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It is very telling when people make this sort of remark. Please do yourself a huge favor and learn the basic principles of prudent investing. They are simple and can be used to anyone's advantage. Diversification avoids overexposure to a single company. Staying the course helps one avoid foolish decisions, such as selling at a bottom in a panic then missing out on the recovery.
1. Make a reasonable asset allocation plan. (How much in stocks, bonds, cash. Diversify.)
2. Costs compound against you, so keep them low. Avoid unnecessary fees and use tax law to your advantage.
3. Re-balance on some reasonable schedule.
4. Stay the course.
There it is, the recipe for investing success. Anyone can do it.
I'm so happy an expert is in the house.
Let me ask you this, if you buy preferred stocks or upper series bonds in a huge company that's been solid for years like General Electric with tons of assets is it probable that you could lose all your investment should the company file bankruptcy?
How about those preferred stocks in a bank that's been solid for 40-50 years until the wave of a wand (pen) that says "you're not solid enough for us, we're taking over unless you do XYZ" and your stock drops 75% in about one day as the bank says "we'll work through this, we're doing XYZ as asked and should pull through"?
Now please correct me (and my broker btw) if I'm wrong in this statement "when you hold series bonds, especially the higher end senior series bonds you are (supposed to be) protected in a bankruptcy situation"
If a bankruptcy does occur the bond holders by law get paid in order of their seniority before all others get paid then the preferred stock holders get paid via seniority and if anything is left the regular shareholders get something.
Debtors get paid depending on their placement in the seniority line, it could be before bonds, in the middle somewhere or after.
Secondly, please tell me when in the history of bankruptcy law has all of the assets of a company been seized, the bond/stockholders been told "to hell with you" and half the assets given to ONE group (who happened to be a political supporter of the current ruler)?
I'd love to know if it's a higher count than NEVER EVER before in history.
How do you plan for something like that? That'd be like trying to plan for the government swooping in, taking your house and giving the house that you've paid for over the years to someone else who they think deserves it. Oh and through the whole process you're blocked from selling it to anyone.
Yeah, try planning for that Buffet Jr.!
So much for retirement savings...
No, she was complaining that her mother, after a lifetime of working, is "supposed to live" on her SS check and small pension. That is not at all true. SS benefits have never been intended to replace 100% of anyone's income. The pension, while small, is something most people, after a lifetime of working, don't have at all.
There is absolutely no way we can support a system which would pay everyone 100% of their working income. Let's do ourselves a favor and not pretend otherwise.
Is it me you are talking about? I posted earlier about my Mom's $400 pension. First off I wasn't "complaining" just saying it's already a low amount (but hers is elderly SS). Aside from that, she did the best she could. My father got a brain injury when I was 5 and my brother 12. If he died she would have had insurance, but he didn't. So she was forced into the workforce for the first time in her life with a high school education in 1967...a time with no jobs with livable wages for women (she became a secretary) and no day care or other community supports like there are now. Do you know how hard it is to raise 2 kids alone on a secretaries salary in 1967?/ And you're going to blame her because she didn't manage to put away $500,000.00?
Good grief. I'm not an expert, I'm an ordinary person who has taken the time to read up on the subject. Something nearly everyone can do.
Quote:
Originally Posted by jimj
Let me ask you this, if you buy preferred stocks or upper series bonds in a huge company that's been solid for years like General Electric with tons of assets is it probable that you could lose all your investment should the company file bankruptcy?
Of course. Hence, the reason "diversify" is part of the simple recipe for successful investing. Buy broad market indexes and eliminate overexposure to any particular security or sector. Problem solved.
Quote:
Originally Posted by jimj
How about those preferred stocks in a bank that's been solid for 40-50 years until the wave of a wand (pen) that says "you're not solid enough for us, we're taking over unless you do XYZ" and your stock drops 75% in about one day as the bank says "we'll work through this, we're doing XYZ as asked and should pull through"?
Buy broad market indexes and eliminate overexposure to any particular security or sector. Problem solved.
Quote:
Originally Posted by jimj
Now please correct me (and my broker btw) if I'm wrong in this statement "when you hold series bonds, especially the higher end senior series bonds you are (supposed to be) protected in a bankruptcy situation"
If a bankruptcy does occur the bond holders by law get paid in order of their seniority before all others get paid then the preferred stock holders get paid via seniority and if anything is left the regular shareholders get something.
Buy broad market indexes and eliminate overexposure to any particular security or sector. Problem solved. As to your broker, stop paying a broker. Costs compound against you.
Quote:
Originally Posted by jimj
Debtors get paid depending on their placement in the seniority line, it could be before bonds, in the middle somewhere or after.
Secondly, please tell me when in the history of bankruptcy law has all of the assets of a company been seized, the bond/stockholders been told "to hell with you" and half the assets given to ONE group (who happened to be a political supporter of the current ruler)?
I'd love to know if it's a higher count than NEVER EVER before in history.
How do you plan for something like that? That'd be like trying to plan for the government swooping in, taking your house and giving the house that you've paid for over the years to someone else who they think deserves it. Oh and through the whole process you're blocked from selling it to anyone.
I don't plan for it. I minimize the risk by investing only in broad market indexes.
Quote:
Originally Posted by jimj
Yeah, try planning for that Buffet Jr.!
So much for retirement savings...
Warren Buffett thinks ordinary folks should all be in broad market index funds. Good advice.
Is it me you are talking about? I posted earlier about my Mom's $400 pension. First off I wasn't "complaining" just saying it's already a low amount (but hers is elderly SS). Aside from that, she did the best she could. My father got a brain injury when I was 5 and my brother 12. If he died she would have had insurance, but he didn't. So she was forced into the workforce for the first time in her life with a high school education in 1967...a time with no jobs with livable wages for women (she became a secretary) and no day care or other community supports like there are now. Do you know how hard it is to raise 2 kids alone on a secretaries salary in 1967?/ And you're going to blame her because she didn't manage to put away $500,000.00?
I believe it was you.
I'm not "blaming her", I am reacting to your remark that your mom is "supposed to live" on her SS benefits and her pension. Who promised her that?
I think more of the elderly than the disabled. My Mom worked her entire adult life and is supposed to live on $1100 and change a month SS + a $400 monthly pension. Jobs for women in the 60's and 70's didn't pay much, so her SS isn't much as it is.
This particular potential cut, mentioned in the OP, is not a cut to elderly pensioneers on old-age social security. That program is fully funded (for the next couple of decades anyhow).
SSDI is a different program, funded separately. SSDI is for working-age people (18-65) who have declared a disability. It's administered by the social security administration, which is where its similarities to old-age social security end.
One guy I met a few years ago spoke for much of the local population; he said "All I had to do was tell them I'm an alcoholic and I'm depressed- and I get everything for free!"
Since I've been in this area, I've known very few individuals in the middleaged+ age groups who AREN'T "on disability." And only two have medical conditions: one has out-of-control diabetes, the other has chronic pain from an on-the-job injury. All of the others are on SSDI- and everything that goes along with it- because of drug/alcohol abuse.
Now that the DSM has a category called "Substance Abuse DISORDER," it's going to get worse. Previously, individuals- or more often their health care providers- simply claimed they had mental health issues due to prolonged drug/alcohol abuse. But while I keep reading about 'poor choices' in terms of healthy employed adults getting food stamps, etc., I don't see anyone complaining about this topic.
The guy I mentioned at the top of this post- able-bodied guy in early forties, 2 college degrees, and also completed courses to become a Medical Assistant. Yet he was really proud of himself to find he could get a lifetime of freebies just because he'd spent years abusing alcohol.
This particular potential cut, mentioned in the OP, is not a cut to elderly pensioneers on old-age social security. That program is fully funded (for the next couple of decades anyhow).
SSDI is a different program, funded separately. SSDI is for working-age people (18-65) who have declared a disability. It's administered by the social security administration, which is where its similarities to old-age social security end.
To be a bit more specific, old age pension and SSDI are funded from the same taxing source: the FICA tax paid by you directly via mandatory payroll withholding, and indirectly via a tax paid by your employer on your behalf. The total tax assessed is equal to 12.4% of your income (no tax is assessed on income above $118,500). An additional total tax of 2.9% is taken for Medicare.
All of these funds go into one big pool. Politicians then decide how much of that pool will be directed to support each fund. To use an analogy: you might have $300 a month to save, and decide to put a portion of that into each of three savings accounts--let's say an emergency fund, a college fund, and a home purchase fund. All of these accounts are funded from the same source, you. However, you may decide from time to time to alter the amounts you allocate to each of those three savings accounts, based upon your immediate needs.
SSDI is running out of money because political decisions have been made which have resulted in an under- funding of the program. In other words, the politicians who control The SSA haven't dedicated enough of the master-fund to comfortably maintain SSDI obligations.
Eligibility for SSDI is also dependent upon a worker having worked long enough to accumulate the necessary work credits--this is also true for old age pension. Most people, even well into their twenties, haven't earned those work credits. So the younger you are, the less likely it is that you will qualify for SSDI--regardless of disability status. That's why SSI, an entirely different program, is available for those who don't qualify.
I'm not "blaming her", I am reacting to your remark that your mom is "supposed to live" on her SS benefits and her pension. Who promised her that?
No one promised her. wtf is your problem? You made out in your post that responsible people save for retirement..I am pointing out not everyone has excess to save for retirement.
No one promised her. wtf is your problem? You made out in your post that responsible people save for retirement..I am pointing out not everyone has excess to save for retirement.
I don't have a problem, thank you.
SS benefits will replace at most 40% of one's income. Most of us will receive less than that.
No one is promising us that SS benefits are going to be enough to live on.
With the Republicans on this one. It's time to start addressing entitlement problems rather than just kicking the can down the road by robbing this to pay that, robbing this to boost the economy, and all this garbage. Raise the payroll taxes, cut SSDI, cut SSI (Retirement). Figure it out with some combination of the above. If you can't do that, cut discretionary spending and bailout the SSDI fund that way as a stopgap measure until you can.
This is America, where we put everything off until the last minute.
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