Dear Mr. Berko:
We have an IRA and a retirement account that four years ago was valued at $685,000 and is now worth about $413,000. I’ve enclosed the statements from our adviser, whose office is in Dallas. We’ve also enclosed his name and phone number if you wish to talk to him. Our problem is this: I lost my good-paying job and had to take a much lower-paying position. We suspected this would happen because I knew I was way overpaid at my other job for years. Anyhow, we don’t have enough income now to maintain our standard of living so our adviser told us that we can begin taking money from our IRA without penalty even though we are 57 and 55. We need about $38,000 more a year to pay bills, real estate taxes, social obligations, vacations, etc. So can you tell us which are the best issues in our portfolio to sell to raise $38,000 this year? Our adviser wants us to make the decision, but we don’t know enough to do it. Please help.
F.N., Oklahoma City
Dear F.N.:
I’ve never met your adviser nor have I spoken to him, but I’ll tell you straight away: I’m always contemptuous and suspicious of people who use an initial for their given name. Names like J. Parker Smyth or B. David Melrose make my teeth itch. They’re sort of like an insincere handshake, stepping on a snake or “putting on the ritz.”
Meanwhile, your portfolio looks like it was put together by a short, bald, tattooed psychotic who wears platform shoes and has breath that smells like peanut butter. So before you even dream of taking early withdrawals from your retirement accounts, you better repair your portfolio that looks like a melange of space junk, empty beer cans and discarded plumbing fixtures.
It’s little wonder that your portfolio has lost 38 percent in the past three years. You need a professional who knows that companies like JetBlue, Hovnanian Enterprises, ValueVision, SeaChange International, Motorola, Amerigon, Casella Waste Systems and the like have no place in a retirement account for a couple in their late 50s.
That adviser isn’t giving you the right advice. I wouldn’t put those companies in my mother-in-law’s portfolio. Get your portfolio back to sense, security, and sanity with a combination of phone companies, utilities, MLPs, pharmaceuticals, ETFs, business development companies and a few pale blue chips, all which should yield between 5 percent and 9 percent.
You must downsize. You have no choice. And don’t even think about taking even a dime from your retirement account. Millions of Americans must reduce their living standards to match their lower incomes. And if you take money from your retirement account when you’re working, there won’t be bupkes left to take when you’re not working. I’m sure most of your friends are in the same dingy, but they’re too proud to tell you they feel the panic, too.
The recession has crippled the futures of most consumers, who realize they have to downsize to pay the butcher, the baker and the candlestick maker and stay out of debtor’s prison. This economy will be slow to recover while employment, wages and real estate values won’t return to pre-recession levels for a long time. Retail, auto and restaurant sales will remain low while unemployment will remain high.
We are in the beginning of an economic ice age in which Americans will have to lower their expectations to maintain economic equilibrium. So, F.N., you’re going to need every penny you can squeeze from your retirement accounts.
Meanwhile, it will be difficult to find a reliable money manager. The old metrics have changed, and very few of today’s advisers understand the economics of retirement investing.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com.
© 2010 Creators Syndicate Inc.
