You want a mechanic not a used car salesman

We’ve all heard the story of someone who buys a used car and then takes it to a mechanic and finds out there are all kinds of problems which are really expensive to fix.  The car looked great and the salesman was really sincere. . .

Sound familiar?  I often see people make big financial decisions the same way that and end up with buyer’s remorse because the did not want to take the time or spend the money to get an unbiased opinion.  In many of these situations they have received the advice of a “financial advisor” but unfortunately, he was really a salesperson in disguise, just like the guy at the car dealer.  All he really cared about was selling you the product (annuity, life insurance policy, mutual fund, etc.)

What you want is the mechanic, someone who can give you objective advice, that is not selling you anything, and whom you pay directly, not through the purchase of a product.  Sure the advice is not free, but it’s definitely worth it.

Drive safe.


Are you on track for retirement?

Here is a ‘quick and dirty’ tool that I found in Money Magazine (Feb 2011), that gives you a quick assessment to see if your retirement savings are on track.

For each age there is a savings factor (e.g. at age 30 the savings factor is 0.3).  This means that if you want to retire at age 65 you need to have 30% of your salary saved by age 30.  If you earn $100,000 this means that you would need to have $30,000 saved for retirement.  At age 50 the factor is 4.5 which means that if you earn $100,000 you would need to have $450,000 in retirement savings.

Age        Savings Factor

30               0.3

35               1.1

40               2.0

45               3.2

50               4.5

55               6.2

60               8.2

65              10.6

This table is a better estimate for younger ages when retirement is far off and you want a quick reality check. As you get closer to retirement so many other specific factors could affect your number (e.g. will you have a mortgage, will you move, will your lifestyle change, etc.) that it may be worth doing a more specific sophisticated analysis, or even seeing a Fee-Only(tm) Financial Planner.