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Guarding Your Wealth for Senior Citizens
U.S. Stock Market Returns Mislead Investors into
False Security
Threats out there to your ability to retire,
maintain your lifestyle
By Jeffrey D. Voudrie, CFP
 July 20, 2007 - The three leading U.S. market
indexes recently set all-time records. Investors are being rewarded with
impressive returns. But those returns are very misleading, and unless
you understand why, you are putting your wealth at risk. Read on to see
why.
Most investors don’t take into account the value of
a nation’s currency when they make investment decisions. In other words,
they aren’t seeing the whole picture. The U.S. stock market has gone up
38% since early 2002. That’s pretty good. If you started with $100,000
then, you would have $138,000 now.
What few investors realize, though, is that the
value of the U.S. dollar has dropped much more than that over the same
time period. The USD has lost 55% of its value against the Canadian
dollar and the Euro. It’s lost over 60% against the Australian dollar!
We now live in a global economy. Investors need to
look at investment returns on a global scale. Consider this: if you had
invested your $100,000 outside the U.S, it would now be worth $238,000.
That’s $100,000 more!
Two articles ago, I talked about the debt situation
of the United States (See sidebar). When future obligations such as Medicare and
Social Security are included, the government debt is around
$67,000,000,000,000.00. We are now the largest debtor nation in the
history of the world.
In my last article, I explained inflation and how
it erodes our wealth. A retiree needs 82% more income today than was
needed when I entered the industry back in 1987. Imagine if you needed
$50,000 a year in income then. Now you would need over $91,000. To keep
pace over that time, your principal would have had to increase from
$1,000,000 to $1,820,000.
The level of debt and inflation affect the value of
a nation’s currency. Think of it like a stock. If the prospects of the
nation are good and if they don’t have too much debt, then the value of
their currency will rise. If there is concern over the ability to pay
back its debt then the value of the currency will fall.
Imagine if you were another country and you have
been investing your money in U.S. Government Bonds. Every dollar you
invested in 2002 is now only worth 45 cents! Would you continue to buy
those bonds?
Of course not. That’s the problem. We are dependent
on foreign nations buying our bonds. The U.S. Dollar used to be the
world’s standard. Nations kept their reserves in U.S. dollars. But that
is changing. They’ve seen their nation’s wealth evaporate as the dollar
declined. Now, they are diversifying and investing those reserves in
other currencies, such as the Euro.
As a nation, we must continue to borrow—we have no
choice. At some point, the only way to attract foreign buyers is to
increase the rate of interest. Increasing the rate of interest slows our
economy and spurs inflation. It’s an incredible balancing act and I
don’t know when we’ll reach the tipping point.
Don’t think that I’m a doomsayer. I’m not. I can’t
tell you when these events will occur, just that they appear likely. Nor
am I trying to scare you. I continue to strongly believe in America and
want it to prosper. I continue to invest in it.
Proverbs 27:12 says, “A prudent man sees danger and
takes refuge; but the simple pass on and suffer for it.” My clients
trust me to manage their wealth. That is a privilege, duty and
obligation that I take very seriously. It’s only prudent that I look
ahead and try to identify potential dangers so that proper steps can be
taken.
You should do the same. Did you realize that our
currency has lost half its value in the last 5 years? Now you do. Now
you are also aware of the enormity of the nation’s debt and the impact
that can have on our future. High inflation is a possibility. All of
these combined present a real threat to your ability to retire and to
maintain your lifestyle throughout retirement.
Now more than ever, it is important that your
investments be globally diversified. And proper management is crucial.
I’ve been and will continue to increase the percentage of my clients’
wealth that is invested outside the United States.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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