Free From Broke

A Personal Finance Blog for Regular Folks

Glen Craig

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

Credit Cards Don’t Suck, You Suck!

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I wrote last time about how credit cards suck.

While that may be true at times, it may be more the truth that you suck!

Sounds harsh I know.  But a lot of people who have credit card problems need to take a deep breath and look at themselves.

Let’s look at some reasons you say credit cards suck but really you suck:

Late Fees Suck

They sure do!  That’s why they are there.  It’s meant to punish you for being late and hopefully you remember the next time to get your payment in on time.  If there weren’t late fees then everyone would pay late.  If you pay late once it’s an accident and you can ask your credit card company to remove the charge.  If you’re late more often then it’s all your fault and you have to look at your bill/pay system.  You know you can ask to have your due date changed, don’t you?

They Trick You on Rates

Look, they may put the details in small print but the details are still there.  If you didn’t read through them then that’s your fault.  Read the details and ask questions!

The Minimums Are So Low I Can’t Get My Balance Paid

credit card on computer keyboard
Are credit cards really to blame or is it your fault?

Every now and then we need a little help with our finances.  Something come up this month?  You can pay the minimum.  But if you make it a habit to pay the minimum and you can’t afford more then you have to look at your spending habits and your finances.  It’s not the credit card company’s fault you find yourself unable to pay more.

The Interest Rates Are Too High

Why are they high?  Probably because you don’t have good credit and you are a risk.  The credit card is giving you money remember?  It’s like an instant loan.  You know what it would take to go to a bank to get a personal loan just to buy a new sweater?  Very inconvenient!  That’s why the credit card company can charge you their rate.  If you don’t like the high rate then start paying off your credit card balance and make sure your payments are on time.  Then call them up and ask them to lower the rate.  And here’s something else – If you pay your balance on time every month then it doesn’t matter what the rate is because you won’t have to pay interest!

It’s Too Easy to Spend

C’mon!  Seriously?!?  Have some self control.  Take a look at why you think you need to use a credit card so often.  Why are you spending so much?  You can’t blame the credit card company because you can’t control yourself.

Stop blaming credit card companies!

No one told you to get a credit card.  OK, maybe it helps to have one to build up a credit history but it’s not their fault if you abuse the card.  Take control of you situation and start to do something about it!

What do you think?  Is it the spender who sucks?

Credit Cards Suck!

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You head off to college. You’re finally on your own truly feeling like an adult for the first time.  As you head to the cafeteria you pass a table run by a credit card company.  If you sign up today you get a free t-shirt.  Hey, you’ve wanted a credit card and it’s getting close to laundry day so an extra t-shirt will come in handy.  Fast forward a few years and you’re thousands in credit card debt.  Lucky you!

Yeah, credit cards suck!

So you have a big balance that you built up on the card. Wasn’t too bright, you know.  You want to pay it back but you’re trying to make ends meet too.  You get your credit card bill and you see the minimum amount due.  The low amount entices you to pay it.  The extra money can go toward other things like food and rent.  Fast forward a few years and rather than your purchases getting paid off your amount due grows instead.  You look at the interest you’ve paid out and realize it was as much as the original items you bought!

How about this – You need a new refrigerator. You head to the appliance store and find one you like.  As you are getting ready to pay, the salesperson tells you if you open up a credit card with them there will be no payments for 12 months.  A year of no paying would be pretty good.  So you pay the minimum for 12 months.  On the 13th month you see a huge interest charge!  What you didn’t know was if you didn’t pay the whole thing off after 12 months you pay interest on the balance going back a whole year!  Oh, and the rate on the card is like 24%!!  And you thought you got a deal on the price a year back!

Credit cards suck.

Here’s one – Yeah, you had a lot of credit card debt. But you worked your rear off to correct those mistakes and pay it off.  Hours of overtime and scraping by to make sure you don’t have to pay interest payments anymore.  You’ve tuned the page and you’re now a responsible credit card user.  The day comes where you have paid off your entire balance.  You now owe nothing.  Congrats!  You get a letter in the mail a few weeks later saying the credit card company is canceling your account now that your balance is paid off.  Seems you’re not credit worthy now that you’re responsible.

This one’s good – You know you have a high interest rate. You screwed up a few times in the past.  But you have been reliable for 6 months now with no late payments and you have been paying more than the minimum.  You heard that you can call the credit card company and ask to have your rate lowered.  Nervous, you call them up and explain the situation.  To your surprise the CC company is more than happy to lower your rate by a few points.  That wasn’t so hard!  It’s not until some months later that you find out that rate change only applies to NEW purchases.  The old balance is still at the higher rate.  And here’s the kicker – those payments you have been making?  That went to the lower rate balance while the higher rate balance sat back and accrued interest.

Have I mentioned credit cards suck?!?

Last one – You haven’t been the best with your credit card but you’ve been trying.  It’s been tight with the money and you are trying to stretch every dollar out.  Your credit card bill’s due date is the 2nd.  You get paid on the 30th and mail out your bill the day you get paid.  It doesn’t get to the CC company in times and you are charged a late fee of $35.  On top of that your interest rate goes up to 22%.  You call up the company and beg and plead but they won’t do anything since you haven’t had the cleanest credit record the past 6 months.  That $15 CD you bought just cost you a whole lot more!

Yup, credit cards can be killer!

I’ve been in a lot of these situation myself (I remember getting my first credit card on campus and received a Koosh ball too!).  Not fun times being stressed out with credit card debt.

How about you?  What are your credit card horror stories?  Tell me why you think credit cards suck!

Check out the other side of the argument: Credit Cards Don’t Suck, You Suck!

 

50+ Personal Finance, Investing, And Money Tweeps Worth Following

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These days, it’s all about Twitter and the tweeple there. While many (including my husband) see very little point to Twitter, there are, nonetheless, many twitterers that offer useful and interesting information — even if it is only a link to a well-written blog post. Twitter is full of people tweeting about finance-related subjects. It is impossible for me to include a totally comprehensive list of useful money tweeple, so I’m offering 50 of my tweeps for your consideration — and I’m barely scratching the surface.

Before I share my list of 50 tweeps — in no particular order — I’d like to share my Twitter account, and Bankling’s: @MMarquit, @bankling. If you aren’t on this list, add yourself. And share your favorite tweeps as well. We’d love to follow the people you’re following.

Investing Tweeps

If you want investing news and insight, following the right tweeple can provide you with updates, from the latest Dow reading, to real time forex quotes, to the latest happening in the world of gold. Here are a few of the investing tweeps that I follow:

  1. @TLI_Twitter provides regular investing news and updates. Tweets feature useful links to investing-related articles. Blog: Lucrative Investing.
  2. @TopProsTopPicks is more of a stock-picking kind of tweep. Articles on up-and-coming stocks, as well as news and analysis. This is the Twitter account associated with MoneyShow.com.
  3. @jeflin_sg provides in-depth investing commentary and opinion. Blogs at www.jeflin.net.
  4. @FalkinInvesting offers a good mix of investor education, commentary and news. His blog can be read at Stock Trading To Go.
  5. @penny_stocks, as you might imagine, provides tips on hot penny stocks. For those who are interested in the pink sheets and other low-cost investments. Watch out, though, these are risky investments that aren’t for everyone. Web site at www.thehotpennystocks.com.
  6. @tipd I’m rather fond of the folks at Tip’d (and not just because they put me on their “terrific” list). It’s like Digg for finance and investing people. A number of interesting and varied articles on a number of subjects.
  7. @valuestocks offers some interesting observations. I also like the way account holder Andrei looks to stimulate discussion about different investments.
  8. @forex_queen As you might imagine, forex_queen focuses on the currency market. A look at the latest forex trading news and information. Forex is risky, though; there’s a good chance you could lose a lot of money. She is associated with the Forex Profit Accelerator.
  9. @ETFtrends focuses mainly on the increasingly popular world of ETFs. This is the account associated wtih ETF Trends.

Personal Finance Tweeps

I’m a personal finance blog writer, mainly, so this was a very hard category for me to narrow down. Which is why it’s the biggest. However, there are dozens more high quality tweeps that I didn’t have room for.

  1. @jdroth represents the Twitter account of the wildly popular author of the Get Rich Slowly blog. He is known for his personal finance insight and practical, everyday solutions.
  2. @bargainr blogs at Bargaineering and offers a great deal of good financial information — including CD rates and schedules.
  3. @FMFblog provides personal finance tips and good information. Blog: Free Money Finance.
  4. @fcn is the guy behind Five Cent Nickel. He’s all about a slightly edgy look at personal finance. You can get his article feed at @fcnfeed.
  5. @SunFinancial is an electrical engineer who keeps The Sun’s Financial Financial Diary. Features a number useful links in most of his tweets.
  6. @thepassivedad concentrates mostly on ways to generate passive income. He’s a work from home dad blogging about his efforts at The Passive Dad.
  7. @pimpyourfinance offers helpful tips on a number of subjects — and keeps up with the latest financial shenanigans. Blog: www.pimpyourfinances.com.
  8. @holycap offers slightly irreverent, yet helpful information on good financial habits — as well as his Stop Buying Crap blog. You can stop buying crap! Cap can help.
  9. @CashMoneyLife has good, practical advice about money and preparing for the future. His blog, as you might guess, is Cash Money Life.
  10. @freefrombroke does a great job of retweeting what other personal finance and money bloggers are saying. It’s like another list of great tweeple to follow. Blog: Free From Broke.
  11. @Green_Panda focuses mainly on students. Great advice for college students (and the rest of us) on how to manage finances when first starting out. Blog: Green Panda Treehouse.
  12. @moneymanagement is the account for the Blogging for Change Web site. It’s a nonprofit aimed at helping others learn to manage money.
  13. @WideOpenWallet chronicles the real life adventures of a family trying to keep their personal finances in order. Some good thoughts and interesting tidbits. Blog: Wide Open Wallet.
  14. @flexo is the account for the Consumerism Commentary blog. Focus is on the consumer habits view of personal finances.
  15. @bigcajunman provides a look at finances from a Canadian perspective. Sometimes it’s good to see what’s going on in countries other than the U.S. Author of the Canadian Personal Finances Blog.
  16. @ThatOneCaveman provides real life anecdotes and helpful hints on reaching financial freedom. Blog: One Caveman’s Financial Journey.
  17. @mytwodollars is where I go when I want to know the latest outrage. While offering solid personal finance ideas and advice, My Two Dollars also keeps us up to date on all the outrageous money decisions being made by our leaders.

Credit/Debt Tweeps

Credit and debt issues are getting a lot of play right now, and there are plenty of tweeps who have helpful hints, tips and tricks for dealing with debt — and for improving your credit score.

  1. @NCN writes tweets that focus on debt reduction and staying out of debt. Blog: No Credit Needed.
  2. @debtkid is honest about his massive amounts of debt. Tweets — and his Debt Kid blog — keep followers updated on the progress being made, and provide encouragement for those trying to pay down their own debt.
  3. @paidtwice shares thoughts on getting out of credit card debt, and offers tips for dealing with credit card companies. Blog: www.paidtwice.com.
  4. @nodebtplan provides meaningful help on creating a plan to get out of debt and achieve financial freedom. Blogs at No Debt Plan.
  5. @masteryourcard is the Twitter account for the Master Your Card blog. All about responsible use of your credit card — and using it as a personal finance tool.
  6. @takingcharge shares the thoughts of the editor of CreditCards.com. It’s all about credit card issuer news, and tips for using credit wisely.
  7. @EADFL tweets about making a plan to get out of debt, and then stay there. Includes money making and money saving ideas. Blog: Engineer a debt free life.
  8. @debtblackhole is for the geek in me. A “financial mind meld” of sci-fi and escaping debt. Which is like a black hole. Blog: www.debtblackhole.com.

Christian Finance Tweeps

In the last couple of years, Christian Finance has emerged as its own financial category. It’s all about making sure your financial practices are right with God.

  1. @MoneyMatters puts finances into Biblical terms — and even relates what’s going on in the economy with scripture. Blog: Bible Money Matters.
  2. @ChristianPF is just what it sounds like. Twitter account for Christian Personal Finance.
  3. @glblguy looks at scripture for guidance. Shares tweets that sends followers to a range of sites and tweeple offering good information. Blog is Gather Little By Little. You know, like that scripture…
  4. @RichChristian is a “stewardship pastor” blogging at Rich Christian, Poor Christian. Shares a lot of links about money and the Christian way to get rich.
  5. @jameslparis is the editor in chief at ChristianMoney.com.
  6. @bfnJohn blogs at Borrow From None, another scriptural reference.

Money Saving/Frugal Living Tweeps

In this recession, you need all the money saving tips you can get. The economic turmoil has led to a renaissance in frugal living, and there are plenty of tweeple that can help you learn to live a good life on less.

  1. @CouponTweet Two words: Coupons! Deals!
  2. @CouponCravings More coupons! Retweets/replies to a lot of other thrifty types, providing even more useful people to follow. Blog: Coupon Cravings.
  3. @Lynnae blogs at Being Frugal. She is all about living a frugal lifestyle. And she’s one of Walmart’s Eleven Moms.
  4. @5DollarDinners offers rather helpful tips and recipes for keeping your food bill down. Blog: 5 Dollar Dinners.
  5. @mbhunter ofers insights and information on great bargains from around the Web. Blog: Mighty Bargain Hunter.
  6. @crystalpaine offers tips on cutting the weekly shopping bill and using coupons more effectively. Her blog is www.moneysavingmom.com.
  7. @frugalbabe is all about being frugal while living a mostly sustainable lifestyle. Intersperses frugality with helpful information on going organic. Blog at www.frugalbabe.com.

Tax Tweeps

Because it’s tax season, I offer you some tweeps that can keep you up to date on things like tax credits and deductions. With all the new stuff coming out, it’s nice to have someone who can help you keep up with these things.

  1. @taxfoundation monitors and shares fiscal policy as it relates to taxes. The Twitter account for the Tax Foundation.
  2. @taxgirl is sassy and smart, offering the tax insight of an actual lawyer. Blog: www.taxgirl.com.
  3. @taxtweet authors the Don’t Mess With Taxes blog and offers updates on the economy and tax policy.
  4. @jkharris is the CEO (and founder) of a tax representation company, JK Harris and Company. Has his finger on the pulse of tax trends.
  5. @taxbrain offers links to helpful tax information, education, calculators and more. Web site: www.taxbrain.com.
  6. @althetaxman is a financial and tax planner. Offers helpful tax prep tips and links to informative seminars.
  7. @ifileonline specializes in online filing information and tax software tips and recommendations.

There you have it! Follow my tweeps and learn more about the financial world around you!

Note from FFB: Check out the Free From Broke Guide to Twitter!

Who Do You Follow?

Miranda writes for Bankling, a personal finance portal, which contains both a blog, and a tools section that contains resources like the best bank CD rates, the best savings account rates, online mortgage rate calculators, and more.