What Does the White House, Supreme Court and Los Angeles Unified School District have in Common?

HeadlineWe are Steve Schullo and Dan Robert­son, retired teach­ers who wrote a cou­ple of books about per­sonal finance. Wel­come to our blog. Our pur­pose is to encour­age every­body to learn the basics of do-it-yourself retire­ment plan­ning, at least until many in the finan­cial pro­fes­sion cleans itself up. Looks like they are get­ting a boot in the ass right now from two most unlikely places. We love this news from D.C.!

WhitehousePres­i­dent Obama and the Supreme Court are on the same page when it comes to retire­ment invest­ing. They ques­tion the wis­dom of invest­ment advice from Wall Street, big banks, insur­ance agents and other non-fiduciary advis­ers. These advis­ers are cur­rently guided by the “suit­abil­ity” invest­ment rule. You may have been sold the idea that invest­ment advice and the invest­ment choice(s) are suit­able for you, but are they? Both the Admin­is­tra­tion and the Supreme Court say NO! We agree.

Flanked by Eliz­a­beth War­ren the Pres­i­dent sug­gests replac­ing the “suit­abil­ity” stan­dard with “fidu­ciary” guide­lines. Fidu­ciary is a term which means “put the client’s inter­est first.” This would apply to any finan­cial pro­fes­sion­als who have employ­ers and indi­vid­ual investors as clients. Pres­i­dent Obama’s pri­mary point is to reduce “con­flicted advice” and stop “bilk­ing” Amer­i­can work­ers with exces­sive fees. Con­flicts of inter­est arise because many invest­ments are not nec­es­sar­ily suit­able for you, the investor, because of added costs in the plan. Charges at the front or back of an invest­ment as well as ongo­ing costs would make the plan “suit­able” for the adviser, mutual fund or insur­ance com­pany rather than for you. These added expenses eat away at your opti­mal return, to the tune of $17 Bil­lion per year for future retirees — nation­ally. The PBS Frontline’s The Retire­ment Gam­ble reports up to 50% of your nest egg is skimmed off the top over a typ­i­cal American’s work­ing career!

Most of us sim­ply want a fair mar­ket return, not some con­vo­luted con­tract writ­ten by insur­ance lawyers and sold to us as if they were writ­ten to pro­tect us. Stud­ies show that lower cost­ing index funds pro­vide bet­ter returns than the major­ity of com­pany retire­ment offer­ings (401k, 403b or 457b).

SupremecourtThe Supreme Court also got right to work dur­ing ini­tial oral argu­ments in the Edi­son Inter­na­tional case. Talk about tim­ing with the Administration’s announce­ment! They chas­tened the Edi­son Inter­na­tional attor­neys for com­plain­ing about “extreme dis­rup­tion,” if employ­ers were told to “scour the mar­ket for cheaper invest­ment options”. Thank good­ness some jus­tices took the fidu­ciary view, which states that the inter­est of the worker must guide the retire­ment options avail­able rather than tra­di­tion, or turn­ing the choices over to a third party.

LAUSDBeaudry(Click here to watch a seven minute inter­view about our story behind the Award Win­ning Plan. It was a bat­tle to lower costs. Also, for LAUSD’s Press Release on the Award, click here)
The free pdf book, Fight­ing Pow­er­ful Inter­ests, pro­vides the Pres­i­dent and the Supreme Court, employ­ees and employ­ers every­where an exam­ple of how a retire­ment com­mit­tee of teach­ers has already done this chore. We did due dili­gence work by low­er­ing costs and demon­strat­ing trans­parency long before the 2010 the Dodd/Frank bill came to fruition.

Our com­mit­tee has worked since 2006 to do what the Pres­i­dent and the Supreme Court are now upset about. Don’t take our word, take a look at what a for­mer L.A. Times finan­cial reporter, Kathy Kristof, wrote in her arti­cle (LAUSD Firm forced to dis­close fees). The district’s part­ner­ship of union, man­age­ment, teach­ers, and con­sul­tants put together a model plan (457) which does this now — a boon for lucky LAUSD employ­ees. The LAUSD com­mit­tee found lower cost funds eas­ily. It didn’t take MBAs nor was it a “dis­rup­tion” to apply the fidu­ciary standard.

If teach­ers with­out finan­cial back­grounds can find low cost funds, one would think that finan­cial pro­fes­sion­als with all of their ana­lytic train­ing from Ivy League Uni­ver­si­ties could too. But find­ing low cost funds is not in the industry’s inter­est nor is there any bind­ing reg­u­la­tion that requires it either. That’s why 53 mil­lion pre-retirement Amer­i­cans need legal protection.

In the mean­time, we can get involved right now. Go to your HR depart­ment and start ask­ing ques­tions. Ask for a list of invest­ments and start your edu­ca­tion. Ask if you can join an over­sight com­mit­tee. If your employer doesn’t have one, ask them to get one started and be the first vol­un­teer! You do NOT have to be a pro­fes­sional in finance to serve your own and other edu­ca­tors’ best interests.

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205 Ways to Find Money to Invest

House car investment costsDan and I are retired edu­ca­tors who did not earn exor­bi­tant salaries! Yet, we man­aged to invest in our 403(b) con­stantly for decades. How?  We dis­cov­ered how to con­trol three of the most expen­sive con­sumer purchases:

1. House. When we bought our first house 35 years ago, we rented out the third bed­room and bath to help with the pay­ments and lived in a 1200 square foot house. Amer­i­cans pur­chases houses way too big and costly!

2. Cars. I never bought in new car dur­ing my entire work­ing life. I couldn’t afford a new car pay­ment and invest in my 403(b). I was lucky in that a new, flashy car was never an exten­sion of my ego, but that build­ing a last­ing finan­cial future was.

3. Invest­ment Costs. After you have accu­mu­lated a retire­ment nest egg, many peo­ple pay too much for advice and the invest­ment prod­uct. NEVER PAY LOADS! A “Fron­tend load” is a com­mis­sion and a “Back­end load” is what you pay to get your money out of an account! What!? Those costs are not just absurd and unnec­es­sary, but are RIPOFFS! We saved so much in invest­ment costs by invest­ing in NO-LOAD Index Funds in the last ten years we were now able to pur­chase a Tesla in retire­ment! Click here.

You can down­load the attached 205-ways-to-save. It shows how to con­trol home, car and invest­ment costs but also con­tains 205 com­mon sense choices we make every­day. If we thought for just a moment, we could keep expenses low in many other con­sumer choices too. Impul­sive buy­ing is to be avoided!

For exam­ples,

  • Gro­cery shop­ping after a meal, not while hungry. 
  • Never use a bank–Use a credit union.

Mr. Money Mus­tache (MMM)

I have already writ­ten about MMM before. He is worth repeat­ing. You have to visit America’s favorite mas­ter of fru­gal liv­ing, Mr. Money Mus­tache! This guy is hilar­i­ous! Take a look at my ear­lier post about this amaz­ing char­ac­ter. (click here)

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Attention LAUSD Employees! 403(b)/457(b) Roth is on our February 19th Agenda!

ROTHHi LAUSD Colleagues,

Excit­ing devel­op­ment! Because a few of you began ask­ing for the Roth 403b/457b, this item is on our committee’s agenda! Con­grat­u­la­tions! Now you need to show the dis­trict you want the Roth.

Show up to next Retire­ment Invest­ment Advi­sory Com­mit­tee (RIAC) meet­ing on Feb­ru­ary 19 from 3–5. You don’t have to be there at 3:00. The pub­lic will be allowed to speak about 4:30. When you enter the Beaudry Build­ing, tell the desk that you are attend­ing the Retire­ment Invest­ment Advi­sory Com­mit­tee meet­ing held in Ben­e­fits on the 28th floor.

Loca­tion of meeting:

Retire­ment Invest­ment Advi­sory Com­mit­tee Meeting
Ben­e­fits Admin­is­tra­tion, 28th Floor
333 South Beaudry Avenue,
28th Floor, Room 119
3:00–5:00 p.m
Feb­ru­ary 19, 2015

RIAC Agenda 2–19-15

Don’t know what a Roth IRA, read my prior blog post on the Roth and teacher Larry Shoham excel­lent expla­na­tion of the Roth, click here. Larry is well con­nected with UTLA, but needs your help to get the dis­trict to offer the Roth. Con­tact him either at Hamil­ton High School or email: roth4lausd@gmail.com

Click here for another expla­na­tion on YouTube by Dave, who is a fee-only, finan­cial adviser out of Chicago.

See you on the 19th!

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Female investors outperformed males for 2014!

menwomenwinningBoth Sexes Could Learn from Each Other About the Invest­ing Process

Dan and I love reports that show the grad­ual and incre­men­tal com­mit­ment to wealth build­ing pro­duces higher returns than the get rich, com­pet­i­tive, short-term “suc­cess.” For now, this report, once again, shows that think­ing long term is best dis­played by female investors. Males trade more seek­ing short term gains than the females, which can be dele­te­ri­ous to invest­ing decision-making and females pay higher invest­ment costs than the males accord­ing to the report.

Still, females had a higher invest­ment return in 2014 than the males

Read this com­pre­hen­sive com­par­i­son of the 2014 returns on what exactly do women do (or not do) in which they earn higher returns than men. Females are not smarter about the stock mar­ket than men. Nobody is smarter when it comes to pre­dict­ing where the mar­ket will go. It’s because the gals trade less.

Males can Teach Females about Keep­ing Costs Low

But there is some­thing to be said about dis­cov­er­ing what is the best behav­ior from each sex. Work­ing together by shar­ing what we know about per­sonal finance can have huge payoffs.

Bot­tom line: don’t trade, keep costs low, have a plan and stick with it over the long-term.

For the entire report: http://www.valuewalk.com/2015/02/female-investors-outperform-male-investors-2014/

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Not too Late For Retirement Planning and a Free book On How to Find a Fee-Only Fiduciary Financial Planner

Hello,
     Two quick arti­cles that my good friend Ted emailed the other day. The first one is near and dear to our hearts as our entire book, “Late Bloomer Mil­lion­aires” is a how-to guide for late starters because we were late starters and made big mis­takes, yet we retired com­fort­ably. Click here for this arti­cle of the many excuses for peo­ple to delay (or not) plan for retire­ment. Don’t delay any longer. The con­se­quences can be tragic.

     Read the link below about an unfor­tu­nate story of get­ting sold some­thing that was not in this retired couple’s best inter­ests: http://www.nytimes.com/2014/10/12/business/mutfund/before-the-advice-check-out-the-adviser.html?_r=0

Don’t Get Taken, Here’s How
Find­ing and Inter­view­ing a Fee-only Fidu­ciary Finan­cial Adviser

You have heard this many times. If you need pro­fes­sional assis­tance with your invest­ments, select a fee-only fidu­ciary finan­cial adviser. There is a free FREE 100 page book by Paul Mer­ri­man title, “Get Smart or Get Screwed!” that details the entire process from begin­ning to end. The title is a bit sor­did, but delight­ful. (Click here to down­load Paul’s free book). One part that I liked as it gets right to the point when he wrote:

“When you’re pay­ing for advice (and you always pay, one way or another) you have two basic choices:
Choice #1: You pay your advi­sor, and the advi­sor works for you.
Choice #2: Some­body else can pay your advi­sor and, in effect, the advi­sor works for some­body else.”

Bot­tom line: If you write the check to the advi­sor then you are in charge and the advi­sor works for you. Any other pay­ment scheme puts you at risk of the adviser not work­ing for you and that is a big risk.

Thank you Ted for the two articles.
If any of you find an arti­cle that you think should be shared, con­tact me.
Have a great day,
Steve and Dan

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A Case For the Roth 457(b) at the Los Angeles Unified School District

IMG_1083The guest author is a Los Ange­les Uni­fied S.D.‘s (LAUSD) teacher at Hamil­ton HS. For the past few weeks, Larry and I have been email­ing each other about mak­ing the Roth 457(b) a real­ity for all LAUSD’s employ­ees. Our Retire­ment Invest­ment Advi­sory Com­mit­tee voted to approve the Roth option a year ago, but LAUSD said there was not enough demand and pay­roll sys­tem could not han­dle it.

A year has passed and appar­ently things are begin­ning to look much bet­ter. Larry attended last month’s com­mit­tee meet­ing and voiced his request to the com­mit­tee which includes ben­e­fits admin­is­tra­tion, legal coun­sel and the chief finan­cial offi­cers rep­re­sen­ta­tives. The Chair put it on next month’s agenda! The Roth 457(b) dis­cus­sion is back.

This is a clear exam­ple how one per­son can ini­ti­ate change. But the effort is not done yet. If you are inter­ested in hav­ing the Roth 457b plan avail­able, please attend our next meet­ing on Feb­ru­ary 19th from 3–5. You do not have to come at the begin­ning of the meet­ing. Pub­lic com­ments don’t start until about 4:30. The com­mit­tee wants the Roth 457b as bad as the employ­ees. As Larry will point out, its a great addi­tion to our already Award Win­ning 457(b) plan!

Look­ing into the Future:  A Case for the Roth 403b/457b*

by Teacher Larry Shoham

Thanks to Steve Schullo, I’ve con­nected to LAUSD’s Retire­ment Invest­ment Advi­sory Com­mit­tee. Here, I’ve met some great peo­ple within LAUSD, UTLA, and with TIAA-CREF, who are com­mit­ted to pro­vid­ing teach­ers with non-toxic sup­ple­men­tary retire­ment options for teach­ers. I am eager to learn more about the District’s 457(b) plan, which allows one to take dis­tri­b­u­tions at the ter­mi­na­tion of employ­ment. Unlike a 403b, a per­son doesn’t have to wait until 59 & 1/2 to take out money. Con­tinue read­ing

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2014 Portfolio Return for “Late Bloomer Millionaire” Authors

Happy New Year!
How did your port­fo­lio per­form in 2014?
Today’s blog is not about com­pe­ti­tion, heaven for­bid! We show you how we eval­u­ated our return so that it is fol­low­ing the over­all stock and bond mar­ket index returns. Our goal is to earn the mar­ket aver­ages, not exceed them. We invite you to share your return, so we can all learn.

2014 was a good year for our invest­ments. Our over­all port­fo­lio per­formed a 6.0% return. Any year the return exceeds infla­tion is a good year! We cal­cu­lated our return by this sim­ple for­mula: end-of-the-year-value minus beginning-of-the-year-value divided by the beginning-of-year-value. If you are work­ing, take out all of your con­tri­bu­tions. For retirees put all of your dis­tri­b­u­tions back in. Obvi­ously, this method is not pre­cise as it does not take into account the impact of dis­tri­b­u­tions and con­tri­bu­tions, but you will get a ball park return aver­age. For a cal­cu­la­tor that takes into account the full impact of con­tri­bu­tions and dis­tri­b­u­tions through­out the year, log on to Bogle­heads wiki and down­load a free Excel SS: https://www.bogleheads.org/wiki/Calculating_personal_returns.

For com­par­ing returns across the dif­fer­ent asset classes log on to Callan’s out­stand­ing and infor­ma­tional annual table of which asset classes did well and which did not. Notice how the top per­form­ers one year become bot­tom feed­ers the next. That’s why its so impor­tant to diver­sify among the major asset classes. https://www.callan.com/research/files/989.pdf

Okay, how did our port­fo­lio per­form com­pared to Callan returns for 2014?

Our indi­vid­ual port­fo­lio index fund returns

2014PortfolioReturnsExplain­ing our port­fo­lio return: By com­par­ing some of the major hold­ing funds in our port­fo­lio to the Callan asset class returns, our Van­guard Total Stock Mar­ket ETF did what it was sup­posed to do by fol­low­ing the US domes­tic stocks and returned 12.54 (Callan’s table reports 13.69% for the S&P 500, the clos­est asset class to our Total Stock Mar­ket index, VTI). Callan’s Barclay’s Aggre­gate (bond index) returned 5.97%. Since 65% of our port­fo­lio is in bonds and the inter­na­tional stock mar­ket lost money, our port­fo­lio approx­i­mately reflected what was expected, 6.0%.

An addi­tional way to eval­u­ate our port­fo­lio (and yours too) is by com­par­ing our return to the almost 500 Bogle­heads who reported their returns. Here is a Sum­mary of Bogle­heads’ returns: 73% of the Bogle­head investors returned between 5.0% and 12.4%. If your port­fo­lio was lower than 5.0%, you have a very con­ser­v­a­tive port­fo­lio. If your port­fo­lio did more than 12.4% you had bet­ter be a young investor because you are tak­ing a lot of equity (stock) risk. Either way, if you don’t know how your plan is set up and don’t know your return, this is the time to talk with your adviser and find out. We are show­ing you how we eval­u­ate our port­fo­lio returns.

For addi­tional infor­ma­tion about indi­vid­ual Bogle­head port­fo­lio stock/bond split and other fac­tors that explains this range of returns from 5.0% — 12.4% fol­low this link: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=154376

Hope this helps. Happy New Year! Steve and Dan

Late Bloomer Millionaires book cover

 

 

Our Book Has 83 REVIEWS!

Steve Schullo and Dan Robert­son: Co-authors of Late Bloomer Mil­lion­aires. Read the 82 reviews and pick up a copy by click­ing on the cover above. If you read our book, please write a review on Ama­zon. Much appreciated.

If you have writ­ten a review, THANK YOU! We want to help peo­ple under­stand their invest­ments, be informed and empow­ered. It’s never too late!

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Financial Blogs Worth a Look According to AARP

blog

Dan and I agree with the Amer­i­can Asso­ci­a­tion of Retired Per­sons’ (AARP) finan­cial reporter Jean Chatzky. The fol­low­ing finan­cial blogs are worth a look. The bold print is our 2-cents worth. Enjoy and happy holidays!

Johnny Mon­ey­seed. The author of this blog and his wife are 30-something early retirees. Don’t let that dis­suade you. Their posts on top­ics such as how to be a foodie on a lim­ited bud­get and how much you can save by down­siz­ing apply to folks of all ages.

Invest­ing

The Chicago Finan­cial Plan­ner. Roger Wohlner, a fee-only finan­cial adviser based near the Windy City, focuses on help­ing reg­u­lar investors avoid the hype and con­fu­sion of the financial-services indus­try. An enter­tain­ing writer prone to foot­ball ref­er­ences (a recent post focused on what finan­cial firms could learn from vis­it­ing Lam­beau Field), he gets down to the nitty-gritty on top­ics rang­ing from ETF pric­ing to estate– plan­ning mistakes.

I have met Mike at the Bogle­head con­fer­ence. He is a Bogle­head! Obliv­i­ous Investor. Cer­ti­fied finan­cial plan­ner Mike Piper started the blog in 2007 to deal with the ques­tions his friends and loved ones would bom­bard him with every tax sea­son. He decided that, rather than offer­ing answers over and over again, he’d put them in a book and online. Today read­ers will find suc­cinct tips on tax and retire­ment plan­ning and low-maintenance invest­ing. Con­tinue read­ing

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Tony Robbins enters the Personal Finance Book Business

Tonyrobbins

New Book: Money: Mas­ter the Game: 7 Sim­ple Steps to Finan­cial Freedom

I have never read or fol­lowed Tony Rob­bins. He was too glib, too much of a sales­men, caters to the already wealthy and famous and his walk­ing hot coal story did it for me.

I have not read this book. But from what I read, he has writ­ten a good per­sonal finance book. Any well known fig­ure and book author who inter­viewed and writes what finan­cial giants John Bogle and War­ren Buf­fett have to say are on the right track for giv­ing sound finan­cial advice.

Excerpt:

When I asked War­ren Buf­fett — what are the secrets to your wealth, he said it’s three things. He said:

No. 1, it’s being born in America.

No. 2, is good genes, so I live long enough, and

No. 3, it’s com­pound inter­est. Com­pound inter­est — peo­ple have no idea the power that com­pound inter­est really has.” [Steve says, exactly!]

 

John Bogle says: “Money: Mas­ter the Game will be a huge help to investors…Tony Rob­bins dropped by my office for a 40-minute appoint­ment that lasted for four hours. It was the most provoca­tive, prob­ing inter­view of my long career, a reac­tion shared, I’m sure, by the other souls with strong invest­ment val­ues and sharp finan­cial minds who pop­u­late this fine book. This book will enlighten you and rein­force your under­stand­ing of how to mas­ter the money game and, in the long run, earn you finan­cial free­dom.“
– John C. Bogle, Founder, the Van­guard Group and the Van­guard Index Funds.

Click here for the USA Today arti­cle on his new book. http://www.usatoday.com/story/money/personalfinance/2014/12/09/tony-robbins-money-book/19278963/

Click Here for the Bogle­heads’ com­ments of Rob­bins’ new per­sonal finance book.

Rob­bins is donat­ing all of the prof­its of this book in addi­tion to a per­sonal dona­tion to feed 50 mil­lion meals to peo­ple in need this year through Feed­ing Amer­ica, a hunger-relief charity.

If any­body has read Tony’s book, please comment.

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Trust and Leadership. Nelson Mandela and John Bogle.

trustClick here on our society’s prob­lem about lead­er­ship and trust. There is prob­a­bly not much that we already don’t know. But the author starts with the lead­er­ship model of Nel­son Man­dela. Who could pos­si­bly fill that great leader’s shoes?

Click here to read what John Bogle (The finan­cial world’s “Nel­son Man­dela”) says about lead­er­ship and trust in our finan­cial sys­tem and explains why Dan and I have our money in this great man’s com­pany, Van­guard, which he founded almost four decades ago.

IMO, John Bogle’s best book is Enough. It’s about as thought­ful and reflec­tive of this great man’s finan­cial, polit­i­cal and social think­ing as any of our con­tem­po­rary philoso­phers. Enough is must read about lead­er­ship and trust, the dire need for it in our cul­ture and an inspi­ra­tion for us.

What can we do? Plenty.

  • We can sup­port this great man’s legacy and earn a decent return on our pre­cious retire­ment sav­ings plan by open­ing a low-cost Van­guard account.
  • We can help oth­ers who are unde­cided about their finances.

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