Stop The Retirement Ripoff – Interview With David B Loeper

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Have you wondered how good your retirement accounts are? Is your retirement money getting eaten up by fees you don’t see?  With the way the stock market has been the last year many people have seen their retirement portfolio’s nosedive.  Many people are no longer confident that their retirement savings will support them.  How can you protect your retirement savings so you can live the life you want when your working years are over?

Enter author and financial adviser David B Loeper. Mr Loeper has a new book out – Stop the Retirement Rip-off: How to Avoid Hidden Fees and Keep More of Your Money (John Wiley & Sons, April 2009) – which aims to help workers get the most out of their retirement accounts and avoid costly fees.

Mr. Loeper, what prompted you to write your book, “Stop the Retirement Rip-off: How to Avoid Hidden Fees and Keep More of Your Money“?  How bad are hidden fees in retirement accounts?

I noticed on my own personal 401k statement a column that said “Fees and Expenses” and the amount on the statement said zero.  As a trustee of our plan having just gone through our annual negotiation with our vendor I knew the fees weren’t zero and this struck me as being more than misleading.  I thought it was unethical.  So I endeavored to calculate what I was personally paying.  That “zero” expense was in reality over $1,500 I was personally paying, not to mention the thousands the company was spending on the plan as well.  Despite being a trustee and having more than 20 years of retirement plan experience, it took me nearly 30 minutes to dig through everything and figure out what I was paying.  I thought to myself, if it takes me this long with me being a trustee and knowing where to look, what are the chances any of my employees would be able to figure it out?  I started researching it more and found a Government Accountability Office study that showed more than 80% of plan participants do not know what, if anything, they are paying.  With the financial services industry lobbying hard to keep these costs hidden, and participant’s not knowing they are being ripped-off, I thought the only way to get this fixed is to educate participants, show them how to figure out if they are being skimmed and tell them how to coach their employer to fix it.  That is exactly what the book does.

What’s the difference in a percentage point or two in expense fees
and why should we care?

The difference between a point or two is expenses is MASSIVE.  An excess fee of 1.5% would cost a twenty five year old couple that each saves $2,500 a year with a $1,000 match OVER $1 million (or about ONE THIRD of their wealth) at age 65.  (see  The OTHER Millionaire You Make ).

How do I know if a plan I’m invested in has hidden fees?

Reading the book and following the step by step instructions is really the only way you will know.  That is the problem.  The fees are hidden and it is legal to do so.  In many cases your employer doesn’t even know.  You won’t know if you have hidden fees without doing a little homework.  Is it worth a few hours of your time to find out?  I estimate over 90% of all retirement plans have excessive fees that cost you your lifestyle in retirement.  Your statements may provide SOME information and starting with expense ratios of your funds can give you a clue, but there are all kinds of schemes to hide expenses from you.  A good place to start is look if you have a large cap index fund.  The going rate for a fair expense ratio for a large cap index fund should be no more than 0.10% annually.  If you are paying more (it is common to have such funds priced 3-5 times what is otherwise available) you are being ripped off.  We are not talking about the difference between a Lexus and a Camry.  We are talking about paying Lexus prices for a Camry!

Where can we put our retirement money to avoid costs and build up
enough to retire at the same time?

Anyone that answers this specifically without knowing the circumstances of the person is selling something.  In general, low cost index funds are what we use to construct portfolios to serve each of our employee’s and client’s personal needs.  They completely avoid the risk of materially underperforming and avoid needless expenses with certainty in exchange for having no risk of out performing.  The value of avoiding underperforming is worth that trade off.

Realistically, what does it take for the average person to retire?

A well thought out plan that identifies ideal and acceptable goals with balanced confidence that avoids too much uncertainty and needless lifestyle sacrifice.  We call this Wealthcare.

How are 401(k) plans as a retirement vehicle and what do we have to
look out for?

It depends on the plan.  They can be great, and they can be terrible.  Looking out for more than expenses is important too.  Active management gambles, auto pilot target date funds, insurance company products and fund wrappers, conflicted advice are all HUGE warning signs that you might be better off investing outside of your 401k (or 403b, 457 plan).

That’s a lot to digest, but it seems like it’s essential that we have to look into our retirement plans ourselves and make sure we are getting what we pay for!

Thank you for your time and insight Mr. Loeper!

You can purchase your copy of  Stop the Retirement Rip-off: How to Avoid Hidden Fees and Keep More of Your Money on Amazon.

A popular speaker and writer, DAVID B. LOEPER is the CEO and founder of Financeware, Inc. doing business as Wealthcare Capital Management in Richmond, VA. He is author of the top selling book Stop the 401(k) Rip-off!, three other books being released in 2009 by John Wiley & Sons (Stop the Retirement Rip-off, Stop the Investing Rip-off and The Four Pillars of Retirement Plans). He served on the Investment Advisory Committee of the $30 billion Virginia Retirement System and was chairman of the Advisory Council for the Investment Management Consultants Association (IMCA). He earned the CIMA® designation (Certified Investment Management Analyst) from Wharton Business School in 1990 in conjunction with IMCA.

Credit Cards Are Just A Tool

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I wrote two articles recently that looked at two different arguments about credits:

Credit Cards Suck!

Credit Cards Don’t Suck, You Suck!

You can imagine I received a vast array of opinions on the matter between both articles!  Credit cards cause heated debates with lots of people either loving them or hating them.

Let me tell you what I really think:  Credit cards are just a tool!

That’s it! They are a tool just like money is tool.  They are neither good nor bad.  See, it’s all in how you use them.

For many, credit cards are a useful tool that allows them instant loans for purchases; online payments; rewards points; builds up credit history; extends warranties; tracks spending; and more!  Odds are these people are responsible spenders who pay off most, if not all, of their balances every month.  Credit cards help them get what they need and add a few perks as well.

For others, credit cards are the bane of their finances! For these folks credit cards have high rates; exorbitant late fees; unclear terms; ruins their credit scores; creates a temptation to spend, and worse.  Many of these consumers spend way too much and don’t keep a good enough track of their finances and budget.  For them credit cards are horrible.

The point here is that credit cards, in of themselves, are the same for both types of users. The cards don’t really change.  How one uses them changes!

In my credit card history I’ve both loved and hated them.  At first they were this exciting piece of plastic that represented my financial freedom.  Then that freedom led to chains of debt and resentment.  Now that I’m out of credit card debt I understand that it was me all along who controlled what my credit card experience would be.

So if you hate or love credit cards, or your emotions run somewhere in between, understand that you are the master of your destiny.  You control your spending decisions so it’s up to you to decide whether credit cards are a useful tool or a useless tool!

How do you feel about credit cards?

Creative Commons License photo credit: Fosforix

Way’s To Save On Mother’s Day

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Mother’s Day is quickly approaching!  It’s easily a day you can go crazy taking care of the moms in your life.  But there are ways you can be frugal for Mother’s Day!

Here are some frugal Mother’s Day ideas:

Cards – You must know you don’t have to go to the local card store and buy cards, right?  Remember when you were a kid and you heard Mom say that a present you made was the best?  Yup, still applies!  That Mom in your life will so appreciate it if you take the time to create a card on your own rather than buy a store card.  Got kids?  Have them craft together an awesome card that shows off their love.  Mom will love it!

Photos – Get together some great photos of you and that special Mom (or Mom and the kids).  In today’s age of digital cameras it should be easy.  Craft a mural of different photos for Mom and design and frame it yourself.  You can also find some of your favorite photos for Mom and create a photo album for her.

Dinner – Going out on Mother’s Day can be hectic.  Even if you have reservations the restaurants will be crowded full of other families celebrating Mother’s Day.  And you’ll pay more just because of the day.  Instead egt the kids together and make dinner for her yourself!  She’ll appreciate the effort and you save on hassle and cost.  Extra bonus can be breakfast in bed for Mom!

FlowersFlower companies can’t wait until Mother’s Day!  They haven’t been able to jack up their prices since Valentine’s Day!  If you want to help their bottom line then go out on Mother’s Day and get your special Mom some flowers.  She’ll appreciate it for sure just don’t tell her what you spent!  If you have an understanding, frugal Mom to celebrate then get her flowers a day or two before hand when the price isn’t all jacked up!  Heck, even the day after will be tons cheaper (though she may think you forgot so be careful waiting).  If you have to have them on Mother’s Day then make sure you plan ahead and check online for discounts and coupons.

No Work Day – Mom does a lot doesn’t she?  That’s why you celebrate her this day.  Take it a step further and institute a no-work day for Mom.  She’s not allowed to do any house tasks.  Instead you’ll take over so Mom can have a day of relaxation and you can show her you appreciate all she does.

Picnic – Get a lunch (or brunch) together and head out to a local park for a picnic.  Spend it out in the sun with all of the blooming flowers and trees.  Go and have a great family day!  After all, it’s Mom who’s helped make the family as awesome as it is.

Mix Tape – OK, maybe you won’t make a tape per se (unless she still has a tape player).  But a CD or MP3 play list of some of her favorite songs is still a great considerate gift.  “Mix Tapes are cheesy,” you say.  Maybe, but they are still fun to receive and she’ll love the work you put into it.  Find songs that tie into special occasions you shared.  Put together some of her favorite songs.  Find songs that will remind her of you and the family.  Get creative!

Mother’s Day is about the special Moms in you life.  It doesn’t have to be about spending a lot of money.  Go and make that Mom feel loved and appreciated!

What are some other frugal ideas for Mother’s Day?

Creative Commons License photo credit: kalandrakas

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