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Why Don’t Americans Save More?

I sat down with InvestorPlace’s Jeff Reeves to chat about Americans’ savings habits…or lack thereof. You can read Jeff’s full article here: Americans struggle to sock away retirement savings.

Here is an excerpt:

According to a 2014 survey from the Employee Benefit Research Institute, only 64%

of Americans have reported saving any money at all for retirement to supplement anticipated Social Security benefits. Those with some savings typically don’t have much. The EBRI survey found that roughly six of every 10 Americans have less than $25,000 in total retirement savings.

“Americans just don’t save enough,” says Charles Sizemore, chief investment officer of Sizemore Capital Management in Dallas. “The question, of course, is why?”

Sizemore says another reason Americans have such trouble with retirement planning is cultural, based on our behaviors and emotions.

“Life is pretty stable here, and we have basic safety nets in place. The countries with the highest savings rates tend to have little or no safety nets, and people are forced to fend for themselves in old age. So in a lot of ways, our success and stability have made us a little lax in our attitudes toward saving,” Sizemore says.

Couple that with a lack of mandated savings, and you get an understandable problem.

“In many countries, 401(k)-style contributions are required by law the same way that Social Security [withholding] is here,” Sizemore says. “To the average 22-year-old in their first college job, the priority is paying the rent. Retirement savings is not high on the priority list.”

Investment adviser Charles Sizemore notes that it’s important for older Americans to take advantage of the increased cap on tax-sheltered retirement instruments such as an IRA or 401(k). A typical IRA is limited to $5,500 annually in contributions, but for those age 50 or older, the ceiling is raised to $6,500. It’s similar with 401(k) plans, where the limit is $18,000 for tax year 2015, but those age 50 or older can save up to $24,000.

In addition to supercharging your savings, you can sometimes “save a boatload on taxes” by reducing your taxable income via one of these tax-deferred investment instruments, Sizemore says.

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On WSJ Voices: Picking the Right Estate Attorney

The Wall Street Journal’s Voices column picked up my comments on choosing the right estate attorney. You can read the full article here (subscription to the WSJ may be required), and an excerpt follows below. Enjoy!

Many people think estate planning is mostly about having the right papers in place, but it’s really bigger than that. It’s about managing people. At the end of the day, you can do everything by the book—a will, trusts, custodian arrangements—but none of this necessarily matters if your heirs don’t know where the documents are, what to do with them, or are too emotionally overwhelmed to act.

This is where a good professional can really prove their value. After I had kids and it came time to update my estate plan, I took the details of my financial life—everything from my business-checking accounts to the kids’ college funds—and gave copies to my estate attorney. I then gave my wife, mother and mother-in-law the attorney’s business card and said: “If I die, call her. She knows where everything is.”

This is the kind of advice that I now give to my clients. Simply having the right documents isn’t enough; once you organize your estate plan, you need to pass it to a professional who can hold your heirs’ hands through the process after you are gone. You need someone who can take charge in their time of need.


You can read the full article here (subscription to the WSJ may be required).

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The Importance of Cash Savings

I recently sat for an interview with LoanNow on the importance of saving. Here is an excerpt:

What are the smartest financial decisions we should make?

I really can’t emphasize how important it is to save money. Virtually all other major financial decisions we make – buying a home, starting a business, investing for retirement – first require the existence of cash savings. Without savings, you cannot make a down payment on a house, finance a new businesses or buy a single share of stock; you’re sitting on the sidelines while your friends and neighbors are getting ahead. Step one – before you do anything else – is to save money.

What advice can you offer individuals and families loaded down with debt on managing it? What are your favorite methods for paying down debt?

Debt can be paralyzing. When confronted with rising debts, it’s easy to get overwhelmed with a sense of hopelessness and do nothing. And unfortunately, there are times when a debt load becomes unpayable and the only way out is to file for bankruptcy protection. But this is not something I recommend for the vast majority of borrowers because it ruins your credit, it carries an ugly social stigma and doesn’t eliminate all of your debts. For example, any debts you owe the government – such as IRS taxes or federal student loan debt – are not discharged in bankruptcy. And frankly, I consider bankruptcy the coward’s way out. If you’ve had a catastrophic setback, such as a major illness or the death of spouse, then there is no shame in filing for bankruptcy. But for the rest of us, there most definitely is shame in bankruptcy, or at least there should be.

The first step in getting debt under control is to stop adding to it. Cut your current expenses down to the point that your paycheck easily covers them. Next, prioritize. Higher-interest debts should be paid back first or rolled over and consolidated into something with a lower rate. After that, it becomes an exercise in lining them up and knocking them down one by one. Dedicate all free cash to eliminating one outstanding debt, and then once paid off, repeat the process on the next debt. It’s a long process but very doable if you keep the long-term goal in mind.

What are the worst things we can do when it comes to managing large amounts of debt?

The worst thing you can do is nothing. Interest compounds. That’s fantastic when it’s working for you as an investment, but it is fiscal suicide when it works against you as a borrower. Doing nothing puts you on the wrong side of compounding.

Along the same lines, attempting to pay back debts without a good game plan in place is a major mistake. Hey, any debt repayment is good debt repayment, but doing it right and prioritizing by paying back the higher-interest loans first can massively speed up the process.

You can read the full interview here.

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Comments on Greek Stocks

I spoke with Reuters’ Saqib Iqbal Ahmed about the risks and potential returns of investing in Greek stocks via the Global X Greece 20 ETF (GREK):

Political turmoil in Greece has hit its financial markets hard, and traders in the U.S. options market are positioning for a further fall in Greek stocks as the country heads to a snap election that could determine whether it leaves the euro zone.

There are few choices for investors who want narrow exposure to Greece in U.S. markets, but one, the Global X FTSE Greece 20 exchange traded fund, which tracks the Greek equity market, has seen more active trading in the options market as traders position for more upheaval.

The ETF has fallen about 50 percent since early March 2014 and hit a two-year low of $12.05 on Jan. 8. Since December alone, the ETF has lost 20 percent, and daily put activity – bets on the market continuing to fall – has tripled in the last two weeks…

Of course, with these declines, a brave investor could go in the other direction.

“For an investor wanting a high-risk/potentially high-return trade, I would say going long Greek stocks makes sense,” said Charles Sizemore, chief investment officer at Sizemore Capital Management.

“If cooler heads prevail and Greece avoids a messy exit, Greek stocks are a bargain,” he said. “But this is also one of those trades where you could lose half your money in a hurry if political events slide out of control.”

Full article: Options on Greece ETF draw bearish bets ahead of election

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China Opens Its Market to the West: Now What?

China’s new Shanghai-Hong Kong Stock Connect program opened up China’s domestic stock markets to international investors for the first time ever this week. This is a big deal: it brings China one step closer to being a “normal” investment destination. But before you plow money into Chinese stocks, there are a few things to consider. I shared my thoughts with Kira Brecht, writing for The Guardian:

Still, there are plenty of signs to suggest US investors should slow down and do their research before jumping into Chinese investments, particularly now.

One barrier: China’s companies are characterized by a lack of transparency to the West and an absence of legal protections. Analysts warn that accounting and disclosure standards in China don’t match up to more rigorous western standards…

All of this telegraphs risk, at least until the kinks are worked out.

Case in point: billionaire hedge fund manager John Paulson reportedly lost $468m in Chinese forestry company Sino-Forest Corp in 2011. The losses triggered questions regarding the accuracy of the accounting of the forest and timber land holdings.

“John Paulson is generally considered to be one of the most successful hedge fund managers, yet he lost a fortune in Sino Forest. If even he can get hosed in China, what hope does the individual investor have?” said Charles Sizemore, principal of Sizemore Capital Management.

Basic research could be a challenge.

“The US has a well laid out GAAP (generally accepted accounting principles). In China, things are less transparent. They don’t have the same accounting standards,” said’s O’Hare.

“You are at the mercy of the company giving you the numbers,” said Sizemore.

Read the full article here.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

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