My company recently updated their benefits offerings to include financial knowledge courses (just shows how great my company is!). This tells me a couple of things…
- A good retirement (e.g. 401K) strategy for your employees can retain and attract talent.
- The retirement/investing world can be daunting even for those that have the money be a player in it.
This has also caused a quite a buzz at work. I have had a few debates from what is the right investment portfolio to college tuition planning for children to starting small side businesses to create passive income. As a personal finance nerd, I have had an awesome time. I love sharing experience and knowledge with others. Here are a couple of stories I found interesting and what might be helpful to you.
The Lost Investor
I caught up with a former manager who has a three year old daughter and dreams of retiring in ten to fifteen years. Sounds great I told him which he promptly returned a depressive swirl complaints about endless work and his measly 401K. I counted with “No way!” He started in the company’s heyday and rode some pretty prosperous times. My 401K is solid, so I thought his must have been stellar. So I probed a bit more to figure out what was going on. To be fair, he married and became a parent late in life, I’m sure the new lifestyle and its costs gave a quick sucker punch to his savings and drove his spending through the roof. But then he told me something that violated a very basic tenet of investing; his 401K consisted of 50% company stock. Half your retirement in only one investment is a big fat red flag; sound the sirens immediately. I was shocked. Here is a guy that took care of entire department budgets and advocated for his staff’s promotions and raises, and he staked his entire retirement future on one investment. Top it off with the fact that the other 50% was in a index fund which meant his asset allocation was 100% stock. I was actually scared for him.
I will advise when you meet someone like this, do not judge. Keep a straight face. Everybody has their own story. Be empathetic to the dreamers and schemers, but throw some logic at them.
Once the dust settled, my ex-manager started asking about my retirement plans and I stopped him right there. I gave him an action item to sign up for the financial knowledge courses the company offered and talk to me after that. As much as you may want to help an old friend or colleague, they’ve got to learn the basics. Not just the financial terms like diversification, but they have to understand where their spending, risk tolerance, and goals are at. If they are completely uninterested in learning these things, then I would advise them to hire a financial adviser from trusted referrals.
So first piece of advice: Learn about your investment/retirement options. Learn to be interested in them. If you can’t/won’t do either, learn how to judge a financial adviser really well.
My counterpart on another team and I are the same age, same career and retirement goals, and we talk “shop” pretty frequently. I’ve shared my investment and retirement strategy which is essentially to keep my yearly expenses below $40,000/year, tap out my 401K and Roth IRA, and push everything else into mutual funds and choice REITs/stocks. My calculated retirement age is between 45-50 given these factors. He, just as many people, wants to retire early too.
Lately he’s been wanting to know every single stock in my investment portfolio. Again, no problem, I give that knowledge freely to friends. However, in hindsight, I would have done something differently.
My colleague’s goal was to figure out his retirement sources. Which is great but his goals for retirement living probably differ from mine. I choose REITs, high dividend yield stocks, etc. because that’s what I’ve decided to use as passive income in the future. Many others have different routes like property investment or more creative outlets like blogs and teaching courses for example; I have no desire to be a property manager and hope to spend most of my time volunteering in different countries. I also only selected investments that are in my realm of expertise. Usually I follow the industry as a whole and utilize that knowledge to look for key risk/benefit indicators that fit my portfolio. For him, he is more likely to follow local economy and benefit from an extensive local family network; he might be better off looking into investment property or opening a small business. Who knows, but it is likely that my projected passive income wouldn’t cover his retirement plans.
So for those that are chomping at the bit to get into investing my advice is this: There are no home runs, no perfect investments. There is only the right investment for what you hope to accomplish.
The Overall Experience
So I came through with a third revelation after talking to so many people about their investment plans. Money is still a very taboo subject. I talk about money with family, friends, co-workers, even strangers with whom I share an Uber pool. I have no problem sharing this information or asking others about similar details. It is no different then talking about the daily weather patterns.
This was not the case with my fellow colleagues. There were several instances where we spoke in whispers. A couple of times they would actually look around to make sure no one was around before they told me about their fears about retirement or how they were investing for their child’s college education. I found this really odd, but completely understandable.
My final piece of advice to EVERYONE: Talk about your finances with someone, preferably someone NOT trying to sell you something. Learn to think about the future and to own your choices by having those words come out of your mouth.