In Support Of The Half-Birthday

I'm writing this entry on my half-birthday.  It's six months from my last birthday, and six months to my next birthday.  The question is, do half-birthdays mean anything?

I never used to think so.  Growing up with an August birth month, I never had a school day where others might have recognized even my regular birthday.  It was kind of a bummer when you were youngster, watching everybody else get attention on their birthday that you never got.

Things are a bit different now.  Back then no one celebrated half-birthdays in schools like some elementary classes do now, which is a very nice thing for us summer birthday people.

Also, as I've aged I've paid more attention to half-birthdays, at least my own.  We only have a certain number of trips around the sun, and nowadays I kind of like to mark the halfway point for some perspective on how things are going.

Also, there's at least one half-birthday that's somewhat consequential in America.  That's when a person reach age 59.5, which makes them eligible for penalty-free withdrawals from most retirement accounts.  It's not much, but for people thinking about retiring, it's something.

So let's give it up for the half-birthday.  Why celebrate only once in 365 days when it can be done twice?

We're Not All Experts

I've been working in the retirement / investment planning world for a long time now.  I don't recall anyone I've ever talked to about retirement, meaning hundreds of people, expressing much confidence in their retirement planning.  There are just too many variables, and too many programs like social security and Medicare they don't understand.

However, when it comes to talking to many of those same people about investing, there is not only confidence, but more recently overconfidence about how to do things.  Why is that?  Consider a few macro-reasons:

1) Thanks to American innovation and capitalism, the stock market goes up over long periods of time.  It also goes down, sometimes sharply, for short periods of time, but people eventually forget about that short-term pain.  So, over long periods of time, they see their money grow, and they assume this means they're great investors.  In fact, all they've really done is to stumble into one of the greatest passive investment strategies there is -- put money in stocks, and do nothing.  This works fine, until retirement, when you no longer want too much invested in stocks.

2) The proliferation of financial media outlets in the past two decades has given people many opportunities to be 'enlightened' by so-called investing experts.  Watch enough TV or read enough on the internet, and soon people are convinced that they too, are experts by simply following the unsolicited advice of these other so-called experts.  If anyone actually tracked their results, they'd be disappointed, but rarely does anyone track the performance of a media-expert.  Also, no one wants to be inconvenienced by the truth.

3) A perfect pandemic storm that includes the introduction of no-fee securities trading, a massive surge in technology stocks, and social media platforms and influencers.  Many in the new 'work-from anywhere'  crowd have only been able to do this investing thing for a short time, during a prolonged market upswing.  At this point, they think the stock market and their investments only go up.  Their confirmation bias will ultimately lead them into one of the inevitable sharp short-term market corrections.  Unlike others, this millennial-heavy group isn't likely to have the patience or discipline to keep from exiting their positions.

Investing doesn't have to be complicated, but it decidedly isn't a simple thing.  The only sure thing is, being overconfident in one's ability to do it will lead to a bad outcome.

Insurance = Bad Investment, Redux

I've covered this before:  Generally speaking, insurance is a bad investment.

Last week, I got into a prolonged, disagreeable phone conversation about a mutual client with what I consider to be the lowest form of 'financial advisor' on the planet:  A career life insurance agent.  Here's my open letter to him:

What gives you the right to call yourself a financial advisor?  You have one strategy -- convince everyone that their financial situation can be helped with some type of life insurance product, including (and especially) variable and indexed annuities.  Isn't it interesting that these these products generate big commission payments to you?  Never mind that your client pays well over 2% and probably closer to 3% of their 'invested' money every year in expenses to help pay those commissions, a fact you don't audibly disclose.  Never mind that you have little or no expertise in retirement, investment, or tax planning.  Never mind that you don't live by a fiduciary standard, you live by making your insurance company quotas.  You either don't know, or don't care, that not everybody needs life insurance.  In fact, you want people to believe that it's perfectly normal to buy enough life insurance to cover all the income they might make in the future -- a 'future value' approach that makes absolutely no sense, and profits nobody except you and your company.  You are a self-serving loser, and you suck.

This letter doesn't apply to every career insurance agent, just most of them.  As a certified financial planner, I do everything in my power not to be closely associated with them.  Actually, that's a financial strategy that would help everyone!

Another Iowa Taxpayer Boondoggle

[Below is the text of an as-yet-unpublished letter I sent to The Des Moines Register last week. I've had several letters to the editor printed over the years, but I haven't written any recently due to lack of time and lack of confidence that anyone even reads that section of the paper anymore. Regardless, this letter follows the theme of every other one I've written - wasting taxpayer money.]

Before becoming too content with the recent 'good news' that the IPERS pension plan is improving while nearly $5 billion underfunded, one needs to more closely consider a statement from the consulting actuary that's buried in The Register's December 3rd article.

The actuary noted that one reason the projected shortfall has been reduced is due to changes in actuarial assumptions on the plan's liabilities. In other words, an accounting maneuver has simply made it look as though the plan will not cost taxpayers as much as before.

Those few who understand traditional pension plan valuation know that actuarial assumptions are often too optimistic, especially in public sector plans. In the end, the true cost of the IPERS plan - actual benefits and expenses paid - will very likely be much greater than currently projected.

Unfortunately, taxpayers won't be able to change an actuarial assumption to reduce their liability.