Investing for Retirement - Cramer's Mad Money (7/3/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Thursday July 3.

Take Care of the Essentials

While many investors dream of making a killing on the stock market, they should first take care of three essentials, said Cramer. First, credit card debt should be paid off so they don’t waste their gains on expensive interest. Second, all investors need health insurance, since medical bills are the leading cause of bankruptcy. Third, disability insurance is essential, since any gains made on stocks will be wiped out by unexpected medical bills.

Do Your Homework

Cramer reminded viewers that one should do at least one hour a week of homework for every holding. This involves keeping up with news stories about the stock and reading earnings and annual reports. Many investors put off homework at their peril.

Investing for Retirement

While many people who are investing for retirement tend to be risk averse, Cramer thinks one can go out on a limb once in a while; he reminded viewers it isn’t enough to get a 4% return on bonds. Cramer urged viewers to avoid one cardinal sin; “Don't use your 401k to buy shares of your employer.” Instead, diversification is the key. Another investment mistake is to put money into a stable-value type of mutual fund which barely generates enough money to keep up with inflation. S&P index funds are better since they have the best-performing asset class over any 20 year period. Cramer says bonds are fine, but they should not comprise more than two-thirds of a portfolio by retirement age.

Look to the Market

Cramer suggested letting the market decide when to invest in one’s 401k throughout the year. He would use declines as buying opportunities, and would devote double the amount to buying any time the market falls 10% or more. “This will make a huge difference over forty or fifty years,” he said.

More than 401K

Cramer told viewers not to restrict themselves to 401k plans but would look at individual IRAs in addition to the 401k. Although for 2008, one can only put $5,000 in an IRA, Cramer would “max out” on this amount to get the most out of one’s retirement.

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Comments

[fxtrader07]

Cramer and investing are absolute antonyms. This crook and clown switches his recommendations within 24 hours. He very recently recommended to 'buy banks and shun oils' and a week later he ranted you that you were a complete loser having bought banks and having avoided oils and that "he can't keep you in the game if you do such foolish things'
don't believe it? See for yourself: youtube.com/watch?v=_n...

It's absolutely weird that this alpha-destroying clown has a whole section devoted here at 'seeking alpha'.

[Seamus O'Bannion]

Cramer's an entertainer making a bundle. There's a saying that if you say something loud enough, someone's bound to listen unless he's deaf.

SOB.

[User 26737]

oi..... buy, buy, buy .......week later ..... oi ...... sell, sell, sell!

[msoori]

Make your own financial independence day!

digg.com/business_fina...

[zooey]

Why carry the rants of Cramer? He is wildly emotional and irresponsible in his commentary; so why give him a forum for his delusional outbursts? He is a entertainer-lawyer but not qualified as a financial planner. As for the advice in this rant, his recommendations are wrong, incomplete and likely to mislead readers. One can have a 401K and under some conditions have a Roth Ira, but there are restrictions on income and types of plans which he does not mention. It is just another example of his mouth exceeding his responsibility. As for NOW being the time to buy equities, it is not clear what his advice is based on other than guts.

[BerkeleyBob]

I don't buy everything Cramer has to say, but I credit him with helping me be a better investor. I like this site, because it provides a variety of opinion and most of the posts do not slime or engage in ad hominem arguement, unlike the unmoderated and unedited comment boards at Yahoo finance.

[WAKEUP]

CRAMER IS A DUD.

[uncle mike]

cramer i can understand your concerns i,m just glad i live in canada where our medical is taken care of it might not perfect but everyone up hear can afford it because it,s part of our system.call socialisum or whateryou want it helps when your getting old to think your gonna get taking care of one way or the other. i think all over the world everyone should embrase our form of medical care it benifits everyone and amkes no profits for the rich who could care less about who will take care of us.we would,t have thousands of americans comming to canada to buy thier persciptions if we all had these basic rights. freedom liberty justice for all and medical attention to everyone who can,t afford it. think about it how would you like to see your family or a loved one suffer because you can.t afford thier medical.? medical should be a basic right for all of us not just for the prevliaged and the few thats the only thing in america that needs changeing everthing else is right. a canadian who loves america more than his own country mike lazar or uncle mike vancouver b.c

[User 157559]

Whether anyone likes it or not, Cramer's suggestions actually moves the market.
Therefore I say keep him on.
Even if I do not follow his recommendations, its still good to know what his take is on things as, believe it or not, there are a lot of people out there that do.