PRN: Fiscal Potpourri Basket

There are all sorts of ideas, facts,analyses, and opinions available inthe financial world to read and writeabout. In many respects, the financialworld affects most areas of our life.Occasionally some small ideas are justworth noting in passing. Ergo, I put out acolumn from time to time of this 'n thatto at one stroke winnow my files andhopefully provide a spark that resonateswith someone to their financial betterment.A win-win, the negotiators call it.

Investing Strategies

• In the words of Dr. Phil, "Moneyproblems are not solved by money."
• Developing public awareness ofincreasing inflation gives a lot of companiescover to raise their prices usinginflation as an excuse, thereby creatingmore inflation. Make a note to look outfor this within the next 2 years.
• Diversification is a wealth accumulationand preservation strategy, not aget-rich-quick strategy. You are investingin this way because no one knows whatwill happen in the financial markets orwhen they'll occur. Being spread overseveral financial areas that do not go upor down together is an insurance policy.
• Dollar-cost averaging is a well-knownway to take a lot of emotionout of saving and investing. You save afixed amount every month and investit—up- or down-market, up- or down-economy—in a diversified way. Theplan is to dollar-cost average into themarket in your saving years, and then,here's the nugget, dollar-cost out in theretirement years.
• IRA holding firms often tap youraccount for their fees without yourknowledge. Even if the fees are small, thiswithdrawal from your tax-shielded fundcan really cost over time. Instead, ask yourIRA holder to bill you outside the fundand pay the fee with tax-deductiblefunds. Net free money if you want it.
• Likewise, if you put your IRAdeduction away in January as a lumpsum instead of, say, the legal limit 15months later, over the 20 years from1980 to 2000, the difference wouldhave amounted to an extra $26,549.That's more free money for thinkingahead and acting.
• One rule of thumb is to buy lifeinsurance that is 5 to 7 times your income.The corollary rule is that most folks stickto term, not whole life insurance.

Retirement Outlook

• Surveys show that today, womenmanage the majority of households'finances. It's appropriate when you considerthat four of five surviving spousesare women. Let it also be noted thatmen trade, on average, 45% more thanwomen and subsequently, if not consequently,have a 1.4% lower net return.
• Within the past 5 years, 20% ofthe people who retired have gone backto at least part-time work. An uncalculatedlarger number have either consciouslyor unconsciously cut back onspending. The moral: Save more, retirelater, and spend less.
• In retirement, it's the sequence ofreturns that is critical, not the averagerate of return, the first few years beingthe case in point. You can better toleratea hit toward the end of your retirementthan toward the beginning.
• Retirement money needs andspending such as travel can be thoughtof in thirds: in the 60s, go-go; the 70s,slow-go; and the 80s, no-go. This is perhapsinversely related to health carespending, which, according to one surveyof retired people, amounted to asmuch as 500% of their health care plan.

Jeff Brown, MD, CPE, a practicingphysician who is a partner onthe Stanford University GraduateSchool of Business Alumni ConsultingTeam, teaches in the StanfordSchool of Medicine FamilyPractice Program. He welcomes questions orcomments at jeffebrownmd@aol.com.