Wednesday, December 3, 2014

Filler, Fluff, and Drivel

A lot of our friends and family are recently retired, being Boomers, or are looking at it coming down the road.  It's best to be prepared for such a big life change, and being prepared starts with being accurately informed.  Woe to him who tries to reach such a state by reading, over time, dozens of articles in media such as magazines, the internet or from broadcasts.  What you will find is generalized to the point of uselessness and will only confuse you with reference to things as how to use short term bonds in your investment/retirement income strategy.  If you just have a pension and/or a 401(k)/IRA, and have not been playing the investment game actively with a broker, you don't even know if you have those or not, or how much or what kind. And the volumes of printed information your IRA provider sends to you will never give you those facts.  You're sent thousands of words and numbers and percentages of this and that, but no specific information that would be useful.  Ever.

You do need to know some very important terms and figures in order to proceed that you will never get from the popular media, because once you have those you can use the internet to educate yourself.  And you must, because ignorance in general or an ill-informed mis-step in particular can cost you big time.  An example is called for here -- the one which spurred this post. 

Most people know you must begin to take money out of your plan, in a "Required Minimum Distribution," as it's called, beginning at age 70 1/2, whether you need to or not.  That is because the purpose of an IRA is to provide income during your retirement, after all, and not to be a permanently tax-deferred savings account to pass down to your heirs.  I have always wondered what that amount would be and the rules about how to comply, so I've waded through countless articles trying to find out in advance.  It's been like wading around in a vat of marshmallow fluff.  It took until a few days ago for one writer to slip and actually mention the specific term which would allow me to search for the answer:  it's the "IRS Multiplier."  With that little gem, I found the instructions and the chart (on which explains, as Clarissa did, everything.   And on one concise page.  Note to Vanguard (and the rest):  you can do this, too.  It looks like you must have a reason not to let us amateurs in on How Things Work.  All the writers say to consult your tax advisor or financial planner. You might as well be advised to stick your hand in the crocodile's maw.

Lost in trying to understand how to use two types of depreciation and/or expensing when preparing my tax return due to having a rental property, I once ignored my own advice and best instincts and consulted a tax advisor.  That genius missed my two biggest deductions and I had to redo it and submit an amended return the next year after ruminating a while over the large amount that was, uncharacteristically, owed.  If there's information out there, in plain English, about how to properly figure depreciation yourself, I sure could not find it.

Many retirees are urged by those "advisors" and "planners" to keep or get a mortgage and put the amount that would have paid it off into investments -- often annuities -- instead.  Articles in the media do this all the time also.  They call such a move capturing "opportunity cost," which sounds impressive, but it's a terrible idea, and really just a device to generate fees.

And would Grandma lead you astray?  I'm talking about the single worst source for financial and real estate guidance:  AARP.  I have no idea why we're members, except that we must need more junk mail pushing their insurance, cell phones and Rascal electric scooters.  Those 10% discounts on some things like bus tours or bad chain motels must have been the reason for giving in to their long campaign to sign us up.  AAA has those, and more we can actually use locally, along with actual services like towing (since we're avid collectors of nails in our tires, we've used it several times.  And if you actually follow any of the advice in their publications, you're being played for an idiot.

The financial world is like a casino.  No clocks, no windows, a layout like a rat maze, and no indication how to find an exit that doesn't dump you in the trash bin area.  Getting out with your money in your pocket is not the desired outcome for you, dear consumer, in either world.  Real estate ads for new developments sell the sizzle while being short in the specifics; in all the advertising you won't find figures and facts they would prefer you don't know until it is time to sign those papers.  I tried to find out what the HOA fee is for a new village style development outside Mechanicsburg, PA, called Walden (oddly, there's no pond) just to see if that information was accessible.  Guess what: that number is nowhere to be found.  I would be more interested in doing business with people who were up front about the essentials, if I were in the market for their product, but that is not how things are done.  You must enter the selling zone to find out more.  Smiling faces of models and puffy white clouds aplenty in the ads and brochures, though.

What if people were well educated about finance, housing and even the best choices in education itself, during their student years?  Or the popular media became a reliable source of real-world guidance? Wouldn't big and small business welcome rational, informed customers who weren't clueless deluded suckers?

What's with all the laughter?


1 comment:

  1. Do you believe everything that you read or hear or watch?