AssetBuilder’s Scott Burns: Five Tips for Weathering the Current Financial Crisis
Burns and Co-Author Laurence J. Kotlikoff Say Specific Decisions Can Make a Big Difference in Your Personal Finances
Scott Burns, chief investment strategist for AssetBuilder, and Laurence J. Kotlikoff, his co-author of the new book “Spend ’Til the End: The Revolutionary Guide to Raising Your Living Standard -- Today and When You Retire” (Simon and Schuster, 2008), offer small investors the following six tips for weathering the current financial storm – and securing their long-term living standards.
1. A tip for retirees: Buy TIPs.
For households that are retired or close to it and relying on the stock market to finance their retirements, moving their funds to inflation-protected long-term Treasury bonds – known as TIPs -- makes good sense. So does using their regular financial assets to pay off their mortgages. There is no guarantee the stock market will rebound any time soon. And it could get worse before it gets better.
2. Another tip for retirees: See if Uncle Sam will give you a better deal on Social Security.
Retired or soon-to-be retired households should ensure they are getting the best possible deal from Social Security. This includes considering repaying the Social Security benefits received in the past and reapplying for higher benefits. It also includes deciding when to take Social Security, integrating that decision with the timing of retirement account withdrawals, and deciding which account to tap first.
3. For younger workers: Keep investing in your 401(k) -- but consider a Roth account.
Younger workers with money invested in the stock market and relatively secure employment should know this is no time to sell. The market is in a panic, but it will come back over time. Had you purchased stock the day before the crash in 1929 and held it for several decades, you would have done just fine -- indeed, much better than investing in bonds. Stock prices are incredibly low, so this is actually a very good time to contribute more to one’s retirement plan and to allocate those contributions to the purchase of low-cost stock index funds. But given the potential fiscal burden facing the government, consider contributing to a Roth rather than a regular 401(k) account.
4. Consider paying down your mortgage.
Another thing that makes good sense is using any regular assets you have to pay down your mortgage. Doing so is a completely safe investment and will, most likely, save you on taxes, as surprising as that sounds. The one caveat here, and it’s a big one, is inflation. Inflation has been running very high -- about 6 percent -- over the past 12 months. If that continues, you probably don’t want to pay down your mortgage (certainly not if it’s a long-term mortgage). The reason is that inflation will erode the real value of your monthly mortgage payments.
5. Be opportunistic in looking for a better job.
Workers without strong job security should be on the lookout for securing, if not raising, their living standard by switching jobs. Even as unemployment rises and hundreds of thousands of jobs are being destroyed, there are also hundreds of thousands of new jobs opening up. In a period of economic turmoil, new and highly advantageous job opportunities often become available. Don’t be discouraged; this is a time to search harder, not sit back and say it’s hopeless. For workers in adversely impacted industries who are finding few alternative job openings and don’t have the skills to switch careers, this may be the time to attain those skills – e.g., it may be time to consider obtaining a higher degree.
To arrange an interview with Scott Burns or Laurence Kotlikoff, contact Cathy Baradell at email@example.com or 972-235-3439.
About Scott Burns
Scott Burns is a newspaper columnist and author who has covered personal finance and investments for nearly 40 years. Today, he is one of the five most widely read personal finance writers in the country, according to The Dallas Morning News. In 2006, he co-founded AssetBuilder, a Registered Investment Advisor (RIA), where he serves as chief investment strategist.
Burns and Laurence J. Kotlikoff are co-authors of “Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard -- Today and When You Retire” (Simon & Schuster, 2008) and of “The Coming Generational Storm: What You Need to Know About America’s Economic Future” (MIT Press, 2004).
AssetBuilder offers weary investors a science-based alternative to the unnecessary costs, risks and complexity of traditional Wall Street firms. Co-founded by personal finance writer Scott Burns, the company provides customers a menu of pre-constructed, risk-managed portfolios that make choosing and implementing a personal investment strategy simpler than ever. Based in Dallas, AssetBuilder is a Registered Investment Advisor. For more information, visit the company’s Web site at www.AssetBuilder.com.
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