Another reminder about how Wall Street is trying to profit from you; Make sure you're earning the maximum return on your cash; A 'looming threat to bitcoin'; Some general financial advice for retired readers

1) Since many of my readers are at or near retirement age, a recent article in the Wall Street Journal caught my eye: What the Record Wave of New 65-Year-Olds Means for Wall Street.

While the article focuses on the implications for the largest financial firms, it's important for you, the customer, to understand how they're going to try to profit from you – and I can assure you, your best interests are far from the top of their agenda...

As a data-driven guy, the first thing that caught my eye was this chart confirming the headline of the article – more Americans are projected to turn 65 this year than any year in U.S. history:

This paragraph in the article really caught my eye because it's a topic I've written about often:

For financial-services firms, that likely means more demand for investments that can help people close the income gap they expect from not working. That can be as simple as putting their cash into higher-yielding vehicles, such as money-market funds. Already, investors' close attention to cash yields is a challenge for banks and brokers accustomed to supercheap deposits.

In six of my e-mails last year (most recently on November 19, which links to the prior five), I've pounded the table on this:

... some wealth-management firms are screwing their customers by paying them minimal interest on their cash when the market rate is around 5%...

I'm going to keep writing about this topic because it's scandalous what many of these big firms are doing – and because moving your excess cash to an account – or a firm – that offers market rates is the biggest no-brainer I've ever seen.

It's easy to do, you'll earn free money and – depending on how much you're keeping in cash – it could be big money.

To understand how big, consider this fact from a Yahoo Finance article two days ago:

The national average interest rate for money market accounts is just 0.66%, according to the FDIC. However, the best money market account rates often pay around 4.5% to 5% APY – similar to the rates offered on high-yield savings accounts.

The 4.5% to 5% rates are above market and likely teaser rates. But I checked two of the largest brokers, Vanguard and Fidelity, this morning and they're paying 4.28% and 4.23%, respectively, right now.

So if you have $100,000 in cash in an average account, it's earning a mere $660 based on the 0.66% interest rate. But if you take five minutes and move it to an account paying 4.25%, that's $4,250... $3,590 more, or more than six times as much.

Do you think that's worth five minutes of your time?

That's why I keep saying it's "the biggest no-brainer I've ever seen."

(Of course, remember that we here at Stansberry Research do not recommend or endorse any brokers, dealers, or investment advisers. We aren't affiliated with any brokerage and don't receive any compensation for mentioning a particular broker.)

2) The WSJ article then goes on to discuss complex investment products like annuities and "so-called alternative-asset managers, which specialize in private-market investments."

I would urge caution here...

Some annuities offered by reputable firms can be a smart way to convert cash into a lifetime stream of guaranteed payments that can help during retirement. I helped my parents do this with roughly 10% of their net worth a number of years ago.

But the annuity world is filled with complexity, high fees, and hard-pushing salespeople who get paid big bonuses if they sell you the most lucrative products – for their firm, not for you! So stick with reputable firms and keep it simple.

Incidentally, while the article doesn't mention it, I would say the same thing about the life-insurance business – complexity, hard-pushing salespeople, etc.

I've purchased more than $10 million of life insurance because I do dangerous things – dodging drones on the front lines in Ukraine, climbing 3,000-foot rock walls and 20,000-foot mountains and, most dangerously (seriously), riding my bike every day in the streets of Manhattan – so I owe it to my family to make sure that if I get unlucky one day, they'll never have to worry about money the rest of their lives...

As for alternative-asset managers offering "private-market investments," I think 99% of investors would be better off avoiding these altogether.

3) Turning to even riskier investments that the most investors should avoid, I would put speculations like options and cryptocurrencies in that category as well.

Look, if you want to take a small portion of your portfolio and have some fun trading options, I'm not going to lecture you.

And there are a few more conservative options strategies that make sense...

In fact, here at Stansberry Research, my colleague Dr. David "Doc" Eifrig has used options in his Retirement Trader service to achieve an incredible 95% win rate over the past 15 years. (You can learn more about Retirement Trader as part of a special presentation right here.)

As for cryptos, again, if you want to put 1% of your portfolio in bitcoin or Ethereum, I'm not going to argue with you. But understand the risk you're taking, as this is the kind of asset class that could go south in hurry. This recent article in the WSJ captures one of the many reasons why: A Looming Threat to Bitcoin: The Risk of a Quantum Hack. Excerpt:

Bitcoin's rally faces a risk that isn't on the radar of most crypto investors: quantum computing.

The nascent technology, which drew attention this month after Google claimed a breakthrough with its new Willow quantum-computing chip, could one day enable hackers to break the encryption that keeps bitcoin secure. Such a hack could torpedo bitcoin's price, by allowing thieves to swipe coins out of supposedly secure digital wallets.

Researchers say a quantum device powerful enough to crack bitcoin is likely a decade or more away. Still, advances in the technology pose a long-term risk, unless bitcoin's fractious community of developers beef up its technology in a time-consuming upgrade.

And as the article continues, an attack like that on bitcoin wouldn't just be limited to the crypto itself:

A 2022 Hudson Institute study estimated that a quantum hack of bitcoin would cause more than $3 trillion in losses across crypto and other markets and trigger a deep recession. [Arthur Herman] said the likely costs of a quantum hack have swelled since the study came out, as bitcoin has climbed to near $100,000 and grown into an increasingly mainstream investment asset.

In general, if you insist on being overly risky and losing your money gambling, at least go to Vegas and have some fun doing it!

4) The first WSJ article above on those turning 65 concludes with a warning about rising credit-card balances – and delinquencies – among the elderly:

Credit-card debt has also grown more for older cohorts over the past three decades. Median balances have risen the most for those households led by someone 65 and older in that period, according to the Federal Reserve's most recent Survey of Consumer Finances.

Credit performance metrics for older people are typically better than among young people. But perhaps that shouldn't be taken for granted as a permanent thing. Delinquency rates across credit products, or balances that are 60 to 89 days past due, among baby boomers (born 1946 to 1964) and the silent generation (born 1928 to 1945) are still lower than for millennials or Gen Z, according to VantageScore tracking. Yet the delinquency rates of the silent, boomer and Gen X (1965 to 1980) generations have also been rising relatively faster than for millennial borrowers so far in 2024 through November.

If my most important piece of advice is to make sure your cash is earning a market rate of interest, my second is to not get caught in the credit-card-debt trap.

According to Forbes, the average credit-card interest rate is about 29%. That's a staggering number and will quickly crush anyone paying it. Don't go anywhere near this slippery slope to financial oblivion!

5) For final bits of general financial advice, I'll refer you back to one of my all-time most-popular e-mails that I wrote more than three years ago on October 12, 2021: Financial advice to retired readers.

In it, I shared some investment advice for a hypothetical couple with the following characteristics:

• Age: 72
• Both in good health, vaccinated, nonsmokers
• Two adult children plus grandchildren
• $75,000 of annual income from Social Security and a pension
• Expenses of $50,000 annually
• No expected large payments such as the purchase of vacation home
• No debt
• Savings of $500,000, currently in cash
• Risk-averse

I concluded with some life advice as well:

My last piece of advice to older folks who are in strong financial positions is not to be too frugal – something I regularly lecture my parents about. They are real penny-pinchers, which, over a lifetime, is how they have achieved financial security. But now that they've achieved it, they should enjoy it by spending some money – not on material goods, but rather experiences. Extensive research shows that this is what leads to the greatest happiness, as outlined in these articles: Buy Experiences, Not Things and Why Experiences Are Better Than Things.

For those who like to travel, go see this magnificent country. Rent an RV and take a trip, as Susan and I did [in September 2021]. If you enjoy it, buy an RV and take regular trips. And don't forget international travel – there's a vast, incredible world to explore!

And don't forget to include your family – in my opinion there's nothing better than spending time with your siblings, children, and grandchildren. Pay for your children and their families to join you on a cruise in Alaska or a beach vacation in Mexico, something my in-laws have done for us.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.