions. But it could form the framework for others to use if you are not sure what to ask.

It is very important that you make sure your financial planner knows who you are whether you have your own retirement funds or are in a company fund. You need to establish contact and ask serious questions.

Greg Heiple of The Teeter Totter Principle has just released a new book call the BalanceZone I have been reviewing over the weekend.

My next post will be about it as I believe the BalanceZone is an evolutionary step from TTP to help us Baby Boomers manage our nest egg with or without the help of a financial planner. Read the rest of this entry »

Many Mutual Funds are now seeing their total funds being reduced dramatically by stock market losses and investor redemptions. In order to stop the redemptions Mutual Funds try to intimidate Baby Boomers not to do anything to protect their nest eggs in retirement.

I have taken some statements from the newspapers to make my points. Unfortunately most financial commentators think the same way and have a similar view on investing as the fund managers they write about. But rather than get into arguments with the writers I’d rather try and promote a different view. I want to win the war not just a battle.

Their liberal use of the phrase “Investors should not panic” without any qualification is probably one of the most flagrant ways they intimidate us. First of all if an investor uses a rational investment strategy and exercises stop losses when triggered to exit the market this is panicking by their definition. Even though this may be a well thought out strategy designed to minimise losses and a recognition that the market has proved your investment strategy wrong. There is no loss of face here because the investment didn’t work out. Just forget it and move on. Read the rest of this entry »

As I read more and more about the poor returns from the funds I also see more and more financial gurus rationalizing the losses on the funds and advising intelligent investors to hold on. Baby Boomers need to filter out some of these messages as they don’t apply to you.

It runs something like this. Investors have had 4 years of great returns so one bad year should not result in you taking you money out of the funds. (If you have lost much more than 10% on your risk-based assets like equity and property funds this is actually good advice I think - You’re stuck with your investments for now).

It implies that since the market has gone up in the long term it will soon recover and continue on in its merry way. They have no way of knowing this. Baby Boomers cannot rely on these sorts of statements when their retirement relies on the money they have saved in their nest egg.

It also implies that all fund contributors are investors. Baby Boomers are not investors any more once they have retired and are living off their nest egg. They are capital preservers first and foremost. If their funds make more than is needed to preserve capital that is a bonus. Chasing high returns is risky. The important thing is to avoid large losses because they will be too hard to recover from when taking a pension. Read the rest of this entry »

The Expo was well attended but many Baby Boomers were there to see the Winnebago campervans and visit the retirement village stands. I attended all the Financial Seminars which were not well attended at all.

The seminars ran all day. Here is a quick run-down of the ones I liked the best along with some comments by me.

Clearview Retirement Solutions

Here the key thing for me was the financial planners are paid a salary. That means no commissions before or after the sale. The presentation was very informative and covered much of the new legislation about retirement, super contributions and taxation and tax free withdrawal after 60.

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I don’t think the message is getting through to financial planners any more than it is getting through to bay boomers. That message is Baby Boomers have to observer and respect Rule #1 - Avoid Large Losses in Retirement.

Chasing high returns by having a high proportion of your money invested in equities (risk-based assets) makes no sense when you are in retirement and especially in this market. I’m talking here only about money set aside to be your nest egg. If you have done that and have surplus money then be my guest, try and make a killing in this market using the surplus money.

Remember it is not the fact that the market is down that is the problem. It is the size of the losses you incur and the time it takes to recover those losses that will affect you directly, especially when you are not adding to your nest egg but taking from it in the form of a pension.

Many Baby Boomers have realised this and are moving their money out of risk based assets into safe assets like bonds, term deposits and cash at the bank. This would seem the logical thing to do for the immediate future. Read the rest of this entry »

When selecting a mutual fund to invest in one of the considerations is its Management Expense Ratio or MER. This is presented to investors as a way to compare different funds but it has some serious flaws. A different measure called the Performance Cost Ratio is a better option for directly comparing different Funds.

Now I know many Baby Boomers are in Company Retirement Plans and are in a default balanced portfolio of funds. So probably have very little idea of what MER is or why it is important - or not. Other Baby Boomers will often allow their financial planner to select the funds they invest into and trust them to do the right thing.

In my own case I allowed my financial planner to do just this and didn’t even question what funds I was invested in never mind what the MER was. Read the rest of this entry »

I may not have got all Mutual Fund fees and charges but you should be horrified by the list of the ones I have found. The Mutual Fund industry has found many ways to part you from your money with their loads, fees, charges and hidden costs. They do this slowly with small percentages over time so you don’t notice. MER’s or Expense Ratios are for their great looking prospectus. But many fees and charges may not be included in the Expense Ratios. So you may have to hunt down or demand your financial planner make a full written disclosure on each fund you are invested in.

You should be alarmed by the figures in the table below. it is from the excellent site Retire Early Home Page by John P. Greaney. It clearly shows when you are accumulating a nest egg what effect fees have on the final amount of your nest egg after 40 years. As you can see fees of 3% result in your nest egg being less than 50% ($427,219) compared to fees of 0.02% ($968,249) after 40 years of saving. That money is paid to your financial planner over that 40 year period. Whether you are in the USA with an IRA or in Australia with a Superannuation Fund the fees take the same toll on your retirement nest egg.

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