W. Va. study finds teachers didn’t have enough in their 401(k)

From WSJ: When 401(k) Investing Goes Bad

Seventeen years ago, West Virginia school employees joined millions of workers nationwide in a shift from a pension plan that guaranteed a monthly check, to a retirement-savings plan that would make the teachers, bus drivers, custodians and other staff responsible for their own investment accounts.

Interesting facts from the article:
* The median 401(k) balance for people over 60 and above at the end of 2007 was $34,420, according to Hewitt Associates.
* For teachers in West Virginia the average balance in their defined-contributions plan was $41,478.
* Of the 1.767 employees over the age of 60, only 105 had balances of more than $100,000.
* The state of West Virginia and some private employers are considering returning to a defined-benefits (pension) plan.

‘Scratch Beginnings’ looks at difficutly of crawling out of poverty

Adam Shepard wanted to see if being homeless meant it was impossible to get out of poverty. He left his middle-classe family in Raleigh, N.C., and became a homeless person in Charleston, S.C.

Within 10 months, he was able to move out of a homeless shelter, buy a pick-up truck and save $5,000. He wrote a book of his experience Scratch Beginnings: Me, $25 and the Search for the American Dream. He says that it is possible and he has witnessed others who were able to become self-sufficient.

Shepard’s books contrast’s Barbara Ehrenreich’s book Nickel and Dimed, where the author spent a year working at low-paying jobs. She argued that those jobs foster a system where a person cannot crawl out of that hole.

“Nickel and Dimed” has been required reading at several universities. Shepard’s book hasn’t been out long enough yet to be added to required reading lists.

Get Rich Slowly interviewed Shepard, and included the recent Getting Ahead or Losing Ground: Economic Mobility findings that indicate Shepard’s ability to get out poverty was aided by advantages such as being a college graduate and family background (Shepard’s family was comfortable economically), which are strong predictors on whether a person will be able to become self sufficient.

Christian Science Monitor: Homeless: Can you build a life from $25?
Get Rich Slowly: Scratch Beginnings: An Interview with Adam Shepard

Advice from Yale’s top endowment advisor

Unless you can afford the cost to get all the great advice of the Yale endowment fund, it’s best to keep your investing strategy simple, sayd David F. Swenson, who oversees the Yale fund, which has $22.5 billion in assets and earned 28 percent last fiscal year.

Swenson is profiled in NY Times and published a book of similar advice in 2005 — Unconventional Success: A Fundamental Approach to Personal Investment.

His portfolio would be 30 percent domestic stocks, 15 percent foreign stocks, 5 percent emerging-market stocks, 20 percent real estate and 15 percent each of Treasury Bnds and TIPS (Treasury inflation-protected securities). His ratio of domestic stocks is much lower than I’ve seen others recommend.

He says it is fruitless for individual investors to pick stocks. “There is no way that an individual can go out there and compete with all these highly qualified and compensated professionals.”

OK, maybe it is good advice, but if can earn 28 percent at Yale, many will try to actively manage to that, rather than the more auto-pilot approach.