Seeking Alpha

Dennis Miller's  Instablog

Dennis Miller
Send Message
Dennis Miller is the author of “Retirement Reboot”, a book chronicling his own journey to save his retirement in a low yield, turbulent investing environment. He works with some of the country’s top investment managers, authors and analysts to tackle the financial challenges faced by today’s... More
My blog:
  • The Illusion Of Safe Investing 0 comments
    Aug 13, 2013 2:19 PM

    Retirees are often more concerned with the return of their money than the return on their money. It's understandable; after our peak earning years have passed financial safety becomes our primary concern since the opportunity to earn back investment losses is essentially over.

    My high school graduating class celebrated its 50th reunion in 2008. Since then I've noticed more and more friends losing their spouses, many after fifty or so years of marriage. As expected, the widows club is growing at a faster pace than the widowers group. Biology and the plain fact that women often marry men a few years older than they are mean that's unlikely to change.

    It is hard enough to lose your spouse, but when the more financially savvy partner passes away, whether it's the husband or wife, stress on the survivor compounds quickly. Widows and widowers often feel helpless and vulnerable when forced to handle tasks their spouse had usually managed.

    A recently widowed friend mentioned to my wife that her banker had called to say that one of her CDs was maturing and wanted instructions about what to do. The friend rolled it into another five-year CD because her banker said it was safe. After all, CDs are FDIC-insured, and she didn't want to lose her money. In addition, he reassured her it was a very good, competitive rate. Not knowing what to do, she asked one of her children for advice and was told the same thing: a CD is a smart and safe option.

    Come on folks, what would you expect her banker to say? "Our interest rates are in the toilet, they do not keep up with inflation, and if you were my mom I would tell you to take your money elsewhere," isn't likely to keep him in a job.

    Instead, he did what any banker would do. He pointed out two true facts and assured the new widow she would not lose her money. But notice his lie of omission; while the rate on five-year CDs at his bank may have been very competitive, it's unlikely it was higher than 1.6% or so. That rate won't even keep up with inflation, which is the easiest way to lose buying power.

    At the start of the year, we took a totally unscientific inflation survey of readers of my regular weekly column. The results caused a bit of mild controversy, which I don't want to dwell on today. Suffice to say, 98.4% of those polled believed the government is underreporting the rate of inflation with the Consumer Price Index. At the end of the day, however, what really matters for retirees is how quickly their personal cost of living is increasing.

    So if rolling over your low-interest CDs isn't the answer, what is?

    Unfortunately, there is no one-step solution. To start, both spouses need to know how to manage money. Most couples won't pass away on the same day, so both partners need to be on top their finances. That includes knowing the basics - account locations and balances - and knowing how to research a stock, balance a portfolio, minimize fees, and create a steady stream of income. It includes knowing when and where to ask for help and whom you can trust for forthright answers.

    Managing your retirement portfolio isn't a one-time event. It shouldn't run your life, but it does mean setting aside time and resources for research, planning, and education. A balanced portfolio will include a multitude of investments, including cash equal to about one-third of the portfolio's total value. The rest should be diversified across various sectors and may include dividend-paying stocks and exchange-traded funds (ETFs). Including precious metals and investments not denominated in the US dollar can also help hedge against inflation. There can be a lot to learn if one spouse has never so much as balanced a checkbook, so the sooner couples start working together the better.

    There is no one way to go about it, no one-size-fits-all investment. But there is one investing maxim that holds true for all retirees: safety means more than the return of our money; it means the return of our buying power. Low-yield investments like CDs, or basically any investment that locks in money without keeping pace with inflation, do not meet that basic standard of safety.

    On Thursday, September 5th I'm bringing together leading experts in how we can get the most out of our retirement finances. Guest speakers include John Stossel, formerly with ABC's 20/20 and now with Fox Business News, David Walker, former Comptroller General of the United States under Presidents Clinton and Bush, and several others. Click here to find out more and to register (We expect response to be overwhelming, so you should go ahead and reserve your spot now.)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Back To Dennis Miller's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.