Caution to prospective ERs

Nords

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This article is making the rounds at M*'s boards and will probably be in a few Sunday papers. It's a rehash of a problem that's been slowly gaining attention over the last few years.

http://www.nytimes.com/2004/04/18/business/yourmoney/18retire.html?pagewanted=print&position=

Investors are being encouraged at "seminars" to ER so that they can roll their company savings account over to an IRA in a brokerage account. A trusted broker "invests for growth" with 72(t) withdrawals but of course it's tech in March 2000.

Some of these "investors" were attempting ER with retirement portfolios of less than $400K. Even if you're living the lifestyle of some of this board's veterans, that's a challenge.

Not all of the brokers worked for Snively & Whiplash, either. Some of them (admittedly a minority!) are good people who misguidedly think they're doing good work. No matter how terrible they felt after seeing the effects of their advice, they're not the ones who have to go back to work.

No brokers' advice can substitute for a thorough expense analysis (based on your actual spending habits over the last few years) and a realistic projection of capital costs over the next decade or two. Anything else (especially of the "80% of pre-retirement expenses" ilk) will promote a false sense of security that might last through the first couple ER years... but then watch out. Even slogging through all this board's SWR posts won't help you if you don't have a clear picture of your expenses and a reserve for "surprises".

If you're still determined to ER (after reading this article as well as Terhorst, Dominguez, Bernstein, Dacyzczyn, and others) then at least peruse Bud Hebeler's website for a conservative engineer's realistic approach of using negative feedback to control withdrawals. His book's well worth a trip to the library-- its comments on "Social Security widows" will make anyone think twice about ER. (Hey, my spouse has her own darn pension.)

http://www.analyzenow.com/
 
Nords

Luck, naturally frugal, some education via AAII or the 'I'm unemployed' mindset kept us from a similar fate - spending our 300k rollover in 93. The 'free dinners/buffets/seminars were abundant(we went to 2-3) by investment co.'s wanting 'to help us'. Large and continuous layoffs were like flies to honey. I entertained the 72t thought for a while. That 93 300k is north of 750k with the current market upswing. I'd read none of the books mentioned, but knew there was a reason the co. had index 500 in the 401k and had been reading AAII stuff for a while.

Those kinds of articles make me mad - mainly because I could have been one of them.
 
Good article Nords. With all the publicity about sleaze in the financial services industry, it's a shame so many people still get snared in the traps.

I have a nephew who is a little puke. When he was a child, he was cruel to little kids, small animals, and anything weaker than he was. I can recall my wife and I telling our daughter (who is three years older) that she had our permission to beat the hell out of him at her discretion. She was about 12 years old at the time. Now he is training to be a financial adviser. When I heard what he was planning to do, I wasn't surprised. He'll probably make lots of money and leave a trail of misery in his path.
 
This article is making the rounds at M*'s boards and will probably be in a few Sunday papers. It's a rehash of a problem that's been slowly gaining attention over the last few years.

http://www.nytimes.com/2004/04/18/business/yourmoney/18retire.html?pagewanted=print&position=

Investors are being encouraged at "seminars" to ER so that they can roll their company savings account over to an IRA in a brokerage account.

Is this is the article on the front page of today's NYT business section, about a couple that lost most of their nest egg thanks to bad advice from Prudential Securities?

I thought it was ironic that page 3 of the same section is a full page ad from Prudential, pitching their abilities to manage and control risk!

GF says that Prudential were probably pitched by the NYT advertising dept to place the ad, in view of the unfavorable story on the front page.

If true, I'm not sure that makes me feel more or less unhappy ....

Peter
 
Good article Nords. With all the publicity about sleaze in the financial services industry, it's a shame so many people still get snared in the traps.

I have a nephew who is a little puke. When he was a child, he was cruel to little kids, small animals, and anything weaker than he was. I can recall my wife and I telling our daughter (who is three years older) that she had our permission to beat the hell out of him at her discretion. She was about 12 years old at the time. Now he is training to be a financial adviser. When I heard what he was planning to do, I wasn't surprised. He'll probably make lots of money and leave a trail of misery in his path.

Wasnt he in a movie...American Psycho? ;)
 
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