It’s a new year, so here are a few investment and retirement thoughts that come to mind for 2012.
When it comes to investing, Theme #1 among investors, especially among the majority of the retired or conservative crowd, continues to be the insatiable search for yield. In this regard, I would encourage investors not to be misled by the spectacular total returns on fixed income markets. Long-term Treasury bonds were up 30% in 2011 (as measured by the Barclays Long-Term Treasury Index). That substantial total return arose mainly from a large capital gain due to falling interest rates. (Recall the sequence: Panic about Europe and a volatile U.S. stock market led to a flight to Treasuries by global investors, which drove up bond prices—i.e., resulting in a capital gain on bonds—and consequently drove down their yields.)
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Yesterday, I pulled up to an automated teller machine (ATM) in my automatic-transmission car, opened my automatic car windows, and withdrew cash that had been automatically deposited in my bank account on payday. I then used some of the cash to take my car through an automatic car wash, and when I arrived home, I used the automatic garage door button to close the door behind me. Then I walked into the house just in time to hear the dishwasher beep to let me know it had automatically shut off after automatically drying my dishes. (I just wish it would automatically empty itself.)
We live in a set-it-and-forget-it world, and in most cases, the convenience of automation is fantastic. But, when it comes to money, I’m a proponent of thoughtful automation, or “thoughtomation.” What I mean by thoughtomation is simple: Use automated investment and payment systems, but keep track of them and routinely reassess whether they’re working well for your financial goals. In other words, when it comes to your money, set it, but don’t forget it.
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A few months ago, my wife and I opened a small savings account for our young children to help teach them the power of saving. Compound interest. All that good stuff.
We talked about taking their pennies, dimes, and birthday checks from family and friends and depositing them down at the local savings institution. It’s always neat to see the coin machine sort all those round pieces of metal in a fraction of the time it used to take me to put them into paper rolls. (There used to be some long rainy days growing up.)
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We recently asked college students for their thoughts about retirement—when they want to retire, when they’ll start saving, and what they hope to do once they’re retired. Here’s what they told us.
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My brother-in-law will be graduating from college in a few days, and that has me thinking back to when I started my career a few years ago.
As I set out on my own, I had many questions about finances: How much should I spend on rent? Should I have a roommate? What car should I buy, and how I will afford to keep gas in the tank? (And, of course, how many pairs of shoes can I afford?)
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