Category Archives: Investing

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Can Bitcoin Make Up for Retirement Savings Procrastination?

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If you read my blog post from last week, then you know I discussed why getting retirement investing advice from social media is a bad idea. Most of the people who offer such information have good intentions; it’s just that they are usually in a different place in their financial planning lives than you and me.

So, this week, I offer part two of last week’s post. I recently read a post from another retirement Facebook group that I follow. The person posting the question asked if she should consider looking at a more “aggressive” type of investing strategy since her 401k was not doing the job for her, whatever that means. She is in her 20’s and ready to give up. Ah, youth.

As you can imagine, several responding posts were offering a variety of suggestions. One that caught my eye was from another 20-something. He said he planned to retire in his 30’s because his strategy is to put all of his savings into Bitcoin, and he advised the young lady with the question to do the same. This week, we explore Bitcoin and things to consider if you are thinking of high-risk investing as part of your retirement savings plan.

Bitcoin is a cryptocurrency created in 2009. It trades in marketplaces called “bitcoin exchanges” where people can buy and sell bitcoins using different currencies. The attraction of Bitcoin and other cryptocurrencies is rooted in the fact that there are no middlemen, like banks. More merchants are accepting Bitcoin to pay for goods and services.

For example, you can book a hotel through Expedia using it and Overstock also accepts Bitcoin for purchases. There is a fixed number of Bitcoin, 21 million. Currently, there are 17 million in the market. The rest will be “mined,” which is a process of creating new bitcoin. For a deeper dive into the specifics of Bitcoin, you can read more here.

What I want to discuss is the risk of investing in bitcoin, which is a high-risk investment. Warren Buffet, the famous investor, stated that he would never own Bitcoin due to the extreme volatility that characterizes its trading. Cryptocurrency is not as liquid as stocks, so it is more difficult to get out if you see the value heading south.

Another reason Bitcoin is not for the faint of heart is that it trades 24 hours a day. Bitcoin fanatics are typically glued to their cell phones throughout the day, watching the value go up and down. Some investment pros say that it is a buy and hold investment and that one should approach it that way due to the large swings and the inability to time the market in any way.

The lesson with Bitcoin and any high-risk investment is to ask yourself how you would feel if you invested the amount you are thinking of investing and saw your value go to zero? Then, what if it swings back up in value in a couple of days only to go back to near zero in the next few days, and so on? It’s a classic risk tolerance test.

How much can you afford to lose within your retirement investing time frame, and will you be able to sleep at night knowing the volatility? When one is in their 20’s and 30’s, they have time on their side to make up for a high-risk loss. Not so much when you are in your 50’s and 60’s.

Instead of chasing risk to make up for years of not investing in your retirement plan, start where you are, work with a professional, and develop a plan that will allow you to retire on your terms.

For information on my financial coaching, go here.

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5 Reasons to Check Your 401(k) Statement

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The best time to plant a tree was 20 years ago. The second best time is today.”

When was the last time that you actually looked at your 401(k) statement? Perhaps you are still in the post 2008 financial markets meltdown mode of “If I don’t look at it I can’t get upset”. Well, with the recent market volatility you might feel like it’s “deja vu all over again”.

First quarter statements will be in the mail next week and the results may not be pretty. Still, that shouldn’t keep you from checking your statement and discussing your goals with a financial advisor or financial coach. Your financial goals may not have changed however, how you get there may.

It’s just another reason to make sure that you keep an eye on your 401(k). Here are 5 other reasons to open that statement and keep an eye on things.

  1. It’s probably your biggest retirement asset. If you have a 401(k) consider yourself one of the lucky ones. 25% of Americans who can invest in their company’s 401(k) don’t. One third of American workers have no retirement savings at all. Even if your 401(k) balance is in line with most Baby Boomers who have saved an average of $70,000, that still represents a big chunk of change any way you look at it. Next to the equity in your home it’s probably the biggest asset you have. All the more reason to pay attention to it and make sure it is working for you even if you never add another dollar (which I hope you will, especially if your company provides a match).
  2. Asset allocation still works. After the great meltdown of 2008 the so-called market moguls were/are ready to write of the benefits of Modern Portfolio Theory. Why? Because there were some nuances of the 2008 crisis that couldn’t be accounted for in Modern Portfolio Theory like… corruption in the financial system! It still makes sense not to put all of your eggs in one basket or asset class. Diversification still makes sense and it still works. This recent market volatility will prove that point if you are properly allocated. Read more here.
  3. Social Security is only one leg of three legs you need. One third of retirees end up relying entirely on Social Security. That doesn’t have to be you. Social Security will be there for you but you will also need your retirement accounts like an IRA  and your 401(k) as well as any taxable savings you have. If you are one of the fortunate few who have a pension as well as a 401(k) then you have a four-legged retirement savings stool. Congratulations. Otherwise it’s a three-legged plan. That’s OK. Take advantage of tax deferral. It’s like a miracle.
  4. You may not want to work the rest of your life. Even if you think you will work until you drop either by choice or by necessity keep this in mind…half of current retirees surveyed say they left the work force unexpectedly as a result of health problems, disability, or getting laid off. If you think you’ll just “work forever” instead of planning for retirement, you may want to think again. (Source: Employee Benefit Research Institute)
  5. Tax deferral is a gift you can’t afford to pass up. I remember Bank Day when I was in elementary school. The local bank would give each of us an envelope to put our deposit in and then a representative would come by each week and take it to the bank and then bring back the envelope with our “bank book” inside. I remember being excited to see the “interest” on my money in my little blue “Bank Book”. I wasn’t taking anything out of it so it kept on growing. Tax deferral works the same way. Uncle Sam can’t tax the money in your 401(k) and IRA accounts until you start taking money out of them. Hopefully that will be after you are 59 ½ and in a lower tax bracket than you are now.

    In the meantime the growth in your accounts keep on “truckin'”. Say you invest $1,000 and earn a return of 7%–or $70–in one year. You now have $1,070 in your account. In year two, that $1,070 earns another 7%, and this time the amount earned is $74.90, bringing the total value of your account to $1,144.90. It’s the gift that keeps on giving. Your money grows through compounding and tax deferral. Find out more about tax deferral and compounding here.

So open up that 401(k) statement and face the music whether it’s good or bad. In either case you can still take action to revive this important retirement vehicle. Become informed about asset allocation and tax deferral and then talk to your plan sponsor or financial advisor about advice on the mutual funds in your plan. Remember, it’s never too late to plant that retirement savings “tree”.

Question: What keeps you up at night when it comes to retirement savings? Leave your comments here.

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Hall of Fame Retirement Advice From a Celtic Legend

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Several years ago I wrote a little book titled, Think Like an Athlete, Manage Like a Pro, where I extolled the many positive personal qualities that successful athletes utilize and that business leaders can employ to build their companies. One thing you won’t hear me recommend is that you invest like an athlete. The halls of retired professional athletes are littered with tales of bankruptcy and financial excess leading to financial ruin. One statistic I read recently stated that 78% of pro football players and 60% of NBA players are bankrupt within 5 years after retiring!

With this knowledge I was all the more intrigued to learn of the financial success of one of my all-time favorite athletes, John “Hondo” Havlicek. A recent Forbes magazine article explained how Hondo achieved his success with discipline and sound advice. Consider that he earned $15,000 in 1962 as a professional basketball player with the Boston Celtics. If we factor in inflation at 4% per year then $15,000 per year in 1962 would equate to $116,524 a year in 2014. There are probably ball boys in the NBA making that much today. So how did he do it and what can we learn from his success?

  1. Start early. Yes, Hondo told his advisors to invest his money in “Blue Chip” stocks. He was looking to invest his money for the long haul. Like Hondo if you don’t understand investing go with companies that you are familiar with which typically are Blue Chips, those that make up the DOW for example – like AT&T, Lockheed, Eli Lilly, H&R Block and UPS. The best way to invest in Blue Chips is through a mutual fund such as an exchange traded fund (ETF). If you didn’t start early, OK start now. It is never too late.
  2. Stay invested. Hondo didn’t try to time the market. He learned early that markets go up and down but over time he would benefit from the historical growth of the market instead of potentially missing some of the best days by pulling out when things look bleak. Consider that 95% of the market gains between 1963 and 1993 resulted from the best 1.2% of the trading days during that time! If you missed 90 of the best performing days your return would have dropped from 11% to 3%. Stay invested!
  3. Don’t overspend – Even though $15,000 a year in 1962 was considered a good income Hondo knew his career was not infinite so he had to prepare for the long –term. If you put a budget together now and start living within your means and find some extra dollars to invest it can have a huge impact on your retirement income.
  4. Find a financial manager you can trust. This was critical to Hondo’s success as he relied on expert advice early on especially when he invested in several Wendy’s hamburger franchises. Many pro athletes go broke because they pick an advisor who enables their bad spending habits instead of providing the “tough love” advice that is necessary especially at a young age. You should find an advisor who you trust and who provides good overall financial advice not just investment advice; financial planning advice. A good place to start is with a CFP – a Certified Financial Planner.

Unfortunately we tend to hear and read about the financial misfortunes of athletes. So it’s refreshing to hear of a success story like that of John Havlicek. What makes it even more meaningful is the fact that each of us can and should relate to his financial story and heed his advice. It’s much more difficult to relate to the mega millions being paid today to athletes and to comprehend how they can lose it all within a short period of time. Take these four tips to heart and you too can retire on your terms. Plan well. Live better.


Time Out! Which of the four steps John Havlicek embraced for his sound financial plan is most important to you? You can leave a comment here.

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To CD or Not to CD Redux?

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Yes, that is the question, to paraphrase William Shakespeare. Although the CD dilemma is not the soul-searching question Hamlet faced in his soliloquy. Nonetheless, it is still an important question for many pre-retirees and retirees looking for a safe place to park their money, especially in times of market fluctuation. Before we can answer that key question there is are two fundamental questions that must be addressed. The first is, what is the purpose of the money you are looking to invest in a CD? The second important question is, what is your experience investing money?

A CD (certificate of deposit) is a fixed-rate instrument. As we know, they can be purchased at banks and credit unions, even through brokerage firms. Like other fixed-rate instruments a CD can provide income and growth of principal. It brings with it the federal insurance that other bank deposits carry. As a result, many people who trust CDs to supplement their income are typically low risk investors.

From my experience of working in banks and credit unions, many CD investors want nothing to do with the stock market. They are more than willing to sacrifice the potential upside that even municipal bonds or other so-called lower risk securities can offer.

I have also found that many savers and investors who look to CDs to provide income and security often fail to ask that all important question, what is the purpose of the money? You see in many cases income is not the goal. Many CD holders don’t need the income and want to leave the money to their heirs. So, they don’t want to risk the principal during their lifetime. We will tackle risk next. First, you need to know that a CD may not be the best wealth transfer option that you have.

There are several wealth transfer products that afford you the ability to leverage your CD into a much greater legacy. For example, a fixed annuity with a death benefit can be a way to transfer wealth in a tax efficient manner.

Now, there are complexities, too many to address here, however, as a strategy it is worth considering if wealth transfer is your goal. You essentially partner with an insurance company to give them your funds and in turn, through the beauty of insurance, they provide you with a death benefit that can be much greater than your original CD investment. You name the beneficiary upon your death as you would with any life insurance policy. A more thorough explanation can be found here.

The second question, what is your tolerance of risk? That is a more complex discussion and should include a financial advisor that you trust. Beware the “one-size-fits-all” approach with a number scoring. While questionnaires are useful, a good financial advisor will have a thorough discussion with you to arrive at an appropriate risk assessment.

If you truly are risk averse, then a CD may be the best vehicle for you. If you can tolerate some risk, then it opens a world of other so-called conservative investments that can move you ahead much faster in the retirement and pre-retirement game. Risk tolerance is unique to you just as your fingerprints are, so I caution you not to follow your neighbor or cousin Harry’s advice as it is based on their risk tolerance not yours.

To CD or not to CD? Perhaps. Perchance to dream of possibilities of a retirement on your own terms. One that is unique to you. Work with a financial advisor that you can develop a trusting relationship with. Retirement is an arduous journey. One that requires help along the way.