Brett Arends has a short, smart column in the WSJ this weekend, with five simple pieces of good advice:

1. Reaching for yield
2. Going into the poor house to send Junior to a country-club college
3. Owning stock in your employer
4. Taking Social Security too early
5. Buying long-term bonds

The full article is worth your time.


Five Really Dumb Money Moves You’ve Got to Avoid
Brett Arends
WSJ, March 31, 2013

Category: Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “Five Dumb Moves to Avoid”

  1. BennyProfane says:

    Sorry, but, he’s way wrong on taking SS early as a dumb move. Nobody lives forever, so that 10-14 year timeline when both break even (when the total amount taken becomes equal) could make a big difference. Yeah, sure, you’ll be doing better when you’re 72, I guess, a little, but, if that kind of calculation is that important to your finances, well, you’re probably going to need SS as soon as possible.

    Totally agree on owning stock in your employer, though. The Enron debacle should’ve proven that. Unfortunately, I got nailed in 2000, as I watched my 401k sink, and I couldn’t cash out of company contributions. A lot of companies have since changed that policy.

  2. USSofA says:

    @BennyProfane… totally agree on social security. Also in this fiscal climate there is the possibility of means testing for those with the means to wait for full or better benefit.

  3. BennyProfane says:

    I read recently in a WSJ comment section (yeah, I know) that Social Security is now asking new applicants to state their net worth, or, value of assets owned, including retirement accounts. I’m skeptical that this is true, but, has anybody encountered this?

  4. tippet523 says:

    I have a Kid at the University of Illinois (in state) studying engineering. Tuition room and board is 33,500. I don’t know what place is 9000 that he is taking about but it is not here.

  5. From the article: “In any case, it doesn’t take more than just a few years before the total money accrued with the higher, later benefits surpasses the total earned starting at the earlier retirement age. ”

    Assuming the annual benefit doubles at age 70 )compared with age 62), it takes 8 years to receive the same sum. And, if the recipient can save the SS check and collect interest (yes, rates are very low today), then it takes more than 8 years to ‘break-even.’

    I started SS at 62 and am numerically satisfied that I made the correct choice.

  6. JackH says:

    As all short pieces of advice, there’s a grain of truth but it requires context. When your 401k requires employee match using company stock, you have no alternative to holding it, at least until you reach some magical age and can sell it. Discounted purchases of company stock can be good (assuming you aren’t too concentrated in it), unless you must hold it until after company quarterly announcements which can drive the value down before you can sell it.

    I find the Social Security argument amusing because it assumes individuals have alternatives to SS, and that certainly isn’t always the case. Basically, that’s a “work longer” argument in an era of “right-sizing” the workforce and high unemployment. For a person or couple holding large amounts of IRA/401k-type assets, it does make sense to draw them down a little before required minimum distributions begin at 70.5, at the same time allowing the SS monthly value to grow. So, basically, the argument to hold of on SS is “Hold off on SS if you don’t actually need it,” which isn’t the same thing at all.

    I’m ambivalent about the elite college argument, however. An inexpensive degree is a basic entering argument for certain employment, but the average degree holder from my school will wash bottles for a holder from the Ivy League. You pay more, but you might end up with better opportunities. A student going to an upper-tier school might have a small class taught by a professor and might also receive an education, while one attending a large, public school might be taught by a 23-year-old teaching assistant. Who will have learned more? It’s hard to say, but I doubt it’s as easy as saying “just don’t pay for the elite school.”

  7. rj chicago says:

    Totally get that!!! And here is my experience…….with U of I.

    My kid who was accepted at U of I several years back – this just after things blew up in the markets – was notified that “It is with excitement that you have been accepted to the U of ILL-ANNOY but we are having to notify you that due to the financial condition of the State’s ability to fund the University we cannot offer any scholarships or grants at the present time” (or something to that effect).

    My daughter was just dismayed – loved the school and the program she wanted to be involved in BUT…

    Given that my daughter graduated high school – National Honor Society, AP credits ( I think it was 32 total) and great academic standing, she basically said – screw that I am going to OH where it will be less expensive for me to attend annually – this with ALL costs added up and comparing the schools. It is less for her to attend OUT OF STATE!!!
    The problem with ILL-ANNOY is that it is now losing its best to other states. Other states that are healthier financially are able to offer the best kids more options and are now in effect ‘poaching’ the future of IL. We shall see where this ends but with college age kids going elsewhere, and now one person (net) leaving the state every ten minutes I think we all can see where this train is going.

    • tippet523 says:

      That may be the case but I was shocked. He had a 4.8 and 36 on his English ACT and 35 on Math and overall 33 and got deferred at U of I so a lot of bright kids are going there. At least he will make a good living with a Computer and Electrical Engineering degree and he will have no loans. But I have zero Idea how someone who make the median USA income sends a kid to college. I would not recommend to a kid 140000 in loans unless he/she is going to study Finance, business, engineering or something with a good income right away.

  8. Davidocity says:

    I second tippet523′s comment. The pricing of public schools is not as cheap as advertised. Also be aware that graduating in 4 years is not always a given with the public option. This WSJ article is mostly link bait with little substance.

  9. YankInSwitz says:

    Wow. This guy is way out of touch with college prices – like 4-5 years out of touch. However, as stated, public colleges prices are rising more rapidly than private, making this less of an issue. While top-tier schools can be $60K/year (I have daughters in Yale and Vassar to prove it), state schools, with all costs in, are approaching $40K. And, as mentioned, regardless of the fact that Ivies teach the same facts as state schools, the overwhelming evidence is that they pay off. There are a variety of reasons for this, but the effect is very real. For my part – I’m happy to pay the difference.

    Also, taking SS early is a very personal thing. One thing not considered in this, nor in the comments, is that there are plenty of people who, due to genetics or long-term disease, have a significantly lower projected life span than typical – and they are aware of that fact. They should take it as early as possible.

  10. DHM says:

    Where are the $9k tution schools with small classes taught by professors (and not TAs)?

    Simple : look for the state schools that are part of the larger university systems. The midwest has tons of these. Minnesota, Wisconsin, Michigan, etc. Skip the flagships (e.g, Madison) since these are more expensive and have the large classes.