I was really impressed with an article I stumbled on to in the Atlantic about an author who decided to be open and honest about his financial state. It turns out he is like a majority of the US population: Broke and one problem away from financial disaster. While I found it somewhat depressing that a man at his age is so “stuck”, without any retirement savings, and no end in sight for his working career, I also appreciated his candor and detailed descriptions about the choices he’s made. I highly recommend it!
Also fascinating are the comments at the end of the article. There were so many contributions, that the Atlantic created a whole separate “Notes” article about some of the comments that were left.
As I browsed through the comments, I found one that spoke to me. It was about a community college art teacher that decided to devote a whole lecture on the subject of basic personal finance (even though it had nothing to do with the subject he was supposed to be teaching). While I’ve known these things for many years and they’ve helped me to build a sizable nest egg, it was still worth looking over again. He covers both concepts and basic “spend less than you earn” type stuff. He was shocked to see that it was the most attended, well received class he had ever taught and it was optional for the students. It just goes to show this stuff needs to be taught in schools at a much more detailed rate than it is now.
A couple months ago I was sitting in yet another ALL DAY MEETING with a few of my peers at work and saw something that shocked the hell out of me. I was sitting behind my coworker who is probably about 55 or so. The way we were sitting was somewhat sideways looking forward to a big LCD display that had the meeting content on it. Because he was between me and the LCD screen I happened to be staring straight at the screen of his laptop whenever I looked down.
This guy, we’ll call him “Bob” decided to bring up his 401K account through our internal website. While I tried not to look, I couldn’t help glancing in his direction a few times. At one point he brought up his asset allocation screen that showed where his money was invested. I was SHOCKED to see that he had 100% of his $700,000 retirement fund in the company stock. Now this isn’t some kind of tiny company stock. Think Fortune 100 blue chip stock. Regardless, I couldn’t believe Bob had his entire retirement account in ONE stock. Our company stock has been relatively volatile compared to the overall market and frankly we are always one bad news article away from wild swings in the price. If Bob was 25 I wouldn’t really have thought twice about it (although if he was 25 and had a $700K retirement account I probably would have left my wife and tried to marry him). Unless he’s planning on working to 75 or 80, I just can’t comprehend why he’d think it was a good idea to have zero diversification in his retirement account. Of course maybe this account is a small portion of his overall net worth and I’m just imagining the horror that might be, but statistically, I think he’s probably just got all his eggs in one single basket.
I finally stumbled on to someone at work that is looking at retiring early like I am. I was shocked when her date was two years sooner than mine (we are the same age). It helps that her husband is older than she is and already qualifies for a pension and has a large 401K. She will also qualify for a pension at 55 but she’s looking to retire before age 50!
We only had a short conversation about retirement but I look forward to talking more with her about it. She mentioned that they’d been to a financial adviser and I was thrilled to hear that she used a “fee only” adviser to avoid all the conflicts of interest with the other types. While we haven’t gone to an adviser yet, I’ve been considering it in the next couple years.
I was able to share a few things with her that she wasn’t aware of including that our 401K plan now lets you invest after tax dollars (up to a max of $53,000 a year including pretax) and then lets you do annual ROTH conversions. For us it would allow us to drastically increase our ROTH contributions, although I haven’t even taken full advantage of ROTH’s because we never set one up for my wife. That’s currently the number one thing nagging me in the back of my brain. It’s been foolish for me not to have started a ROTH for her. I found myself justifying by saying that I wanted to get more money put in post tax accounts to help us live during the years before we turn 59.5 even though I KNOW I can access all the ROTH contributions before 59.5. You know how sometimes you just make stupid decisions and can’t explain it? Yeah, this is one for me. My goal for this year is to correct that.
Welcome to Naked Net worth. You won’t find any nudity here but you will see all the naked numbers around our net worth and hopefully you’ll participate in the discussions about money and how to keep yourself pointed in the right direction on your path to financial independence.