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Don't Get Cheated Out of Your Nest Egg

By Tobin Smith

While on a skiing trip with my family and friends at the Deer Valley Resort in Park City, Utah, I noticed an alarming trend: Many affluent retirees are now finding themselves "detired."

"Detired" is a term my twin brother Brian devised to refer to the situation in which a person once had enough assets to retire comfortably, but now does not.

Detirement was a topic of much discussion on the trip. Many of my brother's friends who live in Park City fit the profile of a detiree. They are entrepreneurs and executives who after 30 or more years in the business game cashed in and entrusted their money to a money manager.

The moral of this story is simple: If you have accumulated enough assets to retire, you cannot mentally check out and expect a money manager to keep your nest egg intact.

Why? Money managers get paid 1% or even 2% of equities under management, but only 25 to 45 basis points for bonds, and nothing for money markets or treasuries.

When you have reached the point in your life when you no longer need to work, your financial goal is simple: to stay rich.

I can't tell you how many people I met at Deer Valley who told me the same story: "Well, I thought I was set for retirement, but now I have lost more than half of my financial assets, and I'm screwed."

Invariably, the next thing they do is ask, "So when is this bear market going end?"

My answer is always the same: "It will end when the $8 trillion of bad financial assets gets flushed from the financial system. So you tell me when that happens, and I'll tell you when the bear market will end."

What's more, after this bear market rally, we should expect another correction in stocks to reflect the $8 trillion flush.

What are the lessons that can be learned from the detirement story?