03/08/2006
Another old-guard pension plan bites the dust. Check out today's headline straight from the Motor City:
"GM to Freeze Pension Plans of White-Collar Workers"
That's right, General Motors announced that starting January 1, 2007, it will freeze accrued pension benefits for its approximately 42,000 U.S. salaried employees under the current defined-benefit plan formula and begin a shift toward defined-contribution plans, such as 401k plans.
GM is just the latest high-profile example of corporate America's move away from defined-benefit plans (which place the financial risk on the employer) to defined-contribution plans (which place the financial risk and responsibility for management on the employee). Let's face it, one day all of us will be completely responsible for managing our own retirements, and that means that the burden of generating income for your retirement is on you. And you know what -- in my opinion, that's the way it should be.
I don't know about you, but I don't want anybody else responsible for my life but me. That's not to say that you can't get rational advice and assistance in managing your money, but what it does mean is that you cannot be passive and hope that the corporation or the government will take care of you in your golden years. It's not going to happen, and the sooner you come to this realization, the more time you'll have to prepare and nurture your nest egg.
I see retirement investing as a process of roughly three phases. The first phase is the growth, or accumulation, phase. That's when you are saving and investing in your retirement accounts in preparation for the time when you'll need it. It is critical here that you form the good habits that will allow you to maximize gains in bull markets, and minimize gains when the bears are in control.
The second phase is usually between ages 55 to 60, or when you are about five years away from retirement. Here you need to start thinking about a strategy of growth and income. You want to take a little bit less risk, and minimize those sleepless nights that the stock market can sometimes impose upon us.
The third phase is when you are in your seventies and beyond, and that is when generating income is the overwhelming purpose of your investing strategy.
My Successful Investing service will help you maximize gains in phase one, while helping you transition into phase two. My High Monthly Income service will take you from phase two and into phase three by showing you how to position your assets for both capital appreciation and capital preservation. I invite you all, whatever phase you're in, to check out my services.
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This past week we saw a lot of selling in the stock market, but my friends, all selling is not created equal. The tech sector got the worst of it, with the Nasdaq Composite dropping big time in Monday and Tuesday trading.
Those of you who subscribe to my Successful Investing service were spared from the carnage in techs, as I told you about two weeks ago to get out of any tech stocks, particularly the Nasdaq 100, or QQQQ, before the bears ate you for dinner.
So for those of you who heeded my advice; congratulations. If you hesitated and still didn't get yourself out of techs, it's not too late. You still have time to "check yourself before you wreck yourself" as the saying goes. You need to get rid of your tech holdings as these can fall hard and fast. Remember the late 1990s?
If you haven't yet heeded my advice, or if you are new to the Making Money Alert, be sure to check your techs. You don't want to be holding a bunch of stocks like Google, Dell, eBay or any of the other high-profile techs that ruled the roost in 2005. Techs go up fast, and they fall hard fast too. Don't cling to them in the hopes they'll return to their former glory.
"Little ol' boy in the Panhandle told me the other day you can still make a small fortune in agriculture. Problem is, you got to start with a large one."
— Jim Hightower, former Texas Agricultural Commissioner
If you want to avoid turning your large fortune into a small one, or better yet, if you want to turn your small fortune into a large one, we can help. All it takes is a little knowledge and a lot of discipline.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.