Category Archives: Retirement Security

Late Summer Doldrums

The late summer doldrums picked up straight away after our last post and drive to be more diligent here. Who knows what the driving factor has been, but it has been a busy time. Still, that’s no excuse for leaving you in the lurch with respect to finding great guidance for your retirement planning.

Late Summer Doldrums: Will it ever end?
Perhaps the day the doomsayers predict is getting closer, perhaps not. The bull run has been epic, certainly in our lifetimes. That has to end, right? So, what is different this time? The global, ongoing central bank campaign to flood markets with cheap money is one thing. More than just low rates, there was the extended Fed intervention in markets driving up the Fed balance sheet. Plus, many individual investors have migrated to index funds … putting incessant upward pressure on indices. As the Fed contemplates raising rates (tightening money) and selling assets (adding supply) and consumer migration tapers, the end of the run could be precipitous. David Stockman warns the market’s “Chuck Prince moment” has arrived…”only more dangerous” The Rise of Robots & the Risk to Passive
 

Late Summer Doldrums: Why worry?
You may be thinking “why worry? The markets have been great to me.” That may be, even in comparison to where you were in 2007. Then again, can you afford a correction like you saw in 2008/2009? Remember the notion of sequencing risk, retiring into a downturn is the worst-case scenario. Plus, the older you get, the less time you have to recover your ‘paper losses.’ Diversification remains your best friend at this point, with countercyclical components there to help when markets do turn. Just remember, your retirement will be long (longer than you think, hopefully) and come with surprises. 5 Retirement Expenses You’re Probably Not Ready For $500,000 Surprise: Health Care Sticker Shock Awaits You in Retirement
 

Late Summer Doldrums: What can/should you do?
For starters, don’t fret about any of those things. Control the controllable items and be aware of the rest. Start by ensuring your portfolio is properly diversified. The good news is that seemingly all asset classes have benefited from the long rally (oil & gas being the glaring exception). Still, you may need to do some rebalancing to get your portfolio back in shape. Here is an interesting take on total returns that is worth considering. Need More Income: Seek Total Return Here’s How to Determine Your Ideal Asset Allocation Strategy (caveat: no mention of alternative asset classes or even commodities that may provide a hedge)

Summer Doldrums

Seems we have been stuck in something like the Summer Doldrums the past several weeks. Whether that is suboptimal weather, the ongoing mayhem in DC, or the occasional heat wave, I cannot say for certain. Nonetheless, life moves on and so does the need for diligence in your retirement planning regimen. So, we return to the primary topic at hand today with a vengeance: your retirement.

Summer Doldrums: The eye-opener section
Having taken a hiatus of nearly a month, it seems appropriate to start by jerking everyone back to reality. Yes, markets have managed to stay buoyant, but still ….
You should probably consider things that may conspire to trip up your retirement. The first – we’ve called sequence risk here before – is one you must take to heart. 27 Ugly Truths About Retirement
Then there is the matter of the never-ending bull market. Are you still ‘all in?’ Have you taken defensive measures to lock in some of your gains? This lengthy tome may help you put things into perspective. There They Go Again … Again from Howard Marks at Oaktree Capital Management

Summer Doldrums: How about some actionable ideas to consider for your retirement?
We often emphasize risk adjusted total returns when thinking about investing for retirement. That frequently turns into dividend aristocrats as an option. They drive current income and, hopefully, capital appreciation. Combined they are often a winning element of your strategy. Undervalued Aristocrats: Exclusive Dividend Aristocrat Buy and Sell Recommendations From Sure Dividend Ignore the Price, Remember the Dividends: Why Dividends are the Key to Building Wealth
At the same time, it often pays to capitalize on macroeconomic trends. In this case the convergence of a demographic trend and a political reality. A Private Pay Healthcare REIT That Yields 10%

Summer Doldrums: How can you bring about behavioral change?
Since we just missed a month of posting, how do you change behavior? A Stanford University Psychologist’s elegant three-step method for creating new habits

Strange Times

Strange times call for strange measures. With Congressional hearings becoming commonplace, the White House under constant siege, and financial markets hard to predict, perhaps it is time to think differently. We are really quite consistent here in our guidance on retirement. Save as much as you can, starting as early as you can. Watch fees in everything you do, and maintain a balanced portfolio to protect against downturns. When you near and enter the distribution phase, start thinking about income products: annuities with lifetime guarantees and dividend champions. In keeping with current events, though, feels like a good time to pick up a whole slew of unusual ideas. Depending upon how sophisticated you want to be some of these may be worthy adventures for you. If nothing else, you may pick up some new lingo for your next meeting with your advisor.

Strange Times: Some alternative approaches to containing risk.
Whether you believe it, or not, this incredible bull run since the bottom in 2009 will eventually correct. Some of the greatest investing minds of the last 50 years seem to think it is sooner than later. Jim Rogers: The worst crash of our lifetime is coming and Here’s Why Bill Gross is Worried About Markets So, you can/should use some of the approaches we have already covered, or consider some of these ideas.

Stay Invested and Hedge

Options: They’re Not as Complicated as You Think

27 ETFs to Consider for Hedging Your Portfolio Risk

Whether you are heading into (or in) the distribution phase, or not, read this. Retired or Retiring in the Next 15 Years? Better Get Defensive.

Strange Times: Since we are stepping outside the box …
Having led several life insurance companies, I came to appreciate the hidden attributes of many oft derided products. Here’s a great article on one of these. Don’t scoff until you read it, please. What’s Your Safe Money Plan for Retirement?

Strange Times: A little dose of reality …
Separating Retirement Fact from Retirement Fiction

Global retirement ‘timebomb’: Why you’ll have to work past 70

Adieu Paris

Like so many weeks before, last week gave us Adieu Paris from the always unpredictable White House. Unfortunately, it is far more complex than either the press or the President would have you believe. I recall thinking that the deal was not so great because there are self-selected standards, self-defined reporting and no teeth. While you tend to see gloom and doom reporting, it likely is not that simple. Just to feel better about this I managed to scour up some more even-handed reporting. Whether you think this is apocalyptic or a nonevent, have a look.

Don’t Cry for the Paris Agreement

The Plain Truth About the Climate Accord

Game Theory and Trump’s Climate Negotiations

Adieu Paris: So, what should you be doing about climate change?
That is a really good question, and I am pretty certain complaining on Facebook is not high on the list. The sure thing you can do is change your own behavior. Buy a high mileage car, don’t run the central air, walk more, those kinds of things. After that, probably engage locally, encouraging similar behavior in your own community. Then you start getting to lobbying your elected officials, local, state and Federal, to take meaningful action. Did you read those articles? What do you think of the CAFE standards? Should that process be changed? Tell your Congressional representatives and get your friends to do the same. Find discrete, actionable causes and advocate for them. Then you might actually make a difference. Venting on Facebook, not so much.

Adieu Paris: What else should you be doing? Like always, focus on what you actually control!
That is right, here we are right back to your retirement planning. Fact is our sudden obsession with what is wrong with DC is great, but it likely will not change a thing. Spending half as much time on your retirement will make a world of difference to you  think about it. Since I am pretty sure I have about exhausted your interest level, just a couple of things to make you think.

The Chart You Must See to Understand the Widespread Risk in the S&P 500 Today

Homeland secretary: People would ‘never leave the house’ if they knew what I knew

21 Informative Maps That Will Change Your Worldview

30 Mind Blowing Facts That are Actually True

Focus, Focus, Focus

What a week it has been, clearly it is time to focus, focus, focus. Donald Trump won the election by promising a whole lot of things. Not much of this has been done, one might argue none of it. Boy has there been controversy, though. Whether you agree that media reports and hearsay trump first person accounts from General McMaster or not, Congressional Democrats and the media will not let the latest story go. All this smoke seems to mean that any progress you were hoping for on taxes, healthcare, jobs, or any other important area of focus for the government is not likely to happen any time soon. That’s why you and I need to focus, focus, focus on what we can control. Sadly, this seems to be a theme of late because there is a never-ending stream of scandals or wanna be scandals. Don’t fall for it, wait for the process to work. Did you notice the reporting on Seth Rich and Wikileaks? http://www.foxnews.com/politics/2017/05/16/family-slain-dnc-staffer-seth-rich-blasts-detective-over-report-wikileaks-link.html Here, too, sensitivity to the nature of the underlying evidence produced – in both these cases none – is paramount, and the lack of actual evidence reinforces our topic today: focus, focus, focus.

Focus, Focus, Focus: Have a plan and stick to it.
There are only so many drums we beat here to help you navigate your way to a comfortable retirement. One of those is to have a plan and stick to it. This article reinforces this notion, pointing out that investor behavior is a big driver in returns. Don’t get sidetracked by Washington, please. Up on Trump or in the dumps, don’t invest emotionally
In that vein, here is a nice tutorial on why it is important to have a plan and stick to it. The Most Important Rule in Investing
Another important thing, have the right expectations. With retirement savings so anemic in the US, ever increasing longevity and related healthcare costs … what do you expect? This is somewhat cutesy way of slapping you on the same old retirement notion. A personal finance writer explains what too many people get wrong about retirement

Focus, Focus, Focus: Another dose of dividend investing ideas to keep you thinking.
Yes, dividend stocks and ETFs may not be the sole component of your strategy, but the right ones can provide income and principal protection. Here are some interesting takes on the space right now: Not all Dividend Growth ETFs are Created Equal Great Dividend ETF to Simulate Dividend Yield of 21.5% and Recent Price Declines Make MORL Attractive Dividend Champions Everywhere Patience Leads to Great Dividend Growth

Dividend Defense

Markets remain a perplexing, challenging read and a dividend defense may not be the worst approach.  The first thing you need to do is understand the environment. Whether you are in the accumulation phase or the distribution phase, dividend defense may be a good approach.

Dividend Defense: What are the risks you face today and how can you protect against them?
As you plan your retirement you have to be wary of myriad risks, and reliable dividend stocks can be a good way to insulate your portfolio through the cycles.
Let’s start by assessing the risks that can derail your retirement plan. 7 Dangers that Could Derail Your Retirement (and What to Do About Them) and 5 Silent Killers of a Financial Plan
Then, of course, there’s the truly defensive way of thinking. Seems like we have been waiting forever for the ‘other shoe to drop.’ It really has been a long run up since the debacle that was 2008/2009. Will it go on forever? Unlikely. Retirement Strategy: Do You Have What it Takes for the Next Major Correction? or Positioning a Portfolio Properly for Any Outcome
A quick word of caution: all signs point to passive investing as the way to go. Indeed this week Warren Buffett essentially endorsed the model saying: “ “ Two ways of looking at this, if markets are going to correct, indices go with them and how much of the market rise comes from the move to indexed products? Indexing Investment Strategy Becoming Increasingly More Risky? Not to mention, Monday Morning Memo: Is Capacity a New Restriction for the ETF Industry?

Dividend Defense: Using dividend stars to deliver returns or income and preserve capital
All too often we focus solely on the income aspects of dividend stocks. They are a great way to deliver income and preserve capital in the distribution phase. They are also a decent way to deliver returns and build basis in the accumulation phase. Regardless how you plan to utilize your dividend investments, fundamentally sound selection is the key. 15 Straight Dividend Hikes, Raised Guidance Again, Major Earnings Growth, 12% Upside or 10 Champion Dividend Dogs Said to Gain 7% – 22% by May 2018 or Dividend ETF to Retire On

Dividend Defense: Evolving political landscape aims to make self-determination easier.
No matter your opinion on where markets are heading or dividends as a tool, this is a good idea. TIAA, IRI Back Bill Requiring Retirement Plan Income Projections

Moving Targets

We focus our effort on improving your retirement, today we start by looking at moving targets in Washington. Healthcare reform is dead. There is no coherent tax reform strategy. The budget talks will inevitably end in an impasse. They have no chance at a comprehensive immigration policy. Have you thought any of those things? Of course, you have, and now we have a stop-gap budget. There is a very high level White House outline of tax reform. The Affordable Care Act is back in the crosshairs, and immigration continues to brew on the side. Smart money seems to indicate that the House Republicans’ tax outline from last fall is the likely jumping off point. You can learn more about that here: http://www.taxpolicycenter.org/publications/analysis-house-gop-tax-plan/full. Should the ACA repeal and replace fail again (Don’t look now but the Republican health care bill is in trouble again. Again.) All the more reason to believe they will fight mightily to get something done on taxes.

The apparent lesson of the first 100 days is that this will not be easy. Turns out the Washington system is so dysfunctional that you cannot simply will it to work. Coalition building, which should be a deal maker’s forte, seems to be a giant vacuum. The far right of the Republican party want little to do with progress, standing on principle. The Democrats see that as an opening to stand firm. So, how does the deal maker in chief make these big things happen? Seems to me there will have to be some serious horse trading. If neither the Freedom Caucus nor the Democrats play, we may be in for a long two years. Unfortunately, big things need to get done and there is no template for making that happen.

With all these moving targets where does that leave you and me? Well, we have said this before, focus on what you can control. Today we will throw out a few facts, figures and ideas to help you improve your retirement. Perhaps a little pressure on your elected representatives to move some of these big agenda items will help, too.

Moving Targets: What is the landscape now? What can you be doing?
As always when it comes to major policy changes in DC, don’t hold your breath. It is best to plan given what you do know and what you can control.
Then again, knowing what you are up against is perhaps the best place to start. Imagine this, global central bankers continue to intervene in the world economy on unprecedented scale. Presumably this cannot go on forever … what is their plan? What is yours? BAML: The ‘$1 trillion flow that conquers all’ explains everything happening in markets
In the what else is new category we find another study indicating that Americans are not saving nearly enough for a secure retirement. Hopefully since you are this far down in the piece you are not among them … or committed to changing your ways. Only 1 in 10 Americans in Peak Financial Health
So, start working on your own situation. These 3 easy steps can improve your retirement savings – in less than an hour and Slash your retirement costs with these 5 tips (everyone read #3)

Retirement Planning

Retirement planning is a vital tool in your retirement security arsenal. No one is doing this for you – if you are not paying them. Social Security alone will not deliver a secure retirement. If you are like most Americans, you are not saving enough for a secure retirement. So, you need to arm yourself with a plan and start following it.

Retirement Planning: Where are you now?
Inasmuch as you probably do not believe you need to spend this time, why not assess your situation. If you are like most Americans you simply have not saved enough and do not save enough. Here’s how much the average family in their 40s has saved for retirement The most alarming statistic: to be financially ready to retire at 67, Fidelity says, you need to have six times your salary saved by 50. Do you? Will you? Did you?
Part of a retirement plan is a retirement budget. Since you will likely be on a ‘fixed income’ in retirement, managing expenses is vital. Knowing your expenses is an important part of developing your retirement plan. How to set a retirement budget
The flip side of your retirement budget is your retirement income. Just how will you be generating retirement income? Social Security? 401(k)? Pension? Working? Somehow you have to zero in on a balanced budget – income and expenses matching up over a likely very long time. What’s your retirement strategy?
This piece takes a more comprehensive look at the problem – expenses and income. Some good food for thought and guidance here. The 7 elements of a successful retirement

Retirement Planning: Plugging the gaps.
What should you be doing as you approach retirement age? Are there specific steps you should be taking? This article has some interesting perspective on moves to make before you stop working. An Investing Roadmap for Pre-Retirees (you may need to create a login, but access to Morningstar data is not a bad thing to have)
Since you just signed up for access to Morningstar, why not look at dividend stocks? One inexpensive way to generate quality income from dividend stocks is through a dividend ETF. This focuses on Schwab, but talks about the competitors, too. High-Quality Dividends for a Slim Fee
I loved the concept of this piece: focus on sequence, longevity and unplanned expenses. Fact is we talk a fair bit about the first two, and the last one is a good addition when thinking retirement planning. It is a super simple article, but helps reinforce the point. Take the time to read it. Prepare now for these 3 retirement risks

Retirement Insecurity

Finally, something we can all agree on: retirement insecurity. Perhaps through persistence or saturation or simply self-awareness people are coming around to the unnerving truth. Whether driven by slow starts, low balances, Social Security, longevity risk, medical costs or something else, people are concerned. Democrats and Republicans Alike Worry About Retirement Security
Just in case you think that is all overblown, the Congressional Budget Office just released this study on Social Security. Social Security ‘broke’ by 2029: What’s not in it for you?

Retirement Insecurity: Don’t just sit there, do something about it!
We have talked many times about the QLAC (Qualified Lifetime Annuity Contract) and the potentially vital role it can play. These Government authorized ‘longevity insurance’ annuities provide you income for life within your qualified plans … when plan sponsors provide them. Seems that may be getting some traction now. Employers are trying to solve their workers’ retirement income problem It doesn’t hurt to bring it up with your employer.
We say it here virtually every installment, use all the tax advantaged tools you can when saving for retirement. Just in case you missed that, there’s this. 6 Tax-Efficient Strategies to Keep More of Your Money in Retirement

Retirement Insecurity: Save more while you are working and be smart about it.
I admit I have not heard of this before, but it is very, very interesting. If you are still working it is worth the time. Another way to measure retirement readiness: Your ‘Power Percentage’
Like most people you likely do not know how much you need to retire. There are plenty of guides, most pretty well useless. This may be, too, but it is great food for thought and might just get you motivated. The 25X Rule to Early Retirement
If you happen to subscribe to the Financial Times this might be interesting reading. If not, it says that looking through US regulatory filings shows that the most successful investors have one thing in common. They all disregard macro trends in favor of betting on individual companies and industries. You might say ‘so what’ I’m not going to do that, but wait then there is this article. Here if you are willing to invest the effort you may well join that club by doing some really interesting analytics on individual stocks, ETFs and more. If nothing else do yourself a favor and read the beginning. The Schwab US Equity Dividend ETF vs. the S&P 500 Index: A Comparative Case Study

Retirement Insecurity: Change your mind set in retirement – distribution not accumulation.
In the perfect world, you manage to get appreciation of your assets and income. That’s where dividend stocks can be helpful by throwing off income without liquidating assets. It is a fluid environment, though, and you should stay on top of your choices. Dividend Champions for March 2017
In case you have not yet figured it out, longevity risk is a giant one for your retirement. That means dealing with it explicitly is a priority. In turn that means you may need to think outside the box on how to address this risk. Life Insurance in Retirement: Who Needs It?

Stick to Fundamentals

Stick to Fundamentals when it comes to your retirement planning. At the very least focus on the fundamentals first. You start with consistently saving as much as possible from your first day of work. You add to that using all the tools provided by the Government, i.e. tax advantaged savings.  Next you focus on balancing fees and performance. You must keep in mind that fees will eat your returns alive. You also need to remember that retirement investing is a long horizon game. That means you should stay aggressive in your investing and not panic or chase markets. Lastly, when you do retire, change your mindset from accumulation to distribution. You are no longer adding to your assets, now you must make them last as you take income and enjoy retirement.

Stick to Fundamentals: Leverage tax advantaged savings.
This is not the first time and will not be the last that we mention Health Savings Accounts (HSAs). We also often comment on the incredible burden of healthcare in retirement. It is time you put the two together in your mind. Leverage the HSA structure to minimize the exposure in your later years. The Best Retirement Account You Don’t Know About Health Savings Account: Your Extra Retirement Funds

Stick to Fundamentals: Keep a keen eye on total returns.
Yes, we talk about fees a lot here, too, and they are hugely (bigly if you will) important. You still have to balance with performance. So, look at total returns or net returns, i.e. returns after fees. Vanguard is keeping the pressure on their competitors. More Fee Cuts at Vanguard
One interesting spin on total returns has to do with sequence of returns risk. It is hard to find a well written piece on this, but here is one. The bottom line is that when you retire matters. There are good years and bad years, and being aware may make a monumental difference. How Timing Impacts Your Retirement Portfolio Longevity

Stick to Fundamentals: Once you retire, change your mindset.
Once you retire you are no longer in the accumulation phase. Now, in the distribution phase, you have to manage principal, income and withdrawals. That calls for a different mindset. How to Invest During Your Retirement Years
Yes, you will find a million tips on how best to do all this. Here is one that balances the fundamentals. 3 ETFs to Help You Make More Money in Retirement