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I have a fond memory of my maternal Grandfather sitting me down before I graduated from college and telling me, “Steve, whatever you do, don’t borrow money.” While Grandpa John lived far from an easy life as a dairy farmer in Nebraska, there was no mortgage on the farm when he inherited it after his father died. Circumstances now, however, are just different and heading into retirement with a mortgage might be perfectly reasonable. Quick rule of thumb: Compare the interest rate on your mortgage with your projected investment returns and allocate your dollars to the higher number.

Last week I wrote about how insurance companies often represent themselves as “financial advisors” while they attempt to sell you complicated insurance contracts called annuities. But they aren’t the only ones hawking these fee-laden products. If your employer’s workplace retirement plan uses TIAA, (like UK, Transy, EKU, etc.) chances are you’re invested in an annuity – even if you didn’t realize you chose it. Why do the firms that sell annuities like them? The money they reap in fees.  

First, what is an annuity? While there are many complicated varieties, the simplest is when you pay a lump sum amount and purchase an insurance contract – called an annuity – that promises to pay you a certain amount for the rest of your life. It sounds great because those of us without a pension have to save, invest and then figure out how to take income from those investments all through our retirement – and that can be tricky. Voila! A perfect solution, right? Well, remember the expression, “If it seems too good to be true, it probably is.”

About once every two weeks or so, on average, my wife will receive a mailer inviting her to a free steak dinner – apparently vegetarians aren’t good prospects – that promises to reveal the secret of not running out of money in her golden years. I used to receive the same ones when I worked at UK, so I assume that’s the list she’s on. As I scan the invitations I often skim to the bottom of the page where the fine print explains these firms don’t really offer investment, estate or tax advice. What do they sell? Insurance contracts called annuities. They imply they’re offering educational retirement planning workshops, but their real intent is to sell expensive annuities and life insurance policies.

There was a movie released last year called Living Among Us about vampires who, previously living in the condo up the street undetected, now make themselves public so documentarians can learn how they live and coexist with humans. When I read a summary I instantly thought of the book, The Millionaire Next Door. That title, even more than two decades after it was written, still paints such a crisp mental picture, doesn’t it? Seemingly normal people, living among us in a non-gated community, driving their Chevy Oldsmobuick to work every day, mowing their own lawn on Saturday, but….behind their cover as normal, they’re actually, shall we say it, FINANCIALLY INDEPENDENT! Oh, the horror!

How should you protect yourself against a market downturn right before or during retirement? This New York Times article recommends several actions, including hiring help - being careful to avoid a salesperson or a broker who call themselves advisors but get paid only when they sell you something – in the form of a Certified Financial Planner professional. Hint: I know one I really like.

It is rare but sometimes I read an article that I think is so spot on it makes more sense to share it than cover the same topic. So, here you go, edited for brevity with a link to the full article at the end.

I think my favorite mother-in-law joke has to be Rick Pitino’s when he told his team he wanted them to play “mother-in-law defense – constant harassment.” That’s the first and last quote of Pitino to appear in my blog and, probably, the last mother-in-law joke. The fact is, my mother-in-law is a wonderful, caring person who also happens to make beautiful quilts - the most recent as a Christmas gift to my daughter. 

Now, examined square by square one sees that each is unique in their own color and pattern and is beautiful on their own. Viewed as a whole, however, the quilt becomes magical with an array of color and patterns that is sure to bring a smile to even the grumpiest of coaches. In short, the whole is greater than the sum of the individual parts.

While I have always admired her quilts, it wasn’t until recently, after reading the blog post of a friend and fellow Certified Financial Planner™ professional, Eric Clark from Charlotte, North Carolina, that I saw how closely Judy’s quilts resemble the sometimes-called Quilt Chart, pictured below. Consisting of blocks of color, each representing a different investment asset class, it looks like a beautiful quilt. Examining each block individually one sees how each asset class – Large Cap stocks, Small Cap stocks, Fixed Income, etc. – performed in every year since 2004.

The stock market is sometimes described as a yo-yo on an up escalator: it goes up and down a lot but eventually reaches the next level. History bears that out. Check out these amazing facts about the stock market:

If you’re like me and buy books for gifts, then you may also look for recommendations. In that spirit, below are the books I read during the year – nope, not a single finance or investing book - with a one-sentence description and a thumbs-up or thumbs-down review.

I love Christmas but I find Christmas-time stressful. Let’s face it, the world just seems to spin faster during December. We’re already busy with work and family and then we add a slew of fun things like holiday parties, office open houses, gift buying and decorating to our schedule. Who has time for all this fun?!

Yes, I know, what could possibly be more fun to read than tax tips. Rest assured, this is quick and understandable – and could save you money.

Max out your retirement account contributions