Baby Boomers – What ARE We Going To Do With You?

The demographic that started the practice of naming demographics is once again living up to its name.

BOOM!!  39,000 State of Michigan employees need to be done with work – and soon!  Just like that.  To say nothing of the fact that these folks actually do a lot of work, the intellectual data that leaves with them all by itself will adversely affect most of the state’s departments for years to come.

Buts it’s simple really;  these folks make $65,000 to $120,000 per year.  Newcomers start in under $40k.  Not only that, the new employees come with far less future cost as they are being hired in under pension promises that are much easier for the state to keep.

For the individual state employee, this is also a very simple question.  Not easy by any stretch, but very simple.  Middle school math, along with an excel spreadsheet and some simple assumptions will tell you if you will be leaving Egypt with the rest of the Israelites or staying on for a while.

Here are just a few thoughts to consider – I’ll have more on this in future posts.

  1. Do not fall for the Annuity trap.  When you take your 401k or 457 or whatever you’ve got, and roll it out of ING (which you should do), DON’T buy an annuity.  It is said that “annuities are rarely purchased but often sold.”  Think about this one for a minute and do some research – this is far too expensive a solution to your retirement income dilemma.
  2. On that same thought, don’t sign anything that you do not understand.  Trust is a good thing.  But as we’ve said before, trust everyone, verify everything.  Do not start with the assumption that there are some things that you just won’t understand.  Figure them out.
  3. Do the math on the hard costs for eye care, dental, and the rest of your living expenses.  Don’t project forward with optimism, but look backward and determine what you actually spend every month/year.
  4. Take the next six to twelve months and finally get out of debt.  Pay off the credit cards and car notes.  If you have $1000 per month going out for consumer debt service, it is like having over $200,000 in investments spinning off income.  Is your car and credit card habit really worth $200,000?
  5. Pay for some education about personal finance.  For a few bucks you can buy Dave Ramsey’s book Total Money Makeover.  For a few hundred dollars you can have an analysis done by me or some other fee-based planner that will teach you how to apply 3% inflation, 8% investment return and 4% income from your capital at work.  Personal Finance is NOT a master’s level degree.  It can be learned in 30 minutes and used to make decisions that will serve you well.
  6. Make sure you remove the destructive patterns that are so prevalent in the average investor’s mindset and habits.  These are market timing, track record investing and stock picking. You need to assess the level of uncertainty in your investments that you can live with, and then, using a passive investing approach, diversify away the risk.  This too is easy to understand.  We give a seminar on it each month if you want to learn it.

So, if it feels more like you are being “squeezed out” near the end of your first career as opposed to being hugged, don’t take it personally.  Do the math, and if it makes sense, take their money and run!

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