Sunday, April 28, 2013

The Great Apache Bank Crash of 2013—or is it more an epiphany


I have to face facts:  I can’t keep my money in the bank anymore.  I got my bank statement a couple days ago, saw the miniscule interest amount I’d earned last month (on my life savings) and nearly fainted. 

It was little more than a hundred bucks, and given the amount of green I’ve got socked away in there, at the current rate of inflation my nest egg is going to be worth about half of it’s current value when I’m ready to retire.

I know I know, things couild be a lot worse; I’m crying because I’ve got a big wad of dough not growing any bigger?  I can’t help but think back to 2004, the year my mom died.  Online savings accounts were all the rage, and with good reason, they were paying interest rates around 5%.  That was TEN TIMES MORE than what banks are offering now.  CDs & money market accounts?  Why bother, they’re just as pitiful.  For all the schemers out there who would like to get their hands on my savings, I would have to say that banks are certainly not one of ‘em.

And economists say that based on previous financial collapses, interest rates take around 14 years to bottom out before climbing again.  Given that wallop we took in 2008, it’s estimated we won’t see rates climb until 2022.  Good for borrowers, bad for us savers.

 So what’s a saver to do?  Earlier this week, I saw an eye-opening documentary on how much (or little) people are saving, both in the bank and their 401Ks.  It focused on two things, how the economy is preventing many from saving for retirement, and for the lucky ones who are, how their earnings are being eaten up by all the hidden fees involved in those mutual fund accounts managed by brokerage firms like JP Morgan, Schwaab, etc.  You can see the video here:

PBS Frontline:  The Retirement Gamble – Will your 401K ensure a safe retirement?

It made me realize how fortunate I am that the 401K funds offered by my employer are provided by Vanguard (known for their low costs as they deal primarily with index funds, not the actual stock market).   Do I sound like I know what I’m talking about here?  I hope not!  Anyway, my 401K is currently in a Vanguard ‘target fund’ aka ‘Retirement 2025’, where the ratio of stocks (risk) to bonds decreases the closer you get to your target date.  I look at it a couple times a week & while it hasn’t done cartwheels, there’s been a slow but steady growth over the past couple years.

So why aren’t I doing something similar with my personal savings?  Because I see that as ‘real dough’, money I’ve squirreled away that I don’t have to wait until I’m 59 years old to get my hands on (if I wanted to buy a powerboat, for instance).  And frankly, I’m afraid of the risk.  I still see myself as some small-town dreamer who’s more inclined to spend a hundred dollars on lottery tickets than invest in stocks & bonds.  But I no longer have a choice.

.          .          .

Well, I’m back!  I started this a couple days ago, and since then I’ve talked to the good folks at Vanguard.  They recommended (based on my age, my paranoia about playing the stock market) that I invest in one of their ‘Life Strategy Funds’, a selected mix of bonds and stocks.  I said I wasn’t ready to hand over the bulk of my savings just yet, and they said “no one says you have to, make the minimum investment, watch it for a couple months, and go from there.”   Okay.

When I was sixteen & worked at the Olde Southern Pancake & Steak House as a dishwasher, my mom would drive me into town every week to First Federal Bank.  I’d cash my check for $50.00 or so, deposit half of it into my passbook savings account & proudly show Mom the account balance.  I sure do miss those days!

bank passbook

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