My Mom Almost Got Mauled by a Bear

3 Great Ideas to Save Mom and Dad from the Bear Market
While there are a good 40 years between us, as well as widely varying political views and completely different social standards, right now I'm looking pretty closely at how different generations--with different levels of assets, liquidity, and different cash flow needs--can work with the current economic conditions, and make them work in our favor. Here are some suggestions for my favorite, older generation, based on what the media is spewing this week:

Media Spew: Don't Touch Your 401K, IRA--Advisers are Predatory Right Now
MyPropFolio Reply: Seek Appropriate Financial Advisers

While I was brought up amongst the notions of "celebrating diversity," and "holistic approaches" to understanding 'how things work,' my 100% North Beach Italian mother was not. If your parents have similar tendencies toward or against certain people, understand that this will affect how, if, and with what regularity they interact with their financial adviser. It is key to match this generation with an adviser or firm that will literally cater to their needs, look past their foibles, understand their intentions, and who won't look upon their nest eggs as a new and completely viable playing field to bolster their management experience.

This week, Business Week featured three "older" (read over 60) retired men who got bored with retirement, and moved into to money management. They all shared the common feature of being very, very conservative. That approach in mind, it might be a good idea to help your parents, or insist that they 'interview' their current adviser to make sure their quarterly goals are being met. This is also a good way to hold your adviser accountable.

Media Spew: Diversification means Less Transparency
MyPropFolio Reply: Diversification with Due Diligence Always Win

I'm not saying you or your parents are like my mom in this, but I tell you: she doesn't even want to buy anything made in China anymore--and good for her. The thing is, while she may think that our jobs are going to "illegal immigrants" (while I was taught people cannot be illegal) I try explaining about outsourcing...Ah, it's a lost cause.

The most common thing I see amongst financial advisers right now is the cry for diversification--because this is what the investing firms themselves are suffering from: they just about lost their shirts (even when Bear Stearns kept their shirts through the Depression) with the security investment vehicles (read: subprime loan) mess.

It was, in fact my mother who said to never put all your investing eggs into one basket. This said, people like my mom also seems to have sanctified comfort zones when it comes to diversifying her investments. "Hell no, Shanghai Stock Exchange," I can hear her saying, even after I tell her that the volatility of that exchange system makes it a formidable place--money rules standing--to really generate some considerable additional income.

Media Spew: Money Rules Go By the Boards in Times of Economic Duress
MyPropFolio Reply: Adjust Money Rules, But Gradually, and not Reactively

The housing market, stock market--pretty much any market is NEVER unpredictable, if you look at enough history. While it is true that some rules get tossed aside as the economy changes, it is more important to alter expectations to fall in line with real possibilities right now. You cannot hope to get a 100% mortgage nowadays. Bank on that. You cannot expect appreciation rates of 6-7% nowadays. Plan on that. You should not expect the same returns on your stocks, unless you have adjusted your "buy" and "sell" thresholds. Adjust those.

Other popular rules that may need adjustment right now:

• The 1% rule (getting 1% of purchase price in rents to make a rental cash flow)
• The 4% rule (do not drain more than 4% of your retirement nest egg, upon inauguration of retirement)
• To Retire Comfortably: Save 10% (yearly) for basics, 15% for comfort, or 20% to escape

Clearly these "rules" do not hold now, what with housing prices down and inflation rising. It will become increasingly important that we all understand how slightly or drastically these rules need to be adjusted across time to reflect the reality of the economic conditions we are capable of creating for ourselves.

Have any other ideas on how to help ourselves and our parents? I'd love to be able to add to the list. Click below to post a comment.