Facing fearmongering in retirement planning

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Q. On TV we are seeing many ads trying to scare the viewer into buying gold. We’re also bombarded with statements claiming we are going to have a large turndown in the stock market. Are we supposed to hide our cash in a pillowcase? The nattering nabobs of negativity tell us we will be a cashless society and the government will confiscate our savings. Does this mean anything to us?
— Tired of hearing it all

A. You’re right that you’ll find lots of advertisements that use fear to bring in customers. We don’t like it at all.

Let’s address all your comments.

First, ads for gold.

Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton, said he’s seen the same ads: William Devane talking about gold. Tom Selleck discussing reverse mortgages. Erik Estrada selling Florida real estate.

“They have two things in common: They are all actors gifted at speaking in a convincing manner, and they know nothing about what they are talking about,” Lynch said.

Lynch said he doesn’t like gold for regular investors.

Gold is a commodity, he said, and generally commodities are market timing products.

“This means that you need to do two things well to actually make money: You need to get in at the right time and then get out at the right time. That is extremely difficult to do!” Lynch said. “If you look at historical gold pricing, it looks like a heart monitor for a person with a heart attack — very volatile.”

Lynch said gold is expensive to trade and to store. He said you can reasonably lose 10 percent or more on purchases and sales of the product, and there are many dealers who are not acting in your best interest.

Gold is also taxed at a higher rate as a collectible, he said.

“If I own a stock for a year and have a gain, then sell it, I get taxed at capital gain rates that are either zero, 15 or 20 percent,” he said. “On gold, it gets taxed at 28 percent.”

So overall, Lynch said, it’s a very complex product that requires excellent market timing to make money, it is expensive to buy, sell and store, and it gets taxed at a very high tax rate.

Now to everything you’ve heard about a market downturn.

“I have done a little media and let me tell you what sells: doom and gloom!” Lynch said. “If you turn on CNBC and they tell you everything is great, you flip the channel and find an old rerun of the Three Stooges. Then CNBC loses all its advertising dollars because nobody is watching.”

But if you turn the TV on and the world is coming to the end, you watch all day long and the advertisers love it, Lynch said.

Generally, he said, the media is not there to educate you, but instead is there to entertain you and sell advertising.

“Many of these investment shows would change to a home improvement or dog grooming show tomorrow if they can sell more advertising,” he said.

On stuffing your cash in a pillow, maybe not.

“Always protect your cash flow and make sure you have enough where you can get through reasonable market declines,” he said. “The rest invest and allow your money to go through market cycles. Cash is very uncomfortable in a pillow!”

In terms of all the negativity, Lynch said, you shouldn’t pay it much mind.

“Let’s assume that I find out that the market is about to crash, stock prices will plummet, and home prices will take a huge dive. Why would I tell you?” Lynch said. “If I have these great facts I would tell nobody, and short the stock and housing market and make a fortune. Why would I dilute my returns by telling everyone about this?”

The bottom line is you should stay focused and disciplined, save regularly and get more conservative as you get closer to retirement.

“It is not as exciting as gold or shorting the market, but it works,” Lynch said. “The tortoise always wins!”

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