by T. M. Meek
After the meeting, everyone went their separate ways back home while Samuel, Alex and Linda stayed behind to talk awhile. “If someone had told me ten years ago I’d be doing this job and learning what I’m learning I’m not sure I’d believe them.” Samuel said.
“Why do you say that?” Linda grinned.
Samuel smiled humbly and answered, “Because it’s amazing. I love what I’m learning and it’s an honor to work with the one and only Linda Wise.”
“I agree. It’s cool to be someone in your social circle. Especially at my age.” Alex chimed in as they all stood around a table and talked.
“Well, thank you to both of you.” Linda said graciously.
“Speaking of being in your social circle, how would you like to help me with the Triple-C?” Alex asked openly.
“What kind of help are you looking for?” Linda asked curiously.
“Research help for my presentation on retirement planning. Actually, it’s not just my presentation. My friends Leena and Julio from school are working on it too. We call ourselves The Success Crew. We’re a team. It would be really nice to have a sharp mind like yours to provide some feedback or maybe answer some questions about money from time to time. Maybe I could call you or text you some questions. I’ll pay you for your time.” Alex said confidently.
Now folding her arms across her chest as if to ready herself for negotiations, Linda asked, “How much were you thinking of paying me?”
“I don’t know. How much do you want?” Alex waited for a response but Linda motioned for she and Samuel to follow her to her office. They talked as they walked. Samuel looked on in some fear wondering if somehow Alex will have him ultimately paying with his own money.
“What if I don’t want cash or any money?” Linda asked wryly. Samuel let out a sigh of relief.
“Are you suggesting some kind of a trade?” Alex inquired quickly catching on. Samuel looked bewildered at the sudden business exchange before him since it’s not every day that a thirteen-year-old boldly negotiates with one of the most powerful and famous financial tycoons ever known.
“Why not? You can ask me any questions you have about money if I can ask you questions.” Linda countered confidently waiting for Alex’s response.
“Questions about what?” Alex wondered.
“Questions about God. Your beliefs.”
Alex suddenly became very reserved and quiet as she remembered the night of Linda’s office party when she looked at Linda’s art and mumbled her thoughts of how angels probably don’t have wings. She remembered how awkward she felt discovering Linda had overheard and actually asked her about it. She wasn’t ready to answer Linda then and she wasn’t ready to answer her now either. Then quickly recalling the lesson learned later that night after the party when talking with Aunt Meredith, Alex felt it was right to make the agreement to trade with Linda so long as there were respectful limits regarding matters Alex felt were simply too sacred to discuss.
“If I say ‘Yes’, I’d like your promise not to pressure me to talk about anything that I feel is too sacred to discuss. If you can agree to honor that then I’ll agree to trade your questions for my questions. If you’d like to set some limits of your own to keep it fair I’ll consider them because I want it to be a fair exchange.” Alex said respectfully. Linda was impressed with Alex’s sincerity and maturity in her pursuit of a sense of fairness and mutual respect. She opened the door to her office and the two followed her in.
“I suppose there is one limit I should impose.” Linda smiled over her shoulder to Alex as she headed over to her desk.
“What limit would you like?”
“You can ask me any questions about money–– even about my own personal finances–– but with the understanding and agreement that if I feel your question is too personal at any time I can decline to answer it by politely suggesting you ask another question instead. I’d also prefer to keep this a private arrangement similar to the concept of providing an anonymous donation of services. Fair enough?” She asked just as she stopped in front of her desk.
“Fair enough.” Alex agreed enthusiastically. She stood across from Linda while Samuel hung back a few feet behind Alex.
Linda extended her right hand and said with a serious smile, “So shake my hand and we’ll seal this agreement to trade questions.”
“I’ll sign a contract if you want me to.” Alex said fearlessly.
“You’re not of legal age to sign a contract.” Linda said half-amused. “So a handshake will have to do for now with Samuel as a simple witness.” Samuel smiled and nodded in agreement.
“Fair enough. We’re agreed.” Alex said as she shook hands with Linda. “Can I ask you my first question now?”
“Of course.” Linda answered as she leaned back and sat on the edge of her big, polished mahogany desk. It was an expensive and sturdy antique and she exuded a natural air of authority and expertise as she spoke.
“What’s the biggest mistake most people are making in their planning that causes them to retire in poverty?” Samuel pulled up a chair and sat back feeling thrilled to get a front row seat of an entertaining yet vital education he never planned.
“It’s not really one particular thing investors are or are not doing. It’s more like a series of mistakes they’re making. Some are along the lines of false assumptions they make and other mistakes are made from misinformation–– even from so-called ‘experts’.”
“What do you mean by ‘so-called experts’?” Alex asked as she remained standing. She asked this even though she was fairly certain she knew the answer. But if Alex was misinformed about its meaning, she wanted to double check with Linda now.
“A very good friend of mine is a woman who’s considered by the top two largest financial publications to be one of the most accurate investment forecasters ever known and she’s only right about seventy percent of the time. She is in fact a true expert who is well known and respected in the financial industry. But most people are fairly naïve when it comes to financial planning and investment strategies and so they look to their average stock broker or other investment broker as an expert and that’s often a huge mistake.” Linda said rather seriously.
“So how often are average brokers right?” Alex inquired.
“Well, since over 90% of people in the United States have been retiring in poverty for well over 25 years now and since approximately sixty percent or so receive advice at some point in their lives from one specifically hired by a company to be a so-called financial expert, with about another thirty-five percent who never consult an expert and the remaining five percent who hire the best, it’s these same sixty percent or so that are often the same people who hire your average broker to give them advice. So how often do you think the average broker is right to trust to create a full and positively effective financial plan to follow?”
“Not very often.” Alex sighed. Then after some thought she added, “That means that even a lot of brokers are retiring poor. Right?”
“Unfortunately, yes.” Linda answered with clearly recognizable disappointment in her voice.
“Even the financial TV and radio news correspondents? Are they retiring poor too?” Alex wondered.
“Sometimes, yes.”
“So I guess these so-called financial experts people hire must not be living within their means. They look rich but I guess they really aren’t,” Alex sighed. “I thought they knew better than that.”
“Well, to know is to do. They live in expensive homes that they really can’t afford, they drive expensive cars that they can’t afford to drive and they certainly dress in the image of success but this is often thanks to consumer debt, so they obviously don’t know it’s not right to do until they lose it all. Or maybe they understand or believe it makes sense in their minds to live frugally and to avoid consumer debt, but not until it’s felt strongly in their hearts will they really know and then do what’s right. Lessons of the heart that result in prosperity many times are brought first from some k
ind of pain. Financial loss hurts. But for some people, experiencing personal and painful financial loss may be the only way they can learn. It’s the wise ones that see the mistakes of others, learn from them and then do those things that are right to keep themselves from having to personally experience such painful lessons.”
“So learn from the mistakes of others, Alex. That’s what I try to do,” Samuel sighed.
“Yes. Learn from the mistakes of others. We all make mistakes at times. But we’ll make fewer of them the more we are willing to learn from others and recognize and do what’s right.”
“So how often are you right with your own investments and planning strategies?” Alex inquired curiously.
Linda smiled and responded humbly, “Only about sixty-five percent of the time.”
“You’re too modest.” Samuel protested. “The last report I read said you were accurate nearly sixty-eight percent of the time.”
“That’s very kind of you.” Linda smiled humbly.
“So what are some of the things people should be doing to retire more securely?” Alex asked.
“What research have you come up with so far?” Linda asked testing Alex to see if she had actually studied up on it or if she was looking for Linda to provide most of the answers.
Alex thought for a moment and then said, “Well, people often pay too high of an expense ratio with their investments. If they’re getting a mutual fund that has an expense ratio that costs two percent then they mistakenly think that’s good because it sounds cheap when in fact it’s more like a rip off. A naïve investor could easily lose the potential for a million dollars or more of investment growth because of too costly expense ratios. It’s better to not pay much more than one half of one percent where possible.” Linda was flabbergasted and nearly had to catch her breath over Alex’s obvious knowledge about investments. Alex clearly wasn’t looking for free information to avoid work. Her efforts at studying proved she was willing to contribute a good amount of her own work to succeed.
“Yes. Watching expense ratios are vital to secure and successful savings and investing strategies. That’s very good Alex. What else have you learned about overcoming retirement planning hurdles?” Linda inquired.
“Other than miscalculating the correct percentage amount of their income they should plan on replacing in future dollars, the only other thing so far is that they’re in the wrong type of funds. Some mutual funds get sold as being a hot investment because of their temporary big returns but the majority of funds people buy into windup getting an average of negative nine percent return on investment or R.O.I. So that’s an average annual loss, not an average annual gain. Index funds with low expenses and minimal fees are often the best investment for retirement as it follows the S&P 500 as its benchmark. But most people don’t know that so they end up putting their vital retirement monies into losing mutual funds. Low cost Index funds are the better winners with modest returns averaging ten percent or more annually.” Alex said thoughtfully.
“You really have studied well.” Linda said feeling deeply impressed with Alex’s advanced level comprehension of investments. “Do you know why so many more people are retiring in poverty than my parents and older adults did?” Linda asked.
“Not really.”
“Part of it is due to underestimating inflation in their calculations.”
“I should write that down and look into it,” Alex said as she stopped to type the idea into her phone as a reminder to research. Once Alex finished, Linda continued.
“Another reason is the tax laws. The tax laws changed back in the 1970’s in favor of the employer and in many ways to the detriment of the employee. It used to be that Defined Benefit Plans were the standard gift for a secure retirement to loyal, long-term employees of large companies. This cost these big companies anywhere from 20 to 30% of their earnings to provide. So they complained long enough and the tax laws were changed so that big corporations no longer had to pay so much out of pocket to ensure a secure retirement for their employees. The burden for a secure retirement was removed from the employer and placed on the backs of the employees and the new retirement plans became known as Defined Contribution Plans – the key word being contribution because it depended upon how much the employee contributed or paid out of his or her own pocket that would determine how securely he or she would retire.” Linda paused to make sure Alex understood. “Are you following me so far?”
“Yep!” Alex responded confidently.”
“So the employer could now limit their contributions as a company to their employee’s retirement plan as a match for their employees. This significantly reduced the burden of cost to the employer so that they only had to pay about 5% – ten percent at most – towards their employee’s retirement. That was a significant reduction when you consider that many companies once paid as much as twenty five percent or more of their earnings towards pension plans for their employees.”
“So companies looking to save money actually hurt their employees by causing them to come up with the extra investment money themselves that the company once provided?” Alex inquired.
“Yes. It also put the burden of smart investment decisions on the employees. Would you trust your average custodial person at a shopping mall with your financial planning?” Linda asked.
“No way.” Alex retorted.
“But yet that’s exactly what these large companies are doing. They have moved to no longer use their own vast corporate money to get good advice on how to plan for retirement for their employees and all of the various needs unique to that stage of life and instead have put that trust onto their employees to provide that same high quality, expensive advice for themselves on their own often seriously inadequate budget as the average employee does not earn enough to pay for the best advice. Therefore the average employee is not likely to succeed in planning wisely for their own retirement and other financial planning needs. That’s a significant disadvantage.”
“That’s two huge strikes against the average employee.” Alex sighed.
“That’s true.”
“That stinks.” Alex said.
“Yes. Yes it does stink.”
“So then what do you do for your employees?” Alex asked honestly. Linda answered without hesitation.
“We educate them about these things so they understand what limits that some aspects of this very industry perpetuate, in part, due to the restrictions of the government. We let them know about IRAs, Roth IRAs and other non-stock market alternatives for financial security. There’s a lot to learn. But for those that are willing to learn and make the right choices, willing to risk occasionally failing instead of totally failing, those are the ones that have the best chance for a secure financial future.”
Linda thought deeply as she sighed in hesitation about other factors Alex hadn’t addressed yet for proper planning needs. She knew that an adequate emergency reserve was vital for more people to have but that too often people didn’t even earn enough to save enough to begin with. She didn’t want to overwhelm Alex and discourage any hope because many people in the U.S. have in fact overcome many odds and become successful by earning enough. But if Alex hadn’t considered the bigger problems of income needs yet, maybe she wouldn’t want to go forward with her presentation ambitions. Linda thought she would simply bring it up and test Alex’s knowledge.
“Alex, have you considered what most people need in the way of emergency savings?”
Alex sighed, “Probably not as well as you have. But I can add that to my list of things to research.”
“Definitely do that. You may also want to consider how much it takes for a person to earn to make it also.”
“I know it’s a lot more than fifty thousand dollars a year,” Alex responded without hesitation.
“Any ideas of how much more?”
“I know it’s six figures but I’m not sure just how much. My latest math shows about two hundred thousand or so is what the average adult needs just to pro
vide sufficiently for themselves. That’s two hundred thousand minimum for income to support one adult. Am I close?”
Samuel practically broke out in a sweat as the idea to earn so much money as a means of survival for just one adult had never occurred to him before.
“You’re very close. Keep moving in that direction,” Linda encouraged. Samuel felt like passing out but he didn’t.
“I will. But I figure I need to just focus on retirement first. Then when I have that other math figured out, maybe I can add it to my overall planning ideas for future reference,” Alex said as if she were tired of the idea of having more math to do.
Alex and Linda continued talking about other ways for people to plan wisely and early for retirement. Although Linda was there to help, she encouraged Alex to think things through as much as possible on her own before Linda would chime in with extra advice. After several more minutes of questions and answers, Linda had not yet requested Alex answer anything about her beliefs about God. She figured that could wait for another time. As Samuel and Alex walked out the door, Linda let out a long sigh as she knew the deep waters Alex was entering into over such a sensitive topic as the average American’s lack of preparedness and education in matters of personal finance.
For some people the news would come too late as they would learn just how much more they should be saving (an amount most likely beyond their reach) because they procrastinated planning and saving. For others, the news would be early enough and they would have more hope for a financially secure – if not prosperous – retirement. It would be a bittersweet experience for Alex and her friends of The Success Crew. The sweet side of it would be easy for them to handle. But what about the bitter? This worried Linda. What if the good intentions of these young kids placed them in a metaphorical war zone of angry, emotional adults? Certainly at least one adult would take offense at the honest approach of innocent kids. But as long as the information the Success Crew provided in their presentation provided a good quality education regarding retirement planning, they had little to fear. She then got up and walked back behind her desk and opened up a drawer.
“Perhaps I could review your presentation early to help you fine tune it so that once you present it to the public that you can be more confident in your results towards providing as much beneficial information as possible for the limited speaking time allowed.
“Thanks,” Alex responded in awe. She hadn’t expected to actually have the e-mail of a famous business tycoon available just for her own thirteen-year-old use. Linda grabbed a small notepad and wrote her email address on it and then politely handed it to Alex.
“Anyone in your audience who might get angry are likely to be the ones who did the most procrastinating or otherwise broke common sense rules about money such as by accumulating excessive consumer debt. The ones who will welcome it will be those who are most likely to take responsibility for their own spending and saving habits – even if the advice sounds difficult to follow. But either way it would prove to be beneficial as it would open the door to a conversation about money everyone thinks everyone else has figured out. When they all discover how much they are in the same sinking boat, maybe the subject won’t be so masked by people acting like they have their financial acts together when really they don’t.”
“I’ll email it to you.” Alex agreed.
“That would be fine,” Linda smiled warmly.
“Thank you again for your help. I suppose we should get going now. It was so nice of you to share some of your time with me. I like your office.” Alex beamed.
“Thank you again, Linda.” Samuel said politely as he mussed up Alex’s hair. “I’ve got the update on the museum schedule. You should see it in the morning in your e-mail. Everything looks good.”
“Well, it’s a privilege to help out Alex in any way I can.” She said as Alex began to lead the way out with Samuel following behind. As Alex and Samuel headed out the door, Linda pulled Samuel to the side and requested to speak with him privately.
“Alex, can you give us a minute? Just wait here,” Samuel said curious as to what Linda wanted to discuss.
“Do you know a man by the name of Manuel Lopez? He lives here in Kansas and owns his own private security firm? He provides personal security services–– usually to prominent celebrities, politicians, well-known religious figures. Have you heard of him?”
“Yeah. His son is on Alex’s team. Why?”
Linda let out a discreet sigh of relief. “Just get close to him. You’ll want him to be the best friend you’ve ever had if Alex takes her presentation in the direction it looks like. He’s a good man and Alex could face some serious backlash if her innocent desire to help accidentally exposes some shady aspects of this industry.”
“You mean the financial services industry?”
“Yes.” Linda whispered.
“Well hopefully I’ll have God to help if it ever gets that heated.”
“If it does, you’ll need Him. And, speaking from personal experience, God can work very well in providing miracles of personal safety. I just happen to believe that many times God answers prayers through other people. It’s a way for us to serve one another well. Doing good to one another is the best way to show our love for God.”
“So God will work through Manuel?”
“Stay close to Him. Be his friend.”
“Who? God? Or Manuel?”
Linda gave Samuel a serious look of warning and answered point blank, “Both.”