Well, a couple of things went wrong. First, many investors missed the entire point of owning a target retirement date fund and misused them as an investment. Then 2008 happened. Folks who expected that their retirement portfolio would be relatively safe under any market conditions (probably a naive expectation) were surprised to discover that their target date fund valuations dropped substantially. Even the most conservative target date funds (those designed primarily for income) fell 17% on average. Those funds with a longer time horizon dropped by almost 40%.  None of them showed a positive return.

And the saddest news of all was for investors who bought funds designed for a target retirement date of 2010. Those funds (there were 31 of them) produced results that were all over the place. The best 2010 target date fund dropped 3.5%. The worst fell 41.3%. Ouch. Happy Retirement 2010!

I don’t care how young or old you are but if you put money in an investment that is specifically designed for your retirement golden years, you never want to experience declines like that. It is emotionally upsetting to say the least and counter-intuitive to the understood purpose of the fund.

So what happened next?

First, many retirement investors pulled their money out and either went to cash or chose another asset class to invest in. (Sadly those folks who pulled out missed the 2009 mini-rally). This happened just when many mutual fund companies were jumping on the bandwagon and joining the parade of new target date funds.

Second, the domino effect caused some of the newcomer target date funds to surrender to the marketplace and simply liquidate.  (A fund liquidates when it stops accepting new investments, sells its current investment assets, returns the remaining funds pro rata to investors, and then closes down.) According to this report, seven target date funds liquidated in 2008. So far in 2009, fifteen have liquidated. There are probably more on the way, as investors remain wary and disinterested based on the 2008 debacle. There are 246 retirement date funds with fewer than $100 million in assets, which is probably below the sustainable level.

This leaves 80% of target date fund assets concentrated in just three companies: Vanguard, Fidelity, and T. Rowe Price.

So what should you do about investing in target date funds? I would go elsewhere with your retirement money, as I did in 2008. I believe that retirement date funds were an experiment gone bad.

If you like the “set and forget” retirement investing strategy, there are a variety of different “lazy man” and “couch potato” portfolios available to you. Investigate them and pick one that matches two important personal characteristics. The first is your risk tolerance. The second is your retirement trajectory.

Note that a retirement trajectory is different from a target retirement “date” because it takes into account how your employment income may phase out over time instead of perhaps suddenly ending. You may be planning for a phased retirement. If so, your “target date” may not be a fixed date at all.

Finally, remember that when you are investing for retirement, your primary objective is to establish and preserve a stream of essential retirement income. Building wealth is secondary.

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Vegas is hurting in almost every economic category, starting with the collapse of the real estate market and ending with underpopulated casinos.

Yet Vegas has not seemed to respond well. The city is increasingly difficult to get around. The streets are crowded. The monorail system is anemic and over-priced. The worst is that the hotels are trying to boost profits by price-gouging convention travelers.

The conventions in town this week are huge. Most of the moderate and high end hotels are sold out. My assistant found a standard room at Caesar’s for the ridiculously high rate of $450 – on a Wednesday. I have been to Vegas many times with Mrs. ToughMoneyLove and sometimes with the kids. We have always stayed at nice hotels and never paid anywhere near that rate. I complained to the desk clerk at check-in. He unapologetically told me that when a large convention is in town and the hotels are full, the rates get jacked-up big time.

That’s classic supply-and-demand capitalism, of course, but here is what really bothered me. As he was checking me in, the clerk asked if I wanted a room upgrade. In response, I asked him if the upgraded room would cost more than $450. “Of course”, he said. I told him no thanks. Ten seconds later he told me that he was going to upgrade me to a mini-suite at no extra charge.

Who is he kidding?

Obviously, there were no standard rooms available. This mini-suite was the only room he had to accommodate my reservation. But instead of just giving it to me (because he had no choice), he tried to suck some more money out of me. Then he pretended he was doing me a favor.

This is a classic case of customer abuse, which to me is foolish behavior in the hospitality industry.

It is sad, really, that Vegas cannot seem to find its place in our economy. I used to enjoy coming here. Considering that Vegas has been built on excess and wasteful spending, it may never regain its former self. Our personal spending habits have evolved and Vegas has not evolved with them. Vegas may not deserve the economic recovery that it desperately needs.

I’m going to give Las Vegas my Fools of Finance award this week.

Have any of you experienced the Sin City recently? Thoughts?

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And what will CIT do after its pre-packaged bankruptcy clears the courts? Start lending again, using the same business model that put it in the dumper to begin with.  How about funding a fine company like Eddie Bauer. Oh – you already did – after Eddie Bauer filed bankruptcy last summer for the second time since 2005? Too bad for us.

The CEO is Jeffrey Peek, who pushed CIT into the sub-prime mortgage and student loan business to “pump up growth.” How’s that plan working out for you, Mr. Genius?

If you own Bank of America stock (I’m glad we sold ours a year ago), you might want to check its balance sheet and think about getting out. CIT owes B of A $7.5 billion, all unsecured.

I don’t give a rat’s you-know-what about whether a company like CIT lives or dies. There will always be another to take its place. I do have problems having billions in our hard earned tax dollars flushed down that rat’s hole.

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I thought Halloween would be a good day to throw a few links out there for your consideration, to see if I can scare you on to something of value.

First, have a look at Cash Commons. This is a brand new site launched by a fellow personal finance blogger, the Mighty Bargain Hunter. The concept is simple. Users ask questions of a financial nature. Other users answer them. It’s all free. I spent some time there this morning reading the questions and offering some answers. I’m going back because I’ve already found some useful stuff there that I can use. Cash Commons can only get better as more readers learn about it.

If you want to know what professional financial planners are thinking about current topics in personal finance, try reading some of the online articles in the Journal of Financial Planning. In the upcoming (December) issue, these subjects will be covered: Constructing and Defending Portfolios During Chaotic Markets; Bonanza or Bust? Roth Conversions in 2010; and Long-Term Approaches to Managing Retirement Healthcare Costs. Each of these is important to most of us.

A site I’ve recently discovered for learning about sales, discount codes, and online coupons, is Offers.com. Some of the offers are exclusive to this site. You can also find free shipping and free trial deals, and learn about upcoming Black Friday deals.

Speaking of learning, the Khan Academy has something for almost everyone. The publisher of this non-profit site has created over 1000 YouTube educational videos on a variety of scientific and mathematical topics. More to the point of my readers, there are sections covering numerous contemporary issues in economics and personal finance. You need to check it out if you are an audio/visual learner.

I hope you benefit from learning about at least one of these links. Either way, please let me know in a comment.

Thanks for reading this week and enjoy your weekend.

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I just returned from the second floor lobby of our office building where I (and many others who work in this building) received an H1N1 flu shot. Yes, the flu shot that is now in short supply across the country. The flu shot that our county health department ran out of last week after only a few days.

How is this possible? Who gave me this flu shot? How much did it cost?

This is where the entrepreneur part comes in.

The company that came on site to provide the shots is called Nursing Resource Solutions. According to its website, it is a local nurse staffing business, owned and operated by nurses, for nurses. That in itself is relatively unusual. Most nurses are employees of large health care facilities and are pushed around by corporate bureaucrats and by physicians. Mrs. ToughMoneyLove – being an RN herself – knows all about this. So I was happy to see that this group of nurses had taken matters – and business – into their own hands.

One of the owners of the business – a young African American man – was on-site with his team of shot-givers. After I received my shot, I asked him how he was able to get the H1N1 vaccine (mist and IM versions) when so many others could not. His answer:  We filled out the paperwork and submitted it early. How refreshingly simple is that?

In other words, this small business was on top of things from the beginning. The owners saw an opportunity and jumped on it. Now they have a product that is in high demand and in short supply. What a great combination for a small business entrepreneur.

I also have to give this business credit for its efficiency. First, they distributed the pre-shot literature and consent forms early by providing it to building management who then emailed it to all of the tenants. Everyone showed up with the forms in hand, filled out. The shot cost only $20.00. No insurance forms were involved. They provided a receipt on request so the recipients could file it with insurance if they desired. Their non-labor overhead consisted of a folding table and chairs and few bags of cotton balls and alcohol swabs.

When it comes to signs of a successful entrepreneur, that’s what I’m talking about.

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Here are some key NRRI findings and metrics and further commentary by Nationwide Insurance, the NRRI underwriter:

• Fifty-one percent of Americans would be unable to maintain their standard of living if they retired at age 65, compared with 44 percent in 2007. This estimate is actually conservative because it doesn’t include medical or long-term care costs.
• Americans are facing a decline in home equity at the same time that the government is increasing the age at which retirees qualify for full Social Security benefits. The average 401(k) retirement savings account fell by almost one-third in 2008, and people aren’t saving enough to make up the difference.
• The U.S. personal savings rate fell to 3 percent of disposable income in August from 4 percent in July. (It was 8.9 percent at the end of 1992!) The saving rates needs to increase to at least 8 percent  to compensate for the drop in retirement assets.

It gets worse. It seems that our friends and neighbors are so discouraged by what has happened to their home equity and retirement accounts that they are disengaging from the retirement planning process.

This is from Nationwide:

Along with the new NRRI data, Nationwide’s senior vice president of Customer Insights and Analytics, Paul Ballew, says the company’s own research is showing that a significant number of consumers who were actively planning for retirement before the recession are disengaging from the process. Those insights are confirmed by existing market conditions.

“We’re really looking at a one-two punch right now,” Ballew said. “We’re seeing the number of disengaged households increasing by more than a third. Many of these individuals felt the brunt of the economic downturn to a greater degree than others and have moderated their expectations toward retirement. It’s clear that many of these people who were planning before the downturn are now pulling away from the table. That’s exactly the opposite of what they should be doing.”

And the scariest data of all? According to Nationwide, compared to 2007, there has been a 60% drop in agreement with this statement: Creating a retirement income source is important.

Are you kidding me? Do you want to live in a van down by the river when you retire? Or do you plan on dropping dead in your Walmart greeter’s vest?

That tells me that too many folks have transitioned from being merely negligent about their financial planning to being recklessly or willfully foolish. It also tells me that they are likely counting on the government (us) to bail them out. They have thrown up their hands in disgust and are now ignoring the retirement crisis in their future. They want their crisis to become my crisis.  They hope that Obamacare expands beyond health care to solving their retirement problems. That’s not gonna happen to Mr. ToughMoneyLove. I intend to tax-plan my way out of that obligation. (Yet another reason to pay off that mortgage.)

I’m not trying to sell Nationwide products here (particularly variable annuities) but I have to give it credit for supporting the National Retirement Readiness Index and for having one of the better sites  for retirement assessment. In that regard, if you want to get some feedback on your retirement readiness, try Nationwide’s “RetirAbility Check” interactive tool. Get your “R-Score” and let me know in the comments how you did.

Whatever you do, keep your head out of the sand and face your retirement problems head on – now.

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This “policy” is not free to the consumer. Rather, if you want to reserve the right to return your new Chevrolet, it will cost you $500. The reason is that Chevy is offering all buyers a $500 “rebate” if you “waive” the right to return your purchase.

Seriously, who is going pay $500 for a sixty day “free” trial on a Chevrolet?

Instead of buying a GM car, spend some time catching up on your personal finance reading. I recommend the following:

Over at Debt Free Adventure, Matt Jabs joined the “I don’t care what my FICO score is” club. Don’t overlook the comments to the post. I wish more folks would throw off those credit score shackles. It’s sad and disappointing that many personal finance bloggers devote so many of their words and advertising links promoting the “best” credit cards. There is no “best” credit card. Rather, there are some that are less bad for you than others.

Andrea at Fools and Sages wrote a nice piece on the attributes and benefits of thoughtful spending.  Americans are notorious for being impulsive shoppers and less than mindful of the consequences. As Money and Such tells us, buyers on credit are often undisciplined consumers.

For a final dose of hard truth, the Macroblog (from the Federal Reserve Bank of Atlanta summarizes the evidence that our economic recovery will be a “jobless” recovery. A lot of the jobs that have been lost are not coming back. Get used to it.

On my Go To Retirement blog, I wrote about planning for a phased retirement and at Failsafe Retirement, I commented on ways to turn savings into retirement income.

Enjoy the rest of your weekend.

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