Confused post

I was planning on writing a post about another topic, paying ourselves, but I decided not too. I am a little too distracted to do that today. I have been sitting at work for the last couple of days clicking on the internet news and finance sites compulsively(while doing my job) at regular intervals to find out what is going on in the world of finance. Banks are collapsing, the Dow is tanking, our retirement accounts are losing money...etc. It is one huge mess. I am fully aware of business cycles and how recessions come and go, but this seems different. In the past they seemed to be part of the normal course of things and while recessions were a drag, they were nothing to panic about. This one worries me more than the others because there seems to be no control at all over what is happening. The Treasury Dept reassures us every few days that things are fine and we are ready for the upswing, then another shoe drops. The Bear Stearns bailout was supposed to stop the free fall. It didn't. The Fannie and Freddie bailout was then supposed to fix the problem they said. It didn't. Now Lehman Brothers is gone and AIG is in trouble. AIG only needs $75 billion to right itself. Oh, is that all? Let me look under my couch for that..no worries. Geesh! I don't pretend to be smart enough to know where all this is leading, but I have real worries. I bet you do too.

Ouch!!!!

As you must already know, wall street took a dive today. Today was a really bad day. It is getting harder and harder to know what to think. The gov't keeps telling us that they have the situation with the financial sector under control, but it just keeps getting worse. Our retirement accounts are getting crushed, like everyone else's. The only thing we know to do is to hang in there and keep telling ourselves that we must be buying stocks cheap in our retirement accounts. It is hard to believe that the Dow is back to where it was years ago. So much for the good economy they kept talking about. All the gains we all made are all gone. We will just have to perservere. We will continue to follow the conventional advice and keep contributing to our retirement accounts out of every paycheck, and assume that that is the best thing to do. It had better be because there doesn't seem to be a better option. Good luck to all of us.

Social Security or Social Insecurity

I received my new issue of Money magazine yesterday. It has an ominous article about social security and medicare. We have known for a long time that those two programs are in trouble, but the article does a nice job of laying out exactly what the issues are and what the potential fixes are. To boil it down, we should expect the feds to raise taxes and cut the benefits that we will receive. They could do one or the other but it is more likely that they will do a combination of the two. Social security can be fixed fairly easily, but it is Medicare that is the biggest problem. It makes it tough for all of us to plan our retirements because we don't know exactly what is going to happen, so we end up having to plan for the worst. In some ways, I just wish they would do something, fix it however, just to remove the uncertainty so that we can know how much we need to save for retirement. As it is, I am thinking that we will need to change our calculations and assume that we will only receive 75% of the benifits that we are supposed to get. Then we can recalculate how much we need to save, or assume that we will have a lower income in retirement. If we get full benefits, I guess we would look at that as a bonus. Trying to plan for retirement has become such a moving target that getting it right is becoming increasingly difficult to get it right. The article also says that we will need several hundred thousand dollars to pay for out of pocket health care expenses. Several articles I have read give out varying numbers on that, but they are all really high. Yikes. I wonder what the future holds for all of us in terms of retirement. I know that I read a great deal about personal finance and I know that very few other people do. When I bring up any of these topics with people I know I usually get the blank stare. If I mention something such as a target date retirement fund to my coworkers, I might as well be speaking Chinese. As complicated as finance has gotten, and with as little financial education as there is, how is the average person supposed to survive in these times. We are increasingly expected to take charge of our financial lives(401(k)s instead of pensions) however too many people are ill equipped to do so. It worries me...a lot.

Another Bailout?

I am watching the news this weekend and it appears that they are working towards some sort of solution to the Lehman Brothers problem, namely lining up a buyer to take over the company at a fire sale price. What the hell is going on in the economy? They are afraid that the failure of Lehman will cause a whole bunch of problems so it is better to organize a buyout(sort of a bailout) than let the company go under. That seems to be a growing trend. We working class stiffs need to start taking exception to some of this. They took down all the regulation in recent years, let the banks do whatever they wanted(loan money to deadbeats) and now we all have to pay for that. The companies have sucessfully privatized profits while socializing the losses. Investment bankers are vacationing on tropical islands enjoing their huge bonuses from the past few years and sticking the taxpayers with the bill from the inevitable losses. What a crock. We working class stiffs ought to be mad as hell about that. Something tells me this won't be the last bailout. It will take a while to work through this mess. Why the greyhound? Because I love them. No other reason.

Does net worth matter?

I have been reading other blogs debating the value of "net worth." Does net worth really matter? Is it a deceptive number, or is it just an ego trip? I have read books that tell you to calculate everything you own, including clothes, furniture, etc. and then subtract your debts to determine what your net worth is. They seem to think that this matters. They are missing the point. The point is, "do we have enough money, or are we on track to have enough money, to create the income stream we need to retire?" The personal objects we have, such as an old couch, cannot generate any income so they don't matter. I have never understood why some financial planners insist that people add up the value of all the junk they have. The only things that matter are those that can generate income when you need it. When I calculate net worth, we add up our savings account, checking account, 401(k), 403(b), our Roth IRAs, and the stocks we own, plus what we think we have in home equity(obviously a little tough to gauge now), and subtract out our liabilities, which is our mortgage only. The personal junk we own, such as the beer can collection that I started when I was ten(it was popular then) is irrelevant. The beer cans will never generate any income, so they don't count. I would be curious to see if other people agree. Why the greyhound? Cause she rocks and looks beautiful, that's why.

More links

I have added more links today to add more resources for everyone. I particularily like the CNN calculators link, as they are really helpful. You can calculate what you need for retirement, see how fast your money will grow, etc. I use them all the time and find them to be very helpful. In fact, I find them probably to be the most helpful tool out there. If you want to achieve a goal, you have to know where you are and where you need to go. The calculators help you determine both. It is funny to me that more people don't use them. I survey people I work with, most of whom never do any sort of retirement planning. I see some of them studying all sorts of things, such as specs on new cars, consumer reports on electronics, etc., but nobody but me wants to study anything about retirement. The small amount of time they spend trying to save a few bucks on an appliance is fine, but if they were to spend the same amount of time organizing their finances, they could make hundreds of thousands of dollars. It just doesn't make any sense. So many don't seem to realize that saving a little now means a lot later. Oh well, live and learn, or better yet, don't live and learn and be poor. Why the picture of the greyhound..?? Because greyhounds are most excellent. No other reason. Just enjoy the pic of this beautiful boy!

Tough year

It is looking like this year is going to be a writeoff year. We have managed to save enough to offset all the market losses, and will probably end up the year in the positive range, but not by much. It puts us a year behind and there is no way to know if future years will be able to make up for the lost time. If you are like us, you keep track of your investments every year and track your progress towards your retirement goals. If you have done your homework, you know how much you need(or want) to have for retirement and therefore how much you need to save every month. This year isn't helping anybody's cause. It makes me wonder what could have been done to stop this mess from happening. Maybe if the housing and mortgage market had been better regulated, as they are now proposing, the real estate bubble could have been avoided and therefore the bubble would not have burst. The cascading effect of the housing market on the rest of the economy is killing all of us. I hope this nightmare ends soon and we can get back to making progress.