Let’s look at three big trends that have created the “perfect storm.” First, in 1975, the stock market was in the middle of a 10-year period slump—much like today. The S&P 500 began the ’70s around 90, ended at 100, and bounced around between 65 and 120 throughout the decade. In those days, 27 million workers had corporate pension plans, and they were guaranteed a fixed amount at retirement. The corporations had to manage the pension funds properly to meet these obligations. But with a flat stock market, these obligations became greater than what pension plans could support. New accounting laws mandated that these “unfunded liabilities” be shown in public financial statements. Corporations had dramatic decreases in their values because of these pension obligations.

During this time, Congress also approved new laws that created the 401(k) and the IRA. These plans made the worker responsible for his own investing. Corporations effectively said, “Hey, employee—we’re not going to guarantee you a fixed pension each year, but we’ll guarantee you an amount we will contribute. You then have to manage your own money, and whatever you end up with is your problem!” But there was another problem. While employees were given responsibility, the securities laws didn’t protect them from the financial services industry.  The financial advisers were not held to a high standard.

In 1975, about 72 percent of retirement funds were professionally managed by corporations.  Today that has dropped to 23 percent, while the rest are managed by employees in 401(k) plans and IRAs. With less protection from advisers and brokers and less expertise, employees started paying more in fees with subpar advice.

Returns have suffered. Corporate pensions between 1998 and 2007 generated average returns in excess of 7 percent, while 401(k)s returned 5.4 percent, and IRAs only 4.5 percent. Over a working life, these differences can mean that two workers making the same contributions will end up with very different nest eggs. That 2 or 3 percent can mean that the corporate worker can end up with twice as much as a worker managing his own 401(k).

Second, baby boomers will increase the over-65-years-old population in the next 20 years from 35 million to 70 million. But that is only half of the story because this creates a double whammy.  The baby boomers between the ages of 45 and 65 who are working today are paying Social Security and Medicare into the system through payroll deductions. When they retire, there will be fewer individuals collecting a paycheck that the government can tax. And baby boomers are going to live longer, so there will be more years that the government will have to take care of the aging.

The third trend, of course, is that the U.S. government is going into increasing amounts of debt, and cutting that debt is hardest when your population is aging.  This means that the government will be forced to manipulate inflation rates, add a year or two to the retirement age, and reduce Medicare benefits.

Retirement investors must understand that a harsh new world is in front of us. You are responsible for managing your retirement. The sooner you prepare for the new realities, the better. Here are three ways to positively impact your nest egg at retirement:

Overall asset allocation. Add up your retirement accounts, 401(k)s, IRAs, and pensions for you and your spouse and look at them as one portfolio. Are the allocations right for you? If not, make some changes.

Orphan IRAs. Do you have multiple IRAs that came from 401(k) rollovers from past employers?  Consider combining them so that the dollar amount becomes more meaningful. It helps focus attention. Brokers like Schwab and Fidelity like having more assets and they make it easy to combine IRAs. See if you can continue making yearly contributions. Even if they aren’t tax deductible, they will grow tax deferred.

Fees. Blindly choosing the recommended funds in a 401(k) plan without looking at the fees is a big mistake. Look for an index fund (usually the one with the lowest fee) in each category and you’ll never go wrong.

You’ve probably never heard of Phyllis Borzi. She is an assistant secretary at the Department of Labor and she’s helping you and our country in ways few will ever appreciate.

We’ve written extensively about the inherent conflicts of interest when you trust someone with your money. In finance circles, it is called “agency risk.” Yes, your broker, or mutual fund manager may not fully put your interests ahead of their own. These conflicts almost define how the investment management business operates and is regulated.

Borzi runs the Employee Benefits Security Administration (EBSA), which “pursues policies that encourage retirement savings and that promote retirement security for all working Americans.” Our retirement security depends in large measure on the sound investment of more than $11.2 trillion in pensions, 401(k) accounts, and IRAs. To guide our decisions, we get advice from trusted experts.

But a flawed 35-year-old rule gives brokers a loophole that allows them to skirt these fiduciary standards. Under her stewardship, the Department of Labor has been pushing through regulations that would force service providers to disclose fees and limit conflicts of interest.

“The law on its face is simple enough: advisers should put their clients’ interests first. But as always the devil is in the details – in this case, in the question of what constitutes paid investment advice,” Borzi said last week before a House committee. “(We) will amend a flawed 35- year-old rule under which advice about investments is not considered to be “investment advice” merely because, for example, the advice was only given once, or because the adviser disavows any understanding that the advice would serve as a primary basis for the investment decision.”

When it comes to your retirement savings, fiduciaries who advise you have a duty of “undivided loyalty” to your interests, to act prudently when giving advice. You can sue a fiduciary personally for any losses arising from breaches of such duties.

But the 1975 laws were made before 401(k)s and at the inception of IRAs. The loopholes and technicalities let brokers easily dodge fiduciary status. Borzi has reams of evidence showing that because of this, IRAs are dramatically underperforming 401(k)s.

“For additional evidence, consider the underperformance of IRAs relative to plans, the size of the gap is troubling,” Borzi said. “IRA holders do not have the benefit of an employer to represent their interests in dealing with advisers. From 1998 to 2007, the average annual returns for IRAs were 4.5 percent, compared with 5.4 percent for 401(k)s. IRA holders often pay fees that can be two to three times higher than the fees paid by employee benefit plan participants.”

Borzi believes that Americans with 401(k)s and IRAs are entitled to receive impartial investment advice and wants to ensure that you can see the fees you are paying. Her new proposals would protect us and our IRAs from conflicts of interest and self-dealing by correcting outdated 1975 rules.

The brokerage investment community is having a fit because many IRAs today are held by brokers, not advisers. Brokers do not have to live up to a fiduciary standard and can get paid for advice by commissions for trades and by getting a piece of the fees you pay to mutual funds. Brokers claim they are not fiduciaries because they “disclaim any understanding that their advice might constitute a primary basis for the IRA holders’ investment decisions.”

If brokers become fiduciaries, they could not accept commissions or revenue sharing payments. To do so would constitute “fiduciary self-dealing,” which is prohibited. They would have to be transparent and show you what you are paying.

They have submitted hundreds of comments, even going so far as to claim that Borzi’s proposals would increase costs to the investor.

Borzi is on a mission to change the system so anyone getting advice on IRAs could receive an extra 1 to 2 percent return by eliminating the conflicts. Fees would go down and investors would retire with more. There are 75 million IRA accounts with $4.7 Trillion invested. If she impacts half of that and help investors keep another 1 percent, that’s almost $24 billion each year that will stay in our pockets.

Today, the United States is facing its own Wimpy-esque moment in the form of the debt ceiling. The free burgers have flowed for sometime now, but the patrons have grown wise to the scam. The pitch of pushing off today’s payment until some future Tuesday has become a bit haggard and worn thin for many in America. Simply look to Greece, Portugal, Spain, and others to see what it is like to have one’s hamburgers taken away—and the forced diet does not look pretty.

Strangely, as the U.S. citizenry passionately criticizes their government for running up the budget deficit, a greater irony is afoot: When it comes to debt management, Americans are sadly worse than their government.

While government debt sits at 94 percent of national revenue, U.S. household debt sits at a whopping 107 percent of personal income. The household balance sheets of Americans are in worse condition than anytime since the Great Depression. The ratio of household debt-to-GDP is greater than anytime since 1929. And while we all are trying to comprehend a poorer nation, many American’s have not yet comprehended their own personal poverty.

A burger today? From the early 1940s through the late 1960s, an ethos of saving before spending ruled the roost. If you sought to buy a house, 20 percent was required for a down payment. Similarly, substantial savings were required to buy a car, and home furnishings, clothing, and more were paid for primarily with cash. By the 1970s, however, rampant inflation helped form a debt culture that found footing and gained steam.

If you saved, inflation threatened to erode the value of your savings, while the price of your desired purchases continued to rise. What was the point of saving when individuals could buy with little to nothing down, deduct interest from their federal tax obligations, and have those things they longed for?

Over the coming decades, American household debt ballooned, eventually doubling from $7 trillion to $14 trillion between 2001 and 2007. Debt fears, however, were assuaged by the rapidly growing value of real estate as homeowners used equity lines to buy more property, cars, and pay for vacations and toys. Burgers were flowing for all.

Then in 2008, the sudden and violent decline in house prices revealed just how bad the debt binge had been. Tuesday had finally arrived and like Wimpy, our wallets were a bit too thin to meet our obligations.

Feeding the furnace or building an engine. Criticizing government fiscal irresponsibility should in turn lead us to honest self examination. At the heart of this audit should be the confrontation of personal debt and the embracing of basic investing disciplines.

Each person must make a decision to feed the debt furnace or build a retirement engine.

Like Wimpy, we all experience the gnawing hunger to consume more than we need. Each time we reach out, through credit, for a burger today, we take our future dollars and throw them into the blazing furnace of consumption. The heat of the moment is delightful, but the end result is the poverty unfolding before our nation.

When we behave like wise and disciplined investors, we resist our pulsing appetites, take our hard earned dollars, and direct a predetermined portion to smart, long-term investments. In doing so, such investors build an engine through the miraculous power of compounding interest. Unlike Wimpy and other debtors, this interest works in your favor. Ben Franklin understood that for such savers, “Money can beget money, and its offspring can beget more.” Einstein called compounding the “eighth wonder of the world.”

Those who reject debt and invest wisely create a powerful engine, so that Tuesday’s obligations can be fully met on time, leaving a few burgers to spare.

“Chrematophobia” is the abnormal and persistent fear of money, according to WebMD. It comes from the Greek “chrimata” (money) and “phobos” (fear). Some of its symptoms include heart palpitations, anxiety attacks, sweaty palms, and an intense desire to flee. Sufferers worry they might mismanage money or that money might live up to its reputation as “the root of all evil.”

If you have it, maybe you can blame it all on your brain. California Institute of Technology neuroscientists discovered that a fear of losing money is tied to a brain structure called the amygdalae, which generates emotional reactions to money.

Researchers found two subjects with damaged amygdalae and asked them to participate in an “experimental economics task” in which they were faced with variety of financial gambles, each with a different possible gain or loss. The subjects took risky gambles much more often than control subjects of the same age and education. In fact, they showed no aversion to monetary loss whatsoever, a sharp contrast to the control subjects. Researchers believe that the amygdalae is critical for triggering a sense of caution toward making gambles.

If you don’t want to blame your brain, blame your folks.  Others contend that a fear of money is related to subconscious beliefs from religion or parents who told us that money is the root of all evil, is power (and power corrupts), will change your life, and can’t buy you happiness.

Are you chrematophobic? Here are some telltale signs:

–Not opening bank statements, bills, or mortgage statements
–Not checking account balances, or refusing to track net worth or spending
–Being defensive about a lack of financial literacy
–Trusting someone else too much with your money or letting someone else make your financial decisions
–Worrying excessively, but refusing to think about finances at all
–Not planning for the basics such as retirement, and forgoing life insurance and wills
–Overspending or over-saving

So let’s say you’ve got a little chrematophobia — what does that mean for retirement investing? It gets down to whether you should hire an adviser to help you, or if you can invest on your own.

There are two tasks involved in retirement investing: putting together a financial plan, and implementing an investment strategy.  The plan should be built with you by a professional, paid by the hour who can learn your individual circumstances and map out an appropriate plan. This plan will assume a rate of return on your investment portfolio and a savings rate. For example, the plan may show how, if you save and spend certain amounts and achieve a 6 percent after-tax rate of return, you can retire at 65 and have plenty of money.

After you have a plan, you have to decide whether to invest on your own, or hire an investment professional. Today, with software and online brokerage accounts, anyone can build and manage a low-cost retirement portfolio. But the real test happens when the market plunges. In these “emergency” situations, does your fear of money prevail or are you able to stay the course?

If you know you are prone to panic, chrematophobia will cost you. Investors who did not stay the course and got out of the market in March 2009 have missed the nearly 100 percent bounce back.

Pilots spend 99 percent of their time training for the rare life-and-death events that occur less than 1 percent of the time. Like a pilot who is paid well for the emergency situation, a competent adviser with low fees will help keep you on course, talk you off the ledge, and make sure your emotions don’t lead you to bad decisions. Knowing yourself and whether you can handle market ups and downs as a do-it-yourselfer is the first and most important decision you can make as a retirement investor.

Recent research, however, reveals that early retirement may not be the panacea many have hoped. A slew of negative health effects have been correlated to early retirement starting with memory decline. And, unfortunately, mental exercises don’t seem to help. Lisa Berkman at Harvard’s Center for Population and Development states, “If you do crosswords or Sudoku, you get better at crosswords and Sudoku. You don’t get better at cognitive behavior in life.”

Stanford’s Center on Longevity discovered that maintaining the rigors of work actually keeps people functioning optimally. Richard Suzman of the National Institute on Aging says, “It may be the mental rigors, the social engagement, or even an aerobic component of work itself.” Whatever the exact reason, getting out of bed each morning to face the workday creates a healthier and happier you.

It has also been noted by many of the world’s great religions that humanity was created to be productive and live with a sense of purpose. Whether due to science or religion, work seems to benefit the human psyche. Retirees are the most vulnerable societal group to become restless and struggle with depression. “Only when we’re retired do we discover what we’ve lost,” says Christopher Sharpley, professor of psychology at the University of New England. “Immediately after retirement, there’s a strong upsurge in well-being for the first six or so months, commonly known as the honeymoon period. After one or two years, there’s a decrease in well-being, which can often turn into serious depression.”

Possibly, work isn’t as bad as we have been lead to believe. A University of Chicago study revealed the influence of the prevailing cultural stereotype that work is bad and leisure is good. Researchers gave men and women of various ages and occupations a pager that would randomly beep eight times a day. They were each required to keep a log of their emotional state when the pager went off. When at work, 54 percent of respondents reported feeling “strong, creative, motivated, active, and positive.” When away from work, a mere 18 percent noted these same positive emotions. When asked how they felt about work, however, the overwhelming majority of respondents said they would rather not be at work, but engaged in leisure activities.

These findings and others call into question the institution of retirement itself. Strangely, retirement wasn’t a cultural concept until the 1880s when Germany introduced the institution into its social structure. Before that time, people worked until death—something that may seem like a terrible plight to some, but that research is showing to have substantial benefit.

Today, however, baby boomers are creating a new normal for retirement—scaling back on work hours while staying professionally engaged. Whether through consulting, reduced hours agreements with their current employer, or branching out as a “seniorprenuer” by starting a new business venture, increasing numbers of seniors are finding an enjoyable work and life balance. The new retirement is no longer trading work for leisure, but trading work you no longer want to do for work you love to do at the rate you want to do it.

When you look at the facts, it becomes compelling to reject the idea of traditional retirement. Whether you lean into to the tenets of ancient religions, which state that humanity was designed to live purposefully, or to science, which shows that unused systems run down and go dormant, the results are clear: use it or lose it.

First, understand that 2010 was an excellent year in the stock market. Everyone should have made money. But did you make enough money to compensate for the risks you took? The only way to do this is to create a valid benchmark for your entire portfolio.

The common wisdom is to use the Standard & Poor’s 500 stock index as a gauge. But if you have a well-diversified retirement portfolio and own small-, mid-, and large-cap U.S. stocks, international stocks, real estate, bonds, and even commodities, the S&P alone is insufficient; it is only one of several indices of your portfolio. Judging a diversified portfolio’s returns just by the S&P is like grading a salad just by the lettuce. A salad is made up of many ingredients-and so is a portfolio. You have to measure the interplay of all components to find out if your portfolio achieved “market” returns.

To measure your portfolio’s results with a true apples-to-apples comparison, you have to compare it with a portfolio that includes all of the indices in your portfolio. For example, if you had 50 percent of your money in S&P 500 large-cap mutual funds and 50 percent in bond funds, you would average the 2010 returns of the S&P 500 and bonds, and compare that with your returns. If you did better than the average of these two indices, then you did well.

Our 2010 Report Card presents returns for five of our MarketRiders portfolios using ultra-low fee exchange traded funds (ETFs) from Vanguard, iShares, and State Street.  These all-ETF portfolios include different allocations to all industry-accepted asset classes as “baseline” portfolios as a way to benchmark 2010. They don’t have the fees that you’ll find in mutual fund portfolios, so we’re left with “pure” returns.

For example, in 2010 a 90 percent bond portfolio should have gained almost 4 percent with extremely low risk. In the worst month, this portfolio lost only about 1 percent. Alternatively, a diversified 10 percent bond portfolio should have experienced a robust 16 percent rise by the end of the year. However, to get to that point, investors endured a loss of more than 6 percent in the worst month-a one-year swing of 22 percent!

To see how your retirement portfolio performed in 2010, use the instructions on our Report Card and compare it to the returns of one of our five passive low-fee portfolios. If you are paying fees for managers to actively pick stocks and manage your portfolios, you now can see if you are getting your money’s worth. If you have a typical portfolio with these allocations that didn’t achieve these results, you are underperforming and might want to make some changes.

This fictitious character’s predicament is not much different from what many retirement investors face. In love with the Wall Street fantasy of trouncing the markets through laser beam equity selection, many investors prefer to see themselves as a type of Warren Buffett-glasses slung low into the bridge of their nose, astutely gazing past today’s Journal while processing terabytes of random data with super-computing accuracy to distill the investment insight of the day.

The unfortunate fact, however, is that research unequivocally demonstrates that only a tiny percentage of professional money managers display such oracular talents. For those who value facts over fantasy, the fulcrum about which all investment activity should turn is that the overwhelming majority of active money managers do not beat the market.

Research by CXO Advisory Group LLC has revealed that stock market gurus have a forecasting accuracy rate of 47.5 percent in any given year. While you would do better flipping a coin, a further look at the stats is even more interesting. By extending the investment time horizon to five years, only 1 in 3 active managers beat their index. For the betting man, these odds quickly become unacceptable.

What if you tried to game the system and bought only the top-performing actively managed funds in any given year as the Morningstar systems seem to suggest? Within five years, 20 percent of these top-performing funds are closed due to poor performance, with 83 percent of the total group underperforming the index. Wow!

These facts, however, relate to one fund in one asset class. What happens if we compare active management to a real-world situation where your time horizon is 10 years out and you are investing across six asset classes or more? What then are your odds of beating the market? Research by numerous sources puts this likelihood below five percentage points.

As one famous money manager, Bill Gross of PIMCO, bravely stated, “The industry as a whole cannot outperform the market because they are the market, and long-term statistics revealing negative alpha for the class of active managers confirms it. Yet, what a price investors are willing to pay!”

What then does a fool believe? Amongst other things, that he can do what professional managers cannot-beat the market. For those of us who prefer reality, low-cost indexing, asset allocation, and driving down all unnecessary fees are the game of the day. Sure, we too enjoy reading our daily Journal, but we have been schooled by the facts and are better for it.

MarketRiders helps you invest as elite endowments, pensions, and foundations do, except that we are able to help you invest in “alternative” asset classes like private equity, venture capital and hedge funds. Investing in alternatives is costly because of the due diligence and expertise required in selecting managers. Fund-of-Fund products sold by brokers help select managers (although many missed Madoff), and they give you some access to funds. However their outrageous fees eradicate all the benefits. Don’t fret about missing out on alternatives. We bring you a study showing that these investments aren’t delivering as promised.

The Washington-based Employee Benefit Research Institute (EBRI) released a study to wake up anyone over 40 years old who doesn’t have a retirement plan in place. The study shows that because we’re living longer and the market has not done well recently, you may be working well into your golden years.

If you get worried about retirement, you can quickly build a comprehensive plan with CNN Money’s retirement calculator. It is a sophisticated, easy-to-use, free tool. Take some time one lazy day this summer and check it out.

But after 50 years old, we start waking up at night worrying, “Will I ever be able to stop working one day?”  Taking action without the benefit of 20-30 years of time on your side is like swearing off steaks as you’re being wheeled into the operating room for a triple bypass:  too little, too late.

Since April 15th was the deadline for making yearly IRA contribution, the finance writers were dolling out plenty of advice and ideas on retirement. Neil Weinberg of Forbes guides us how to figure out one’s asset allocation in his article Asset Allocation -The Key to Building A Big Nest Egg.  His advice is very useful and his guidelines are similar to how MarketRiders online portfolio manager software works.  Other articles worth reading are found in the Wall Street Journal and the Washington Post, they both feature articles on ways to figure out how much you’ll need to retire.

Saving is the first step.  Smart investing is the second.  A recent MarketRiders study on how fees can devastate an IRA portfolio has been generating a lot of interest.  The study reviews three scenarios showing how a 35 year old can diligently contribute $4000 per year to his IRA, but end up losing $1 – $1.5 million over 40 years, just because of fees.

After you read this week’s articles, please fund your IRA this year.  You’ll be glad you did!

A few other noteworthy tips that surfaced recently are highlighted below.  I hope they are of interest to you.

* Economist and “Sunday Morning” Commentator Ben Stein stopped by “The Early Show” Thursday to discuss advice from his new book, “The Little Book of Bulletproof Investing.” Stein explained how to maximize your income while protecting your savings from financial calamities.  Interested to learn more, read the complete story:

* Mr. Madoff spends free time in the prison library on the weekends and often watches movies, including “Lethal Weapon,” according to the former inmate. He said he chatted with the admitted Ponzi schemer on Saturdays in the library and asked for financial advice: “He gave me ideas on my index funds.”  Mr. Madoff advised him to diversify, saying he should invest in funds that track the S&P 500 index of stocks “where my money would be on all the stocks instead of putting my eggs into one basket,” the former inmate said.  The source might be questionable but the advice is good.

* Lastly, TIPS-short for Treasury Inflation-Protected Securities-offer investors the closest thing Uncle Sam has to a sure bet these days. These bonds have the full backing of the U.S. government and provide investors with returns that will keep pace with future rates of inflation, as measured by the U.S. Consumer Price Index. You can buy them directly from the government, but it’s easier-and a better investment decision in many cases-to buy low-fee ETFs that hold TIPS. Read more.