The timing of Teacher Appreciation Week (May 7–11) and Mother’s Day (May 13) got me to thinking about what my mom taught me about finance. While mothers may not be teachers in the official sense, they play an important role in teaching us about the world around us.
One of the vexing questions in the investment world is why many investors are inattentive to fees. While Vanguard has helped create a class of investors that’s fee-conscious and fee-aware, the fact remains that many individual investors remain in high-cost funds (and in other high-fee advisory strategies).
On December 16, 2008, the Federal Reserve cut its target for the shortest-term interest rate to nearly 0%. The Fed’s bold policy action was one of many aggressive steps taken to stabilize global financial markets and a U.S. economy that was in freefall. The Fed’s goals have been clear: prevent broad-based wage deflation, lower borrowing costs, rouse investors’ animal spirits, create incentives for risk-taking and, ultimately, investment in new ventures that would create new jobs, the engine of a self-sustaining recovery.
A while back, I wrote about how people often miss the impact of investment costs on wealth accumulation. Today, I want to make sure readers know that it’s as critical for retirees (people spending money) to think about how costs hit their portfolios as it is for people who are still saving. In fact, you might say that by taking a bite out of both income and wealth over time, costs actually hit retirees with a “double whammy.”
The latest figures are out from the Employee Benefit Research Institute (EBRI) in Washington, D.C. Unsurprisingly, “retirement confidence” remains down from its peak in 2007, and is at levels similar to what we saw during the Great Recession.
What’s going on? In 2007, fully 70% of American workers were either “very” or “somewhat” confident about their retirement. By 2011, this group had fallen to 52%, a decline of 18 percentage points. Similarly, the number of workers on the negative side of confidence rose by 18 points—from 29% in 2007 to 47% in 2011. In short, we’ve moved from a 70/30 confidence/no confidence world to a 50/50 world.
