Diamonds and Dogs #24

Dec 11, 2014 by

In each post of the Money Counselor “Diamonds & Dogs” series, I pick three items—an article, a website, a video, an image—that in my humble opinion would be especially valuable—the Diamonds—in helping Money Counselor readers make better money choices. And to contrast with the three Diamonds, I pick one lame item—the Dog.

money idea gems3 Diamonds

  • As intended by Zee at the blog Work To Not Work, the improbable post title “Early Retirement Is Ruining My Life” got my attention. Turns out the post comprised a cleverly sarcastic take on the life effects of saving half of one’s income as part of a plan to retire early. I found creative and entertaining Zee’s way of helping the reader think about ‘the horrors’ of frugality and the shackles we must wear if we choose a goal of early retirement over current (over) consumption. Evidently Zee was a bit too clever for some; since I first read the post, a note’s been added highlighting that, hellll-ooooh, the author’s being sarcastic here gang!
  • I really enjoy Dee’s stuff at the blog Color Me Frugal. (In fact, I like it so well I just added CMF to the Money Counselor blogroll!) Typical of the sort of thinking and writing Dee does is her “Best Money Tip: Choose Your Own Financial Age“. Dee makes the, unfortunately shocking to many, point that you can actually choose your standard of living! Dee suggests that you “pick an age when you had enough money to get by, and continue to live like you are that age for years after the fact.” Just because your income goes up doesn’t mean you’re obliged to upgrade your car, your home, your wardrobe, and everything else about your lifestyle, right? I mean, what’s the point of all the upgrading, really? To send a message to the world that you earn a lot of money? Whoopee. You can instead choose (like Zee has, above, and Dee) frugality, saving, and early retirement!
  • You know how much I dislike active money management. Justin (retired at age 33!) at Root of Good highlights a similar theme wonderfully in “Starve the Army of Hungry Money Managers“. He recommends DIY investing instead of hiring a financial advisor. Justin’s prescription: “Invest in an adequately diversified portfolio of low cost passive investments and hold for the long term.” To help make this happen he further recommends Vanguard, and I wholeheartedly agree. John Bogle and Vanguard are the small investor’s best—and perhaps only—true friends in the investing world.

lame money adviceA Dog

And just to give one small example of the reality that enemies of the small investor populate the professional investing world, how about this article from Bloomberg: “Brokers Lure Soldiers Out of Low-Fee Federal Retirement Plan“. If there’s one thing that galls a money manager or financial advisor more than anything else it’s a small investor who’s not paying big investment fees. The nerve!

Bloomberg relates the story of how former U.S. Labor Department Economist John Turner went undercover to investigate his suspicions that brokers were “encouraging federal workers to ditch their top-flight retirement plan.” Mr. Turner phoned representatives at companies like Bank of America, Charles Schwab, and Wells Fargo, identified himself as a potential client who needed advice about handling his nest egg. Though Turner told the representatives that his retirement savings were in the federal employee Thrift Savings Plan—an extremely low fee 401(k)-type program—every private sector financial services firm representative except one advised Turner to roll his money into an IRA. Mysteriously, none mentioned that Mr. Turner’s savings would then be vulnerable to much higher investing fees.

Understand that the average fund fee in the Thrift Savings Plan is 0.029%. That’s 29 cents for every $1,000 invested. The average 401(k) investor pays fund fees 20 times higher!

Evidently financial services firms’ campaign to drive money from the ultra-cheap Thrift Savings Plan to higher cost IRAs has been largely successful: In 2013 workers who left jobs with the federal government transferred $10 billion out of the Thrift Savings Plan.

Nominations Please

Do you have a nomination for a Diamond or Dog? Send it to me please. I’ll give you credit if I use it in a “Diamonds and Dogs” post.

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  • Thanks for the mention, Kurt! I love your “dog” at the end. The TSP is perhaps the best retirement savings program out there, and it would be crazy for those feds/military with access to it to invest anywhere else before maxing the TSP.

    Heck, I wish I could get access to it. Here I am paying 0.05% or more for Admiral funds at Vanguard (except Mrs. RoG’s 401k where she has Vanguard institutional funds at 0.02%+).

    • You’re welcome Justin! Yeah, there’s no low to which many financial services reps won’t stoop. They justify their suggestion to ditch the Thrift Savings Plan by saying the investor is paying for their investment advice. Unmentioned is that no financial advisor on the planet can consistently beat (after expenses) low-cost passive index funds, as you point out!

  • Dee

    Thanks so much for the shout out, Kurt! I’m glad you mentioned that post from Zee because I had missed that one- good stuff! Also thank you so much for the addition to your blogroll!

    • You’re welcome on both counts. I don’t just do link exchanges to build my blogroll–these are sites that offer genuine value and that I think Money Counselor’s readers will enjoy. Hope a few come your way…

  • Hey Kurt, thanks for mentioning me! I had been away on vacation and am just trying to catch up on everything here. I’m honored to be included in your round up!

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