When Saying No Helps Your Family

How can I retire now?I’ve been pretty busy here the last couple of weeks. Between packing the old house up in anticipation of our move, I’ve also had to do some work-related travel. Needless to say I need to get some more time to catch up.

I multi-tasked today, and spent some time doing work around the house while I called some family and friends. Multi-tasking is great, and I always feel more productive when I find a way I can do it easily.

I had a quick chat with a good friend who told me a disturbing story. His wife’s grandparents have spent all of their retirement savings. They have many years left, and not a lot of money with which to live.

The problem on their part wasn’t poor planning. It has to do with some unscrupulous family members who have taken advantage of their elderly grandparents. This story really upset me.

For a little background, my friend’s aunt has had a history of living a hard-partying lifestyle. Her hard-partying ways have made it difficult for her to keep a job, and her children’s father has been in jail for some time. She has very little money, and is not doing much to improve her situation. She has been “borrowing money” from the grandparents to support her lifestyle. In essence, she’s been stealing their retirement funds.

It gets worse. When she decided that having her children live with her was too expensive, she dumped them on the grandparents. These children appear to have learned some bad habits from their mother as they have also been taking advantage of their grandparents. Even as they have grown into adulthood, they are still using their grandparents to support their lifestyles.

At this point, the grandparents’ savings have been depleted, and they have been forced to take out a mortgage on their home (which was paid off) in order to continue supporting their family. Why are they in this situation?

These poor folks just don’t have the courage/desire/ability to say “no”.

Normally I would wholeheartedly applaud them for helping their family. I think helping your family is of critical importance. At one point, this situation might have been about a family in need, but now it’s more about the family’s resistance to learn to live on their own. The grandparents are just funding their grown family’s lifestyles and they can’t afford this. In a misguided effort to help them, they are actually doing harm to their family and especially themselves.

The oldest child is old enough to get a job and move out on his own, but instead he prefers to mooch off of the grandparents and go party with his friends. I feel bad for the grandparents for being in this situation, but they’re the ones that have to stand up and put an end to it. Their daughter (the children’s mother) should also find a job and learn to live within her means instead of living her hard-partying, low responsibility lifestyle.

My friend is extremely angry about this and has been trying to help the grandparents. He has, for years, been warning them about what is going on and suggesting what they need to do to fix the situation. He’s confronted the kids and their mother about what they are doing to the family and to their grandparent’s future. Unfortunately, nothing has improved despite his best efforts and now the situation is serious.

In order to clean up this situation, I think the following things will have to happen:

No doubt these changes are going to cause a lot of strife in the family. The greed and immoral behavior of a few is hurting many other family members who must now help the grandparents financially just to make ends meet. They are also going to have to find some way to ensure they are only helping the grandparents, and not continuing to fund the lifestyles of a few freeloading family members. If the grandparent’s would stand up and say “no”, the entire family would be better off.

Sometimes, when you think you are helping someone, you are really hurting them. This can extend beyond just you, and start to affect the others you love. In this case, we’ve got grandparents with no retirement, kids and grandchildren who don’t know how to support themselves, and now additional family members have to be involved in order to help pay for the grandparent’s retirement. It’s essential to know when to say “no”.

Photo by pedrosimoes

Investing In My Roth IRA

Is this enough to retire on?Recently, I talked about how I have switched my Roth IRA from the insurance company to my brokerage account. I started doing some research on where I was going to invest things, and came to the conclusion that I would be investing all of it in Vanguard Exchange Traded Funds after doing some math. The Vanguard ETFs have the lowest expense rations, even lower than their mutual funds, and offer a reasonably diverse portfolio.

There is only one problem, and that is brokerage fees. When I started calculating if ETFs or Mutual Funds would be better, ETFs won out easily for large investments, but with the smaller investments (like $1000 or less), if I had to figure in the brokerage fee, the mutual funds came out ahead. There weren’t huge differences, but because this money is going to be invested for 25 or more years, I wanted to ensure that I would lose as little as possible to expenses and fees.

So, I’ve been taking some time to find out the best place to put my Roth IRA (I’m moving it again I think – I only have so many free trades with my current broker).

I’ve been debating opening the Roth IRA at Zecco.com because there are free trades. I’m just not sure it’s going to make sense though. There appears to be a fee charged on Roth IRA accounts from what I can tell, and I might need to do a bit more research before I consider this option. The fee is likely to eat into my savings one way or another.

I’ve also been looking at opening up a Vanguard account directly because, at least right now, I think I’m going to stick only to Vanguard funds. This might change in the future, when I may want to diversify, but for now, after reading The Four Pillars of Investing: Lessons for Building a Winning Portfolio, I think I’ll stick with Vanguard Index funds. But because I don’t have a large amount of money, I’m going to be hit with fees again. Even if I stick with mutual funds here, unless I have $3000 in each fund, there is another fee I’ll be charged at Vanguard.

It seems the more I learn, I find there is even more to learn. Investing can seem very straightforward one second, and then incredibly complex the next. In the end, it’s just a matter of sitting down, figuring out all of your costs and fees, properly diversifying, determining your acceptable level of risk, and then generally just letting your money sit and earn until you need it.

I feel like I’m back to square one today. I had convinced myself that my Ameritrade was not the best option here, and I might still be right, but the other two options that seemed to be better have more going on than I expected. I’m going to be taking some more time to do the math today, and if I discover anything else interesting, I’ll post it. In the meantime, my Roth is at least making something in the money market account, but it’s not going to make as much as I want if I let it sit there very long.

Photo by CheesePicklesCheese

Is Any Roth IRA Better Than No Roth IRA?

For me, I’d say “Yes”. Just having a Roth IRA got me started in the right direction by beginning to invest outside my 401K.

My Roth IRA was with an insurance company. You may be wondering why I had one there. In the past, sometimes I had a hard time motivating myself to do the right thing. Going through the process of opening one up seemed like a lot of work at the time. I didn’t take the initiative to do it myself. When my insurance agent called me and asked me to come in to go over new guidelines on my insurance, he also mentioned Roth IRAs to me.

I knew I should have one. So when he said he would take care of everything, I figured why not. It was easier than filling out the paperwork and managing it myself. I knew that this would result in higher fees, but since I had not set one up before, and I knew that it was something I needed to do, I went ahead and did it.

I don’t regret that I set it up. If my agent hadn’t talked me into it, I might not have done it for years. I do regret that I didn’t personally manage it. But back then I wouldn’t have known what to do, and I had other priorities in my life. Now I am much more educated on investing, and my priorities are in the right place.

Over the past year I’ve been reading and learning about how to properly invest and manage my money. Today, the transfer from the insurance company cleared and I’m in a position to manage my own Roth IRA.

If I had left it at the insurance company, it would have been alright, but the fees would have been higher than they needed to be, and that would have eaten into my savings.

But at least I would have had savings.

My goal for this week is to take some time and figure out what I’m going to invest it in. Because it’s long term, it needs to be in mutual funds or ETFs, but I want to make sure I have a healthy mix of funds (stocks and bonds, foreign and domestic). By SaturdayThis upcoming week, I’ll report back what I decided to invest my Roth in and why.