A quarter of a century ago, at the age of today’s millennials, I was new to a job. Unencumbered with wife and kids. Saving wasn’t a problem, thanks to habits borne of student loan parsimony. But the money was sitting there in a bank, inert. Doing nothing except disappearing more than it should have been.
One Saturday in the spring of 1993, while puttering around the kitchen basting in the delusion that I wasn’t wasting time, I turned on the radio, listening but really using it as a sort of highbrow Muzak. And this guy was talking about saving and investing and mutual funds. And how it shouldn’t be complicated. And that you’re not talking to a radio celebrity. You’re talking with a friend.
And that was how I stumbled upon Rick Bloom, the guy who got me to invest, although it took a couple of months to get off my wallet. It wasn’t so much healthy skepticism as procrastination. But finally, I placed the toll-free call to the mutual fund company, received the packet, filled it out, sent it back with the check — making sure to fill out the section for automatic monthly investments.
And off I went.
Janus Fund. Scudder International. Twentieth Century Ultra. PBHG Growth. Every month, $100, $75. Keep it going.
Yep, just like you’ve read and heard that it’s supposed to work. Start small. Invest regularly. Be patient. Monitor your holdings, adjusting if the returns suffer over a reasonable time—not two months but maybe a year or more.
In the 25 years since, the funds have changed. My interest in what they call actively managed funds has yielded to index funds and even target-date funds. That really doesn’t matter. What matters is that I did it. And in hindsight, did it in the nick of time.
That’s my message here: Don’t wait. I wish I hadn’t let my student loan paranoia delay my retirement planning when it didn’t have to. It did. But I recovered. So will you.
I was lucky enough that early spring Saturday afternoon in 1993 to stumble upon Rick Bloom’s “Money Talk” show on WXYT-AM 1270, a talk radio station back when the talk actually was worth listening to.
So I have Rick to thank. And so, recently, I picked up the phone and had a nice half-hour conversation with him about my story and his role—but mostly, about the sorry state of retirement planning in this country. His show is long gone, swallowed whole by the trend of infomercials on weekend radio.
“They wanted to sell the interviews,” he says. “I wouldn’t want to do a show like that. I wouldn’t want to do an infomercial.”
He’s still doling out advice to clients and also in a newspaper column and on the internet. He remains on Barron’s list of “America’s Top 1,200 Financial Advisors.” And remains an educator. And opinionated. And the opinions remain familiar to me, a longtime listener—and, now, a first-time caller.
What’s his best advice in planning for retirement? “Take a look at what it actually costs to live. Before you retire, you have to look at what the costs are. If you don’t, five to 10 years later, you could get into trouble.”
So is there, in fact, a retirement crisis? Yes, emphatically.
“One number that scares me,” Bloom says, “is the number of baby boomers who haven’t saved anything for retirement.”
Complicating matters, he says, is that “retirement is a brand new concept.” Back in the ’30s, the average person in retirement lived a year. Now we’re living 30 years.
“We’re living longer and living better,” he says. “People in their 70s are going on cruises.”
And what about this formula that people can retire and live on, say, 80 percent of their pre-retirement income. Well, that may have been true at one time. “You’re going to need a rising income in retirement,” he says. Expenses don’t go down in retirement because you’re active, he says, pointing out, “Everywhere you go, you see seniors who are active.”
Rick has been saying you need a “rising income” since the early ’90s. I know because I heard him say it. And it won’t be the last time in our conversation where his advice is familiar.
Aphorisms of advice I remember: Pay yourself first. Goals and objectives. Also, buying a house should be a quality-of-life issue vs. an investment. Be comfortable with a decision. Walk away from a potential investment if you don’t understand it. Look at paying off high-interest debt as an investment with a guaranteed rate of return.
That advice has remained relatively the same. Obviously, he says, adjustments have to be made for changes in variables such as taxes. And of course, the profusion of investment products.
“There are a lot more investment options today,” he notes, such as exchange-traded funds.
Which leads to the inevitable “paralysis by analysis.” Bloom’s advice?
“If you tried to read everything on the subject (of investing), you wouldn’t do anything. People have to narrow their focus.”
And for Bloom, that focus has been no-load mutual funds, which is what I use to this day.
Bloom says that during his days on radio, the No. 1 criticism her heard from advisers was they preferred he not talk about costs and fees.
“Fees and costs will kill an investment,” he says.
In the epoc of the internet, which was barely a curiosity in his “Money Talk” days, information about fees and costs is at your fingertips. But as is the case with anything digital, reader, beware.
“You need to look at independent information, and that’s one of the challenges,” Bloom says of being an investor in the digital era. “There’s more disinformation than ever before.”
“Wall Street makes things more complicated,” he says. Investors should “focus on the things they feel comfortable with. Stay with what you know.” Too many people “let fear dictate.”
He also urges caution about the role of social media, adding, “People are busier today and tend not to do their research.”
Best advice: “Pay yourself first. It’s corny but true.”
How much to save: “You should save 10 percent of your gross income.”
“Pensions are a thing of the past,” he says. For one thing, “millions are not going to be working for a single company long enough to earn a pension, so they have to save more.” For many, their retirement plan is for their parents to pass away.
In talking with clients, “The hardest part is telling someone they aren’t ready to retire.”
Advice for today’s millennials and young people: “Think about retirement the day they start working.”
The importance of budgeting: “You can’t control what you earn, but you can control what you spend.”
How did the Great Recession affect clients? “People got out of the market and now are afraid to get back in.” But as he points out to what I hope is no one’s surprise, “You can’t invest risk-free.”
Paying for college: Bloom’s response wasn’t so much advice as just general dismay: “There’s something in society that’s out of whack when college costs more than health care. We’ve gotta get control of college costs.”
A suggestion: A child should spend the first two years at a community college before transferring to a four-year college.
Yes, he says, college remains the “best investment.” That said: “It is crazy to have $100,000 to $150,000 in debt. I don’t understand why colleges aren’t doing something.”
What really gets him wound up: The lack of financial education. “They don’t teach personal finance in the schools. You have to have an appreciation in school. It’s still way too easy to lose control of charge cards.”
But in the end, you return to the same timeless question:
“What do you want from your money? People should focus on what they’re trying to achieve.”