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Old 07-05-2021, 03:28 PM   #21
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It is sad how people can be taken advantage of, when they should know better based on their intelligence. I think some professionals may be blinded by their own expertise to the point they believe specialized financial advisor is needed. Of course the FA folks are more than happy to let people believe that personal finance is a complex thing you can't do on your own.
In general personal finance knowledge is very low. At all income levels.
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Old 07-05-2021, 03:50 PM   #22
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That's been my experience too. Obviously there are exceptions, but doctors are notorious for being oblivious to personal finance.
I seem to remember we had a doctor/surgeon who was an active member of this board for a few years, who had saved a lot, but was very risk averse. All of his money was in very safe low-yielding investments. He never seemed to quite grasp the idea that inflation was going to do a number on his savings, but was happy with that, as the price paid for not having to deal with volatility. It also seemed likely that he would be working for many years to come, and would have the opportunity to save even more. IIRC, he had already saved a fairly substantial sum.

I'm fine with people being invested solely in very safe low-yielding investments, as long as they are aware of what will happen to the spending power of their stash over time.

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Some people are convinced that managing their investments is too hard.
Isn't that the oddest thing? I think most of us, when we were kids, thought that "grown-ups" were actually grown-up. Then, on becoming older, we noticed that a lot of adults seemed to behave in much the same way as children. It took me much longer to realize that many otherwise functional and mature adults, have minimal control over their financial lives. That was an eye-opener for me.

I guess it just comes down to the fact that we all have abilities in different areas. Still, I wish I could get through to some folk, how easy managing your own retirement finances can be.
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Old 07-05-2021, 03:50 PM   #23
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For many years I was held accountable and managed million dollar budgets. My compensation and further going up the food chain was based on exceeding expectations and managing under budget. I used this type of mindset in disciplined diversified long term investing. A number of my peers were incredible in their work and their ability to add much value to MegaCorp. When it came to managing and investing their personal net worth, some had no clue how to do it and entrusted this to others.
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Old 07-05-2021, 04:01 PM   #24
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Some people are convinced that managing their investments is too hard. My sister falls in this group. She and I are both at Schwab, she has chosen the managed portfolio solution... I DIY. She pays 0.3% AUM. Which isn't bad. We've talked about it and she likes that she knows she won't panic and sell since there is sometimes in charge if her investments. The fees are low enough to make this a good solution for her.

Lots of my former co-workers (engineers) had high fee advisors because they were convinced it was too hard to invest. I preached the lazy portfolio mantra to them and got blank stares. These are people who understood complex math systems...

Same with other financial stuff. 529s... Blank stares. Expense ratios of funds in the 401k? Blank stares. The idea that pulling cash out in a refi *and* rolling in the refi fees increases the debt, even if you have a lower payment... Puzzled looks.
I think it is the concept that one can't imagine that one can do as well as a professional. Was not really possible many years ago.
For example, one can watch youtube all you want, but can't take out an appendix like a doctor. The same thought process is incorrectly applied to investing.
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Old 07-05-2021, 04:10 PM   #25
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Just another example of at the very least, more personal finance classes should be taught at least at the high schools.
I'm sure I'm the outlier here but in 1st grade a lady from the local bank came by and had us open a savings account (likely illegal now...forcing kids to deal with one bank); she also came by each week to collect our nickels to add to our account. (Hi Miss McMahon!)

In 6th grade we were taught how to balance a checkbook. In 7th grade we were taught about compound interest.

In high school we had some guy come in every month or so from an investment house and explain the basics of the stock market (I must have been asleep a lot; witness my questions on this forum!), how to read a balance sheet, inflation, the differences between bonds and stocks etc. We even had an investment club where we played with fake money/investments.

Of course this was a private school.
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Old 07-05-2021, 04:18 PM   #26
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And then there's just overall financial clueless-ness.

My SIL who's husband makes an easy 7 figures a year and lives in a 3.5MM house.

One day we were all chatting tangentially about financial differences and she said: "Well, you know, someone working in a grocery store could afford to live in my neighborhood".

We sat there with our mouths open for a few seconds and then said: "No, no they couldn't...you'r house is worth over 3 million dollars; your property taxes are more than they make in three years". She said: "Don't be silly. Of course they could! Anybody can afford to live here; we're nothing special" She meant it.

Marie Antoinette I suppose.
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Old 07-05-2021, 04:18 PM   #27
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I'm sure I'm the outlier here but in 1st grade a lady from the local bank came by and had us open a savings account (likely illegal now...forcing kids to deal with one bank); she also came by each week to collect our nickels to add to our account. (Hi Miss McMahon!)

In 6th grade we were taught how to balance a checkbook. In 7th grade we were taught about compound interest.

In high school we had some guy come in every month or so from an investment house and explain the basics of the stock market (I must have been asleep a lot; witness my questions on this forum!), how to read a balance sheet, inflation, the differences between bonds and stocks etc. We even had an investment club where we played with fake money/investments.

Of course this was a private school.
It does sound like more of an outlier, but that would be a good teaching.
BTW - I also went to a private school, but was not taught this background.
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Old 07-05-2021, 04:40 PM   #28
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Last night, we had dinner with a friend, whose father was a Goldman Sachs bond trader in Manhattan for 32 years. She grew up with limousines and even helicopters on demand. I know that her privileged upbringing causes less sympathy but she is a hard-working attorney and fully responsible person, whom we love as an amazingly good friend. We always assumed our friend would inherit many millions someday, and she might have assumed that, too. It turns out, she learned last week that her father was essentially wiped out through a margin call last year when the Covid recession struck. Beyond that, she doesn’t know how he was invested. He’s developed depression and other maladies and his remaining assets are being spent down so that he can go on Medicaid! We were shocked and saddened by her story.

This was in the same week that my 81 y.o. DF, thankfully, reached out to me before liquidating his brokerage account with Bankers Life to buy some exotic whole life policy that his Bankers Life agent was trying to pimp him. In that process, I discovered this agent has my dad invested 100% in a single high fee growth tech stock mutual fund. Apparently, this agent works the modest-income retirement community my DF lives in. As gently as I could, I explained the risks of this portfolio and he agreed to ask his agent if Bankers Life carries target date or retirement income funds. Sickening.

My dad is an engineer who has worked his entire life, and even continues part time employment at 81. He is good with numbers but could never be bothered to read a basic book on personal finance. He does seem to have avoided debt, thankfully, and he owns his little condo outright. He once had an IRA, which he liquidated 30 years ago to buy a cabin, which is now long gone.

Sadly, no matter how I slice the numbers he’s finally provided me, he’s looking at a 50% lifestyle reduction once he finally stops working. I’m just slack-jawed by these two examples of financial irresponsibility. Serenity Prayer time, I guess.


So very sorry to hear all of that. As an engineer myself, I can relate. It is not an intelligence thing. It is a lack of planning thing. I did not come from a home where saving and investing was stressed. I am so very grateful when I was 29 a good friend woke me up. And that was all it took for me. Just needed to pay a bit of attention to it. When my portfolio reached two commas, I called to tell him how much he had helped me.
We should start a bill in Congress to make financial literacy (and retirement planning) mandatory to graduate high school. There is not reason this is any less important than reading or math… and in some ways even more important…
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Old 07-05-2021, 04:53 PM   #29
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Originally Posted by rodi View Post
Some people are convinced that managing their investments is too hard.
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Originally Posted by Major Tom View Post
Isn't that the oddest thing? I think most of us, when we were kids, thought that "grown-ups" were actually grown-up. Then, on becoming older, we noticed that a lot of adults seemed to behave in much the same way as children. It took me much longer to realize that many otherwise functional and mature adults, have minimal control over their financial lives. That was an eye-opener for me.

I guess it just comes down to the fact that we all have abilities in different areas. Still, I wish I could get through to some folk, how easy managing your own retirement finances can be.
I can admit that I thought successful investing was beyond my ability in my early 20’s, and I’m extremely comfortable with numbers, economics, etc. Retail brokers go to great lengths to convince investors they can’t do it for themselves even today, and active traders make it look “too hard” as well. If I hadn’t read Peter Lynch, then Jack Bogle, Dr Bernstein and others like them early in my investment education I probably wouldn’t have figured it out. I was with a full on retail broker from 1987 until 1991, it took me 4 years to understand investing didn’t have to be rocket surgery. For those without an analytic/numbers background I’m sure it looks bewildering…
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Old 07-05-2021, 05:00 PM   #30
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Another reason why I took over managing my parents investments since 2018, as they are 91 and 88 y.o.
Good for you!

I have helped a couple of older relatives by explaining how AUM fees of 2% is real money that amounted to thousands per year they could be spending on themselves, and still own the same funds.

I've noticed some insurance agents will HAPPILY sell an 85 yr old man, an annuity that starts paying out in 10 years !! Talk about optimistic at best.

There are lots of folks hungry to prey on old people and get their money. It's scary.
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Old 07-05-2021, 05:10 PM   #31
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... Serenity Prayer time, I guess.
"...Trusting that He will make all things right
if I surrender to His will...."

Good luck with that...
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Old 07-05-2021, 05:23 PM   #32
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We've seen various friends and family blow through millions of dollar windfalls (inheritance, life insurance and stock options). That is partly why I'm still frugal and invest conservatively.
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Old 07-05-2021, 05:26 PM   #33
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"...Trusting that He will make all things right
if I surrender to His will...."

Good luck with that...
I think it's pretty obvious the OP was going for the line about accepting the things one cannot change, etc...
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Old 07-05-2021, 05:49 PM   #34
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This was in the same week that my 81 y.o. DF, thankfully, reached out to me before liquidating his brokerage account with Bankers Life to buy some exotic whole life policy that his Bankers Life agent was trying to pimp him.
Now I am curious. How much Life Insurance was the salesman trying to get him to buy, and how much does that amount of (whole life) Life Insurance cost per year to maintain for someone who is 81 years old?

No way can it be cheap or cost effective for your father, and I have a hard time believing the insurance actuaries would allow his heirs to come out ahead on this bet.
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Old 07-05-2021, 06:00 PM   #35
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So very sorry to hear all of that. As an engineer myself, I can relate. It is not an intelligence thing. It is a lack of planning thing. I did not come from a home where saving and investing was stressed. I am so very grateful when I was 29 a good friend woke me up. And that was all it took for me. Just needed to pay a bit of attention to it. When my portfolio reached two commas, I called to tell him how much he had helped me.
We should start a bill in Congress to make financial literacy (and retirement planning) mandatory to graduate high school. There is not reason this is any less important than reading or math… and in some ways even more important…
Bold by me.

While I agree with the sentiment, I am tired of the "congress should do....' mindset.

Congress has no such mandate regarding public schools, and they need to stay OUT of that business.

Maybe we need more Civics classes teaching what Congress CAN and CANNOT do, according to the law of the land.
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Old 07-05-2021, 06:06 PM   #36
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I agree. Congress can't even abide their own budget and they should teach about personal finance?
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Old 07-05-2021, 06:09 PM   #37
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I agree. Congress can't even abide their own budget and they should teach about personal finance?
That's part of the problem. Educated professionals can't balance a budget and children usually follow what elders do.
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Old 07-05-2021, 06:38 PM   #38
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I guess it just comes down to the fact that we all have abilities in different areas. Still, I wish I could get through to some folk, how easy managing your own retirement finances can be.
I think its also an interest level thing. Over the years, I've spent a fair amount of time educating myself - reading financial books, surfing the internet and forums, etc. Half the "education" is learning what not to do, like chasing the latest hot stock or panic selling.

I'd be pretty good at plumbing if I devoted that much time learning about plumbing, but I don't want to put the time into that.

I've noticed that when I try to point people to good financial books, it's painfully obvious they don't want to put the time in. They just want quick answers, without understanding the whys.
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Old 07-05-2021, 06:52 PM   #39
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My wife worked for a number of doctors, and they were generally of this scenario:

They lived in the country club neighborhood in a very nice home. He drives an older Escalade, and the wife has a luxury new SUV. Their 2.3 children went to private schools, and later to private colleges. The daughter went on to medical school, did her residency at Cleveland Clinic, married a young general surgeon and they're doing very well. The father has had to fund 100% of his pension because he's self employed, and he continues to work at 69 years old because he didn't invest well. And he could sure use some of that $1.25 million he spent on private schools and $75K a year private colleges.

The father would like to retire, but he's just not in any position due to the high lifestyle he led, and the expenses that come with that lifestyle. And he will continue to work into his 70's in a job he really no longer likes. The paperwork trail a physician has to follow is incredible, and he hates taking orders from non-medical people at The State on how to do his job.

The thing is that nobody ever took time to tell that Medical Doctor that he's going to be middle class in the economic scale.
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Old 07-05-2021, 06:55 PM   #40
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I'm sure I'm the outlier here but in 1st grade a lady from the local bank came by and had us open a savings account (likely illegal now...forcing kids to deal with one bank); she also came by each week to collect our nickels to add to our account. (Hi Miss McMahon!)

In 6th grade we were taught how to balance a checkbook. In 7th grade we were taught about compound interest.

In high school we had some guy come in every month or so from an investment house and explain the basics of the stock market (I must have been asleep a lot; witness my questions on this forum!), how to read a balance sheet, inflation, the differences between bonds and stocks etc. We even had an investment club where we played with fake money/investments.

Of course this was a private school.
Public school for me and everything the same up to high school when I was trades tracked.

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