Financial “Experts” Need to Seek Professional Help

AARP stands unrivaled as a public voice for old folks. Yet so much of what they have to say about the current economic crisis, which has hit us geezers especially hard, is just godawful drivel. On my own blog last week, I commented on AARP magazine’s relentlessly upbeat take on being old and out of work. A recent bulletin piece was full of the same kinds of useless pick-me-ups. What really took the cake for me this time, though, was the financial planning advice offered to recession-battered geezers:

Avoid early withdrawals. “Taking hits on your retirement accounts, especially when the stock market is falling, generally isn’t a good idea,” says Matt D’Arcy, of Greybridge Financial in Cleveland. Seek professional help. “There are a lot of strategies that might help people avoid touching retirement investments,” he says. “The point is to sit down with someone who can help you map a plan.” If possible, delay Social Security. Benefits are reduced before full retirement age.

OK, let’s just take these statements one-by-one. First, “Avoid early withdrawals.” Nice advice if you can afford it. Or maybe not even then: These financial “experts” have been warning us for more than a year not to take our money out of the market. I just checked to see where the Dow Jones Average was a year ago–hovering around 12,000. I don’t need to tell you where it is now. Here’s a chart that tells the story all too clearly:

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Now, don’t you wish you’d made a couple of “early withdrawals” some time in the last year? Instead, we’ve been told again and again that we have to “hold tight” and “wait it out.” Not very useful for people who are already retired and depending on their savings–and could die before this thing hits bottom.

Second piece of advice: “Seek professional help.” How anyone can still say things like this with a straight face is beyond me. By now it would seem pretty clear that these financial “professionals” haven’t got a clue, and that anyone who tells you otherwise should–well, should probably seek professional help.

Let’s not forget all those people who sought professional help from the likes of Bernie Madoff. In a recent letter to the judge in the Madoff case, Massachusetts School of Law Dean Lawrence Velvel, writing on behalf of a group of 300 Madoff victims, noted:

Many–perhaps even most–are elderly, in their late 60s, 70s, or 80s. Many had no other savings or income except what they had in or received from Madoff. Many are completely devastated, financially and psychologically. They are selling their homes in order to obtain money to live. They are attempting to reenter the work force, sometimes in menial jobs, in their 60s, 70s and 80s, in order to obtain money for food and shelter.

Some of these Madoff victims were described in a Reuters article last month; they include a 90-year-old who retired 25 years ago, but has now returned to work in a California supermarket. That’s where seeking professional help got him.

Finally, we come to the third piece of advice: “If possible, delay Social Security.” We all know that the earlier you start collecting Social Security, the lower your monthly payments will be. But right now, Social Security is about the only thing that older people can count on. While everything else is going down, Social Security benefits for 2009 went up almost 6 percent, the largest increase in 25 years. So a better piece of advice might be to do everything you can to protect Social Security from being undermined in the name of “entitlement reform.”

The bottom line is, a whole lot of newly unemployed, newly broke elders will have no choice but to start taking their Social Security as soon as they can–unless they can figure out how to stretch their $250 stimulus checks until the recession ends.

(By the way, last night on “60 Minutes,” Fed Chair Ben Bernecke assured us that the end will come soon–”probably this year.” And if you believe that, I’ve got some shares of AIG to sell you…)

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