Retirement Planning

Just finished the short book,

  How to Retire With Enough Money by Teresa Ghilarducci.

Ms. Ghilarducci is a heavyweight in the world of retirement planning and the overall concern with the looming retirement crisis in the U.S.

So I was surprised to come away disappointed. The book is mainly directed towards promoting her plan which is basically a hybrid of Social Security - take money out of paychecks and have required employer contributions  all invested by professional money managers.

She admits she is no fan of 401(k)s and IRAs. This in spite of some examples in her book whereby they have done well for investors.

My beef is that like so many other instances a government solution is offered in lieu of people taking personal responsibility. Here's the nitty gritty: we expect to reach our mid 60s some day and we know (unless we've been living under a proverbial rock) that Social Security alone will not provide a sufficient income for a comfortable retirement.

So, we can go over some arithmetic in the crazy exercise of trying to pin down how much needs to be saved to reach a so-called magic number.

Forget that. Know that you need to save and the more you save the happier your 65 year old self will be with you. So, look at your 401(k). If it has low cost index funds and especially low cost retirement date funds you're done. Have 10% deducted from your paycheck into these funds.

If you don't have a 401(k) you're not toast like so many commentators suggest. You can open up an IRA and contribute up to $6,000/year. Where? I like Schwab but there are many other places as well such as Vanguard, Fidelity etc. All offer low cost funds that you can invest in yourself or they may offer low cost products whereby they handle all the investing. You just set it up so that a deduction is made from your paycheck on a regular basis.

But don't just take it from me. Here's what Warren Buffett recently said "All you have to do is just buy a cross-section of America and then never listen to people like me or read the papers or do anything subsequently".

So again, this isn't rocket science. And, admittedly, there are some nuances. For example, legally there are some differences between IRAs and 401(k) regarding creditor rights. If you aren't paying alimony payments, are a reckless driver or get in fist fights with your next door neighbor you might want to avoid the IRA.  Ms. Ghilarducci emphasizes this in her book.

I know that a lot of what I have covered glosses over some points that most people may not know, For example, if you open up an IRA with a broker you need to know what a ticker symbol is, how to calculate how many shares you can buy etc. All of this is trivial. I offer one hour sessions at $160 that covers all the basics but you can cover other advisors as well that will do this with you,