There’s no such thing as a free lunch.
Particularly when it comes to getting a few hours of Ben Bernanke’s time. The former chairman of the U.S. Federal Reserve charges from $200,000 to $400,000 for speaking engagements at private equity firms, hedge funds, banks, and trade associations around the world.
However, “Helicopter Ben” (also known as “Bearnanke”) has made a few pro-bono appearances and speeches in which he provides some great advice on financial matters. Here are the five best pieces of financial wisdom from Ben Bernanke.
1. Be Smart About Student Loans
Student loans are a key issue for Millennials, On the one hand, workers with a bachelor’s degree earn about $1 million more in their lifetimes than those with just a high school diploma. On the other, 2014 college graduates owe an average of $33,000 in student loans.
“People have to be smart about how much money they take out,” Bernanke recommends to young people. This short piece of advice is very powerful for retirement planning reasons. Your initial employment years are key for retirement savings because money invested then has the most time to take advantage of interest compounding. If student loan payments are preventing you from maximizing retirement savings, you’re at a disadvantage.
Bernanke points out that you must find and talk with a student loan adviser on a regular basis. Remember that education is an investment, so that means it must provide returns. Keep student loans in check, live a frugal lifestyle during your college years, and choose your major wisely.
2. Remember Money Isn’t Everything
During a graduation speech at Princeton, Bernanke gave this suggestion to the class of 2013: “Remember that money is a means, not an end.” He was not saying money does not matter, rather there are other factors to consider when making decisions such as career.
More than half of Americans are dissatisfied with their jobs. While workers making more than $125,000 are the happiest with their jobs, there are still about 35 percent of them who are dissatisfied.
How can this even be possible? Turns out that the two criteria that make people happiest at work are non-monetary. “Interest in work” and “people at work” were chosen by 59 percent and 60.6 percent of workers, respectively.
Bernanke is right in warning that choosing a career based only on money without consideration on love for the work or desire to make difference is a recipe for unhappiness. Give appropriate consideration to these factors, as well.
3. Evaluate If Annuities/life Insurance Make Sense for You
During his four-year tenure as Federal Reserve Chairman, Ben Bernanke had one of the toughest financial jobs in the world.
So, it’s no surprise he kept his investments simple. His two largest assets are two annuities (Inside life insurance companies), TIAA Traditional and CREF Stock Large Cap Blend, each valued at between $500,001 to $1,000,000 as of 2007.
High net worth individuals, workers close to retirement age, and workers with a late start in the retirement saving race could all benefit from owning annuities for four reasons.
- Life Insurance contracts allow your money to grow tax advantaged, create a source of income for retirement as well as pass to the next generation income tax free.
- Unlike other retirement accounts, annuities and life insurance have no contribution limits. This means that high net worth individuals could put away more for retirement than the $18,000 limit set by the IRS.
- Immediate annuities allow workers close to retirement to stuff away more money in their nest eggs and start receiving distributions after a short period of time.
- Some annuities offer a guaranteed stream of income, which is key for those close to retirement age or who have very low tolerance to investment risk.
Owning annuities isn’t for everybody, but evaluating whether or not annuities should be part of your retirement planning definitely is. We need to talk.
4. Improve Your Financial Literacy
“Financial education supports not only individual well-being, but also the economic health of our nation,” said Bernanke during a teacher town hall meeting in 2012.
Do not kid yourself, Millennials aren’t the only ones in dire need of improving their financial education. More than a fifth of Americans think that winning the lottery is the most practical way to accumulate wealth.
Bernanke advises us to improve not only our own financial literacy but also that of our children. He recommends that our focus shouldn’t be on memorizing financial products or calculations, but learning essential skills and concepts necessary to make major financial choices. For example, to shop around for a loan to get the lowest interest rate and to start saving early for retirement.
Thanks uncle Ben for putting in a plug for me, my blog, and my newsletter.
5. Minimize Costs
When discussing raising gas prices and their effect on the American worker, Bernanke said “it must be awfully frustrating to get a small raise at work and then have it all eaten by a higher cost of commuting.”
Whether it’s the sale price of your home or the size of your nest egg, you can’t always have full control on the returns of your investments. However, you always have much more command on the cost of your investments and purchases. Minimize any type of fees so that you give your investments a better fighting chance. Wow and what is one of the biggest misunderstandings in the financial sector? THE FEES YOUR PAY IN MUTUAL FUNDS……but that is a topic for another post.