I’m reviewing Jane White’s new book, America, Welcome to the Poorhouse. Jane White is the founder of Retirement Solutions, LLC., whose goal is to push for 401(k) reform and provide investment education. I should mention that as I was reading this book, the theme of having 401(k) reform is pushed heavily in this book.
Win a free copy of this book, check the Twitter contests below!
This may be a turnoff for some readers while others may be intrigued and decide to weigh the pros and cons of the authors reform ideas.
Like a lot of my other book reviews, I’m going to present a review of some of the chapters, so you can see if this book would be a good fit for you and your situation.
Chapter 1: Why You Can’t Retire from a 401(k) Plan
White opens up at the alarming fact that many Americans are hoping to retire have nowhere near the amount they need to retire. Fidelity had a report in 2007 that the median balance was $43,000 for workers aged 60-65.
She then compares the situation to Australian workers who have a mandated 9% of the salary invested in their retirement accounts. She argues that automatic enrollement is not enough with defined contribution plans.
Running the numbers, White notes that workers starting to contribute at age 25 should see at least save 10% of their salary for retirement. She passionately pleads that people need to be informed that the amount that the typical American put aside is not enough to retire on.
She criticizes mutual fund company in the media for not bringing this to the public attention.
Chapter 2: How to Save Wisely Until We Get 401(k)
White mentions that 401(k) reform is necessary, and give her rules to cope with the economic hardships. Many readers may be familiar with the financial principles. Some highlighted here on the blog and in this book were:
- Work longer and live on one income ( if you’re two income family).
- Don’t jump out of the stock market when it’s low.
- Don’t base your investment decisions on the fluctuations of the market, instead focused on your long term strategy.
- Don’t borrow from your 401(k) account
- Rollover your old 401(k) into an IRA
She then mentions her reform plan, and how certain lobbyists might try to fight it.
Chapter 3: The Mortgage Mess: It Ain’t Just Subprime
Jane White tackles mortgage and how some home owners cannot afford their house.
The author gives an example of a young couple in San Francisco who bought a house for $730,000. The problem was they the couples house and expenses came out to 55% of their income. My problem with using this example is that they sat down and did their budget after they bought the house.
When buying a house, people need to ask themselves: Can we afford the costs of home ownership? Besides the mortgage, can you afford to pay:
- Homeowner’s Insurance
- Private mortgage insurance
- Home Association Fees
- Property Tax
- Maintenance & Improvement
One part of the mortgage mess is people buying more house than they can afford. Personal responsibility is a factor in this and to just ignore bad financial decisions isn’t going to fix it.
Home buyers, thought, are not the only one at blame. The other two examples given in the chapter’s opening do a better job pointing out some of the problems of the mortgage problems we see.
We have cases of lenders, real estate agents, mortgage brokers, and appraisers all trying to maximize their income to the detriment of the homebuyer. One example of this is the push for homeowners to get an adjustable rate mortgage, so they can qualify for a house they cannot afford.
I included the definition on my post on mortgages and interest rates:
An adjustable rate (better known as an ARM): The interest rate changes at specific times and the interest rate is subject to market conditions. There is a lifetime cap and annual limits to give some protection to radical increases, but your mortgage payments can still increase dramatically.
White argues that ARMs have an effect on the increasing price of housing in United States. She says a factor in this housing bubble was a decrease of government subsidy for low income housing under the Nixon administration referencing a New York Times article from 1975.
White suggest abolishing adjustable rate mortgages as part of the solution. She also suggest that like AIG and GM the mortgages ahould be scrutinized by Congress.
My Take on the Book
What I enjoyed about the book was the references and statistics that White presented. While some of the suggestions were a bit vague (move to an affordable region), I did get some useful information from it.
I would go ahead use the information to make some changes to your finances. It’s obvious that socking away 3% of your pay into a 401(k) isn’t enough. White makes the case for challenging yourself and putting away 10% of your gross income towards retirement.
The advice in the book has some financial rules of thumbs for those struggling with money. Later in the book, in part five, White goes towards more political commentary about big business is lobby and and politicians.
This section was not my cup of tea , but I know some readers may find this interesting. I hope this review was helpful for you.
I think the book is suited for readers trying to determine a general strategy with their retirement and want to examine a viewpoint on the economic mess.
Your Take
I’m curious to see how you have dealt with your finances so far. How do you manage your finances to make retirement possibility? If you’re a homeowner or are thinking of buying a home, what precautions are you taking with your finances? When you finish reading the book, I’d love to hear your thoughts.
Twitter Contest
I have an extra copy of America, Welcome to the Poorhouse!
Rules
- Follow me on Twitter and tweet about the book review.
- You can only enter once a day.
- You must be a resident of the U.S. or Canada
The contest will end Friday, November 13, 2009 at 6pm EST. I’ll announce the winner on Twitter. They will have until Sunday, November 15 at 6pm EST to contact me with their information to claim their prize.
