Money

Many people in the fourth quarter of their lives are not working to earn money. When you are not working to earn money, you are either being cared for by someone else or you have found a way to care for yourself without having a paid job.

Throughout most of human history, if you lived into the fourth quarter of your life you were probably cared for by family members. In the 20th Century, even average people started living well beyond the life spans associated with homo sapiens from the beginning. Now, in the 21st Century, average life spans will reach beyond the age of 80, and if you make it to the age of 60 you need to prepare to live into your 90s. This is both a blessing and a curse.

At the simplest level, something must pay for your rent, clothing, food, medical attention, transportation, and entertainment. Either you are going to pay for it, or someone else is going to pay for it – your spouse, other family members, a friend, or the State. At the present time, some non-working people may wish these bills to be paid for decades.

When you are not working to earn money, you are in a category we might call retirement, that is, retirement from working for money. You may be fully retired, or only partially retired. In both situations you are depending on your savings, or you are depending on some form of pension earned throughout your working years for all or most of your financial needs.

Every working person pays into Social Security and gets some amount of retirement pension from the Social Security Trust Fund.

These days, a very small number of persons have defined benefit pension/retirement programs from private sector employers. Defined benefit retirement programs – programs which, generally, commit the institution to pay the retired employee some percentage of his/her income for the remainder of his/her life – dominate the economic programs of governmental institutions. Many of the public sector programs are underfunded, meaning such programs may have a very challenging time meeting all of their promises. Consequently, even public sector governments and agencies are starting to move away from defined benefit programs,

These days, the most common way for people to save for their retirement is in a 401k type retirement program, or individually managed IRAs, or similar programs. A 401k may also be a defined contribution retirement program, that is, the employer makes a regular contribution to your program, generally some small percentage of your salary. From that point, you are on your own. Your employer has fulfilled its obligation up through that date. You are responsible for managing the funds in your 401k, your IRA, your Roth IRA, or some other similar program.

So, let’s review. When you retire either someone else intends to pay your bills, or you intend to pay them. In an inexorably declining number of cases, some entity, on behalf of your former employer, is going to send you money every month from a defined benefit retirement program, presumably some form of a protected trust fund. Otherwise, you will be responsible for managing your savings, investing it appropriately, and generating the cash to meet your needs and wants. This is called portfolio management.

The only escape from having to manage your portfolio when you stop working for money is to have an externally managed pension program or to have someone else pay your bills. If you hire someone to manage your money, you are still responsible. Only a fool becomes a victim.

This Money forum is initially going to focus on portfolio management.

• How does experience tie into this subject? Consider these questions:
  What rate of return might I expect from my portfolio?
• Do I understand the difference between needs and wants?
• Do I understand the fee structures of mutual funds and investment advisors?
• Why doesn’t everyone invest in index funds as Warren Buffett and the late Jack Vogel of Vanguard recommend?
• How reliable are the success stories you hear from your buddies?
• Are the interests of mainstream investment banks and brokers always aligned with my interests?
• Should an individual buy individual stocks?
• How long will my money last?

People can be quite secretive about this subject. Bragging about success is common. Admitting mistakes is rare. But you learn a lot more from people’s investing mistakes than you do about their successes.

This forum will explore questions like these above, hopefully in very transparent an honest fashion.

But we will also discuss Money, and the place money should occupy in your life.