You’re a smart bunch of people. I’ve known that ever since I first met you. You’re also energetic and resourceful – not accustomed to just sitting still and letting the world have its way with you. I realize that there is some frustration on your part (probably a lot of frustration) about this current economic crisis that’s going on. And to top it off, so far all I’ve told you to do is to wait it out – don’t panic – stay the course.
What I failed to mention in my previous letters to you, my friends, is that there are several common sense things that you can do right now. I’m telling you this because I recognize and appreciate your energy, your resourcefulness, and your willingness to take the hard truths of life, and apply them in a fashion that has no choice but to succeed.
Throughout this past couple of months I’ve had many folks talk to me about how worried they are – worried that we’re on the verge of another depression like we had in the 1930’s. Folks, I understand your concerns, but really – how many of you are considering pulling up stakes and walking away from your homes, to take to the road in the hopes of finding work, any work – like people did during the depression? And this went on for years… We’ve not felt any real pain like that – why, we’re just now trading in our Hummers and Navigators for something a little more economical! No, this is nothing like that at all. But the resolution is very similar, although it’s one of the hard truths that I mentioned before.
The hard truth is this: nothing is going to fix the American and world economies until we (you, me, your families, friends, and neighbors) learn to tighten our belts in a crisis, work a little harder, maybe work a little longer, and most importantly get back in that old habit of spending less than we earn (maybe a LOT less), possibly by settling for homes and autos that more realistically reflect what our finances will support. Because in the end what you save has a much greater impact on your future way of life than the returns you get in the market – good, bad, or horrendous.
This saving I’m recommending will help you to recover your losses. And here’s another hard truth that you may not want to hear: because of the market losses we’ve seen this year, you may have to work an extra year or two before retirement, or perhaps work part-time, or tighten your belt a little more than you expected to. Most likely it will be a combination of the three… but doing all of these things will put you in a much better position when the market does finally come back – even better than before!
All that we need to do (and by “we” I mean all Americans), is save a little more, work a little harder, and work a little longer. Eventually our government will also ask us to pay more taxes, especially to resolve the enormous debt we’ve built up. If our government doesn’t do this, we’re only continuing the transference of this debt forward to the future generations – and somebody is going to have to deal with it. Let’s you and I start doing something about it now.
While we’re at it, we need to put a lot of consideration into our present social programs. For example, does it really make sense for everyone to be covered by Social Security and Medicare? I think we’ve made a lot of promises that we can’t in any way afford to keep, and if we don’t face the hard truth soon, it’s all going to blow up in our faces.
The way you impact this (beyond your savings habits) is to take part in the process and get involved in making sure our government makes the hard choices. Write your congressmen and women. Call your state representatives. Take action – we have to act and act soon!
Another action you can take right now in the light of these difficult financial times is to rebalance your holdings – especially if they’re taxable accounts. If you’ve experienced losses in your taxable accounts (and let’s face it, who hasn’t?), the next six weeks are critical in terms of tax loss harvesting. For those of you whose accounts I’m managing that can benefit from this strategy, I will be in touch with you shortly to work out a plan for taking part in this strategy.
What we’ll do is sell your heavy loss positions before the end of the year and place those funds into something very safe, like municipal bonds, for the IRS-required 30 days (to avoid wash sale rules). Then, along in January we’ll take a look at your overall allocation in all of your accounts and reallocate the funds from the bond holdings into a more balanced portfolio.
You will then have a capital loss on your record that you can use to offset capital gains you may have earned this year, plus up to $3,000 of ordinary income. Any unused losses are carried over and used to offset capital gains and income (in $3,000 per year increments) indefinitely until it’s all used up. It’s a one-time activity that we must take advantage of now, before the market does pick back up. It’s a small amount of silver lining in all the dark clouds we’ve been seeing lately.
For those of you that have taxable accounts that I’m not managing, please let me know if I can help you with the process. It’s fairly straightforward, but you don’t want to make mistakes as you do this – the IRS doesn’t forgive (and they certainly don’t forget, either).
So there you have it, that’s my message. You probably already knew it, but as I said, I felt like I was doing you a disservice by not giving you more direction than to just stay the course. Feel free to pass this message along – in fact, that’s yet another thing you can do: if you agree with even a small part of this message, make an effort to relay the message to others. If, by some wild circumstance, we could get this message and the sentiment out to enough other people like you and me, think about the positive impact we’d have… and we’re just the ones to do it. It’s in our heritage.
.
Let’s say for example that you had a choice to begin your Social Security payout at your early retirement age of 62, at a reduced amount of $750 per month. Had you waited until “normal” retirement age (66), your benefit would have been 33% greater, or $1,000 per month. (For the purposes of simplicity of illustration, the annual cost-of-living increases have not been included in this example.)
Click the link to pick up a copy of 
My other book, 
And if you've come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed "advisor's advisor".