Q-My wife and I are blessed with good jobs and expect to retire in 12 years at age 65. We have no children or debts and are churchgoing people.
Upon retirement, we will jointly receive $37,000 from pensions, and, best as I can determine, we are entitled to $23,000 from Social Security, plus what our current $48,000 in savings will be worth in 2006.
Because our retirement is secure, we are considering contributions of our excess income (about $10,000) every year to our church. Our $48,000 is in CDs, and we want to know how to invest this for a better return.
A-Your intent is wonderful; however, folks with wonderful intent sometimes do stupid things. It might be fatally stupid to include Social Security benefits in your retirement calculations. If you think you’re “entitled to $23,000 from Social Security” at age 65, you’re living in Lala Land.
I don’t mean to throw a wet blanket on your towel, but the U.S. Supreme Court (Fleming v. Nestor) quietly ruled that workers do not have accrued property rights to Social Security.
Those benefits are entirely at the mercy of Congress, and according to my Ear on the Hill, “Congress can do anything it pleases with those funds.
In fact, by 1997-98, we may have to welsh again on our promises and exclude 14 percent of those who are or will be collecting benefits to keep the numbers in balance.”
There’s nothing “secure” about Social Security, and it’s not the “entitlement” you’re encouraged to believe. Social Security is a giant sucking scheme taken over by Congress in 1978, the funds from which are used to finance the deficit.
You’ll both be 65 in 2006, and I suspect your generous pension plus other assets may exclude you from Social Security benefits. Social Security’s first priority will be to provide income to Americans less fortunate than you.
Those 42 years of Social Security contributions you thought belonged to you will be used to support the great unwashed.
Your noble intent is inspiring; however, that charity may put you in the “Alpo line.”
Because I believe prices of pizza, pickles, prunes and peanut butter will triple in 20 years, you must become “supersavers” and strive to save $15,000 each year between now and when you retire in 2006.
Assuming an 8 percent return and a 50 percent tax bracket, you will have accumulated $260,000. And with a small invasion of principal, you should be able to generate $23,000 to $26,000 of income each year.
Meanwhile, consider Dreyfus Growth & Income, Invesco Growth & Income and Berger 101 funds for that money.
Q-There are a bunch of small phone companies in emerging nations that have public stock. Could you research them and recommend the best phone company for a long-term investment?
A-Not on your chinny-chin-chin. I’d have an attack of megrims mushing through the balance sheets of 40 some phone companies from Turkey, Portugal, Malaysia and so on. Besides, my Russian, Hebrew, Spanish, etc., are too slangy to comprehend those annual reports.
A friend of mine who’s an analyst with the Bank of Betelguese, suggests that you consider a closed-end fund trading on the Big Board answering to the name of the Emerging Markets Telecommunications Fund (ETF-$27).
Last year, the inimitable Bear Stearns allowed the hoi polloi an opportunity to invest in the equities of phone companies that serve emerging markets. And in June 1992, the Bear took 7.25 million shares of ETF public at $15 each.
Its portfolio looks like something from the International House of Pancakes: Cellular Communications of Puerto Rico, St. Petersburg Long Distance Telephone (Russia), Italiana Telecom, Netas Teleknmunlk (Turkey), Telefono de Peru, Marooni (Portugal), Telecom Malaysia, Galcom (Israel), Consorcio Inversionista (Venezuela), Telefonica de Argentina and a passel of others.
I will give you my revocable blood oath that the dynamic and inexorable growth in these infant markets will continue unabated (excluding period of wars, or social, economic and political unrest) for two- or fourscore years.
Imagine being able to turn your portfolio clock back some 80 years with an opportunity to invest $10,000 in AT&T. Frankly, today’s investment opportunities in India, Israel, Indonesia, etc., may have similar results.
ETF’s theme is to invest in emerging nations where commerce is expanding and equipment is urgently needed to facilitate that growing commerce.
ETF’s rationale is that political and social changes will create market-driven economies favoring privatization.
Privatization will allow the “Telcos” to create efficiencies and technical innovations that create attractive profits. Go with ETF. It’s better than learning Russian and collecting dividends in rubles.
———-
Malcolm Berko welcomes questions and comments. Write to him at P.O. Box 1416, Boca Raton, Fla. 33429.
