How to be Rich, Happy and Free from Scams

The mad pursuit of corporate profits is threatening us all by Jeffrey D Sachs We live in a time of high anxiety. Despite the world's unprecedented total wealth, there is vast insecurity, unrest and dissatisfaction. In the United States, a large majority of Americans believe that the country is "on the wrong track". Pessimism has soared. The same is true in many other places. Against this backdrop, the time has come to reconsider the basic sources of happiness in our economic life. The relentless pursuit of higher income is leading to unprecedented inequality and anxiety, rather than to greater happiness and life satisfaction. Economic progress is important and can greatly improve the quality of life, but only if it is pursued in line with other goals. In this respect, the Himalayan Kingdom of Bhutan has been leading the way. Forty years ago, Bhutan's fourth King, young and newly installed, made a remarkable choice: Bhutan should pursue "gross natio...

If the second half of 2009 and 2010 were a time of economic recovery, then 2011 has by and large felt like a relapse. Skyrocketing oil prices from instability in the Middle East cut into consumer spending, the prolonged debt ceiling debate chipped away at business confidence and the European debt crisis continues to enrage the stock market. All of this has only renewed concerns among analysts and average Americans that the U.S. would suffer a dreaded double-dip recession, but according to several economists MainStreet spoke with, even if we do enter into another recession later this year or in early 2012, it won't be nearly as damaging as the Great Recession of 2008. "If there is another recession, I think it wouldn't be as severe and it would also be shorter," says Gus Faucher, senior economist at Moody's Analytics. "And the reason for that is a lot of the imbalances that drove the previous recession have been corrected." As Faucher and others ...

I'm 64 and plan to retire next April. I have $160,000 saved. How much lifetime income can I expect to draw from my savings? -- Mike W. Have you ever heard the joke about the accountant who is asked how much two plus two is? His response: "How much do you want it to be?" Well, there are many possible answers to your question, too. The amount of income you can expect to receive from your $160,000 stash can vary significantly depending on a number of factors, many of which you can control and many of which you can't. Indeed, how long you'll live and what sort of gains you'll earn on your savings are beyond your control. Even if you knew the average return you would earn on your savings throughout retirement, you still couldn't know exactly how much lifetime income you could get. When you're drawing money from a portfolio, the pattern of returns, not the average, determines how long your savings will last. So if you draw the same amount of m...

Both the U.S. and Europe are facing a decade of slow growth brought on primarily by the blunders of central banks, noted doomsayer Marc Faber said. Investors should protect themselves by buying plenty of physical gold and putting it in a secure location, preferably outside the U.S., the author of the Gloom, Boom and Doom newsletter told CNBC. "If I look at the politicians both in Europe and the U.S., I don't think that prospect (for growth) is very good," he said. "If I also look at the entitlement system and the government expenditures and the fiscal deficits and the debt overhang, I think for the next 10 years we'll have very muted growth in the Western world and standards of living for the average household will continue to decline." In other words, he said, the next 10 years are likely to be much like the previous decade. "I think we never really came out of the recession in many different sectors of the economy," Faber said. "...

Marc Faber readies for hyperinflation, dollar's demise and civil unrest SAN FRANCISCO (MarketWatch) — Mr. Market, the doctor will sell you now. "Dr. Doom," that is — also known as Marc Faber, the Hong Kong-based investment manager, author, and publisher of "The Gloom Boom & Doom Report," his monthly musing about the state of global economics and geopolitics. Faber is to financial-market optimists what the Grinch is to Christmas. He doesn't often like what he sees, and nowadays he finds even less to like about the world's economic situation than he did in 2008 — as if that wasn't bad enough. "Financial conditions are today worse than they were prior to the crisis in 2008," he said in a telephone interview earlier this week from Thailand. "The fiscal deficits have exploded and the political system [in both the U.S. and Europe] has become completely dysfunctional." Certainly, the unprecedented global stock market v...

by Kelly Greene aurence Montello, a certified financial planner in Palm Beach Gardens, Fla., stayed the course through the stock market's swings earlier this month. Now that stocks are slumping again, led by Thursday's 3.7% decline in the Dow Jones Industrial Average, he is urging clients to bail out. "Three weeks ago, I would have said: 'We're in it for the long haul,'" Mr. Montello says. "But we don't want to see these $200,000 to $300,000 swings in performance in a $5 million account." Mr. Montello now is advising clients, many of them retired, to move 20% of their stock portfolios into cash and 10% into Treasurys. Greg Zandlo, a certified financial planner in Coon Rapids, Minn., went further: He advised clients Thursday to move their investments completely out of equities. "Stocks that have a 5% dividend are great, but what kind of consolation is that going to be if they're down 10%?'' he asks. [More from W...

by Chris Taylor I bought Lehman Brothers. There, I said it. My dark secret, finally out in the open. Watching financial stocks drop like stones in the fall of 2008, I figured it was a classic case of investor panic. After Lehman went from over $90 to under $10, I almost felt bad at getting such a bargain. After all, it couldn't go to zero, right? And then it did. My modest investment was wiped out, and I couldn't even stand to look at the Wall Street Journal for a long time afterwards. My point is that even personal-finance journalists, doling out our sage advice, can make bone-headed financial decisions. Really big ones. That in mind, I asked a few of the nation's top personal-finance commentators about their own missteps that they'd love to forget. You might enjoy the schadenfreude, of reveling in others' misery. But hopefully you can also leverage these lessons to avoid similar screw-ups in your own life. Think of it as a financial group therapy se...

Christina Rexrode, AP Business Writer, On Friday August 19, 2011, 5:50 pm EDT NEW YORK (AP) -- Bank of America Corp. is cutting 3,500 jobs, the latest sign that the banking industry is becoming smaller, simpler and less profitable. It's quite a transformation from the go-go days of five or six years ago. Then, big banks were reaping outsized profits from large bets on risky trading and complicated investments that eventually backfired, fueling the financial crisis that scorched them and the global economy in 2008. The cuts confirmed Friday by Bank of America follow layoffs announced this summer at Goldman Sachs Group Inc., Bank of New York Mellon Corp., State Street Corp. and other financial institutions. And though banks also laid off thousands of workers in 2008 and 2009, analysts say it's different this time: Many of the banks are posting profits right now, so their layoffs indicate permanent structural changes rather than temporary cuts in response to a weak eco...

by Karen Blumenthal After the stock market lost 20% of its value in October 1987, Sam Walton, then one of America's richest men, was unfazed. In less than a week, the value of his Wal-Mart Stores stock had dropped almost $3 billion, reducing his wealth to a mere $4.8 billion. "It's paper anyway," he told the Associated Press. "It was paper when we started and it's paper afterward." Given the wrenching swings of the past two weeks, many of us may wish we could be so sanguine about our own losses. But even without a few extra billion dollars in the bank, there are useful lessons to be gleaned from the way the Waltons and other ultrarich families cope with investments and market volatility. Just like us, the rich want to maintain their lifestyle, preserve wealth and have money for their heirs or philanthropy. And when it comes to investing, there are several ways the rest of us should take a cue from them: • The very wealthy have a plan. Sam ...

The first wave of Baby Boomers turned 65 earlier this year. Once, that was the official retirement age, the birthday after which you could spend entire Tuesdays on the golf course with no judgment. It was also the age at which people would start to look askance at the office. Indeed, a broad swath of older workers once faced mandatory retirement age policies, and until this spring, Great Britain had a "Default Retirement Age" (DRA) of 65. Past that, an employer could dismiss an employee simply because she was getting on in years. But Britain's DRA has now been largely phased out, and social norms are changing. According to the Bureau of Labor Statistics, in the U.S., the labor force participation rate among people aged 65 to 74 rose from 16.1% in 1988 to 25.1% in 2008. To be sure, the increased participation among older workers is at least partly due to financial necessity — though the increase began during good times, rather than simply spiking during the recent re...

by Katherine Reynolds Lewis One of the biggest risks to your retirement is facing a bear market during the early years after you stop working. If you must sell stocks in a falling market, you risk depleting your nest egg at exactly the moment you need it — leaving you with too little savings to cover your needs for your retirement. If you withdraw regular amounts from your portfolio to cover your living expenses during a market downdraft, you must sell more shares at a lower price. It's essentially the reverse of dollar-cost averaging, which is what you did during the accumulation phase when you invested money at regular intervals. Dollar-cost averaging involves buying more shares when the market is down or fewer shares when it's up. "You're liquidating a portion of the portfolio and locking in those negative returns and creating some very bad outcomes," says Stephen Horan, head of private wealth management for the CFA Institute and co-author of "The...

JAMES B. STEWART, On Friday August 12, 2011, 7:54 am EDT Like earthquakes, financial crises seem to be accompanied by aftershocks, like the one we’ve been living through this week. They can feel every bit as bad as the crisis itself. But economic history and academic research suggest they can set the stage for a sustainable recovery — and eventual sharp stock market gains. The events of the last few weeks — gridlock in Washington, brinksmanship over raising the debt ceiling, Standard & Poor’s downgrade of long-term Treasuries, renewed fears about European debt and a dizzying plunge in the stock market — bear an intriguing resemblance to some of the events of 1937-38, the so-called recession within the Depression, with a major caveat: it was a lot worse back then. The Dow Jones industrial average dropped 49 percent from its peak in 1937. Manufacturing output fell by 37 percent, a steeper decline than in 1929-33. Unemployment, which had been slowly declining, to 14 percent fro...

A free-falling stock market can make everyone more frugal. How to find the extra cash in your budget The falling market and the economic uncertainty that comes with it has even the most frugal looking for new ways to save. Many of the easiest ways to do so may not even require that much sacrifice. Right now, there are plenty of reasons to build savings. For the intrepid, extra cash may mean the ability to snatch up stocks at bargain prices. Far more people are still shoring up their personal balance sheets from the last downturn, and another market tumble reinforces the need for an emergency fund, or to pay down debt. Even for spenders, there's an incentive to sock away a little more: The down market is expected lead to sales on many big-ticket items like cars, airfare and electronics. "It's smart to save wherever you can," says certified financial planner Sheryl Garrett, founder of the Garrett Planning Network, a national group of fee-only advisors. In gener...

by Walter Updegrave Over the years, I've lost huge amounts of my retirement fund. I've been through the savings & loan fiasco, the tech stock bubble, the crash of 2008 and now this market. I can't afford to lose my money again, so I'm considering moving it all to cash. Do you think that's a good move? I'm scared to death. -- Cheryl P., Houston, Tex. I hear you. Looking back over the past twenty-five years you can easily get the impression that all we've done is lurch from one crisis to the next. Add to that backdrop new worrisome twists like Standard & Poor's debt downgrade of the U.S. government and Fannie and Freddie Mac, the specter of a double-dip recession, the economic woes in Europe and Monday's more than 5% plunge in the Dow, and it's understandable why you'd want to ditch stock and bond funds and huddle in cash. But that would be a mistake. Now is not the time to give in to emotions and make rash moves. It'...

CATHERINE RAMPELL If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around. Given the tumult of the Great Recession, this may be hard to believe. But the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009. “It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession,” said Conrad DeQuadros, senior economist at RDQ Economics. When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policy makers used most of the e...

by AnnaMaria Andriotis Throwing in the towel? For nervous investors looking for a place to park their cash until this market maelstrom blows over, some options are better than others. Yields on cash haven't been good for a long time, but in recent months, some banks have souped up their offers. Some checking accounts now tout interest rates up to around 3% and money market accounts as high as 1.15%. Meanwhile, roughly a dozen banks recently revamped their certificates of deposit by eliminating penalties on early withdrawals and allowing interest rates to rise for those consumers who stay locked in. For the banks, it's been a campaign to win back savers. Now, with the stock market in free-fall and bonds also risky, near-cash investments look like one of the few remaining safe havens for consumers. At this point, says Jeff Sica, president and chief investment officer at Sica Wealth Management, "You're really playing the game not to lose." In that environmen...