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 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
We often speak of your distribution phase here as the income phase of your retirement planning. It is the time after the accumulation phase ends … once you retire. When you begin to draw down on your retirement savings your mindset must change and your decision making, too. Everyone … even financial advisors … focus their time, energy and attention on the accumulation phase. That makes sense because it used to be the bigger timeframe (and more lucrative for financial advisors). Now though, with longevity increasing, you may actually be in the distribution phase for a longer time. So, how do you most efficiently draw down your assets to deliver the comfortable, secure retirement you want?
Your Distribution Phase: Changing strategies to create lasting income.
The most important component of your distribution phase strategy is to generate enough income for as long as you need it. Without entering into the longevity risk discussion today we can focus on ways to optimize your retirement savings. This is an outstanding article based upon the Stanford Center on Longevity and Society of Actuaries work on the topic. Here’s an ‘income menu’ that could help retirees make their savings last
In a similar vein, while this seems like a sales pitch I think you can extract some value gratis. It may help you in the accumulation phase to adjust your saving strategy. It may help you in your distribution phase to optimize your withdrawal pattern. One online tool helps you turn many retirement factors into money magic
We speak often of dividend stocks (good ones) as a means of generating income and preserving principal. This article takes a look at the multi-generational potential for a solid dividend investing approach. Never Run Out of Money: The Gift That Keeps on Giving
To be fair we always temper our dividend discussions with the need to remain vigilant. Here the Motley Fool helps illustrate that point. 3 Most Wildly Overvalued Dividend Stocks
Your Distribution Phase: Remain vigilant, understand market conditions, and history.
Clearly there is some luck involved in retirement planning success. Far more is dependent upon hard work, by you or someone helping you. Whether it is the accumulation phase or your distribution phase you need to have a strategy. The 3 Characteristics of a Good Investing Framework
If you believe that a downturn is inevitable and coming soon, then understand what works. Here is an interesting look at Beta vs Volatility over time. Low Volatility and High Beta Stocks Prior to Last Downturn
Finally, in the vein of history as a guide, don’t be fooled by seemingly compelling charts. This author picks apart a classic chart to make you think hard about market timing. The World’s Most Deceptive Chart
Happy St. Patrick’s Day, a day when the Luck of the Irish becomes topic for barroom discussion. One thing we all know is that a successful retirement has very little to do with luck. Beyond the possible sequence of return risk luck – good or bad – your retirement hinges far more on the effort you put into planning.
Luck of the Irish: Understand the environment in which you are investing.
Even the best plans need course correction, and understanding the environment is always a good place to start. Yes, retirement saving is long horizon, still there is room for prudence in where you invest new money. How is the economy doing? Do markets match up with macroeconomic reality? Is the Economy Doing Well?
Luck of the Irish: Leverage a combination of savings tools.
The foremost saving tool to leverage: compounding. That’s right, you do not need a government program to effectively save for retirement. You need to start early and be consistent in your saving habit. The power of compounding will repay you in spades. The Power of Compounding: A Patience Game (note that he points out the need to stay aware of the environment here)
While this comes at it from a different angle, the employer’s, it illustrates the power of the HSA. This tool is the Swiss Army Knife of saving, looking to become more powerful in Republican circles. What Clients Need to Tell Employees About HSAs
Luck of the Irish: Remain calm.
Understanding compounding, being diligent and consistent in investing you will accumulate a nice sum of money. Markets do have downturns and the key is not to panic. This article helps put this into better perspective for you. Early in the Accumulation Stage, Price Risk Can Look a Lot Different
Luck of the Irish: Focus on income in the distribution phase.
Once you retire the key is to transition your thinking to distribution of money from your savings. The distribution phase is largely about income, yet preserving principal is not a bad thing. You have the difficult balancing act of greater longevity and theoretically capped principal. That’s why we often highlight good dividend approaches and annuities as tools. Here’s an ‘income menu’ that could help retirees make their savings last Dividends Pile Up with This High-Yield Dividend ETF With Rising Rates Ahead, Stick with High-Quality Dividend Growers The right way to get the retirement income you need 4 Overlooked Tax Breaks for Retirees
With each installment, we try to impart financial wisdom on our readers. It generally comes by way of general rules and valuable pointers. This time we turn the focus to distilled financial wisdom. First from the Oracle of Omaha, Warren Buffett in his annual letter to shareholders. It is a lengthy read, but always worthwhile. You can find that here: Warren Buffett’s letter to Berkshire Hathaway investors explains how to use fear to your benefit. The second piece comes from Jim Gallagher, a personal finance columnist, it is here: 23 years of personal finance wisdom distilled into one final column. Before this one gets too dated I figure why not share Jeff Gundlach’s mid-January opinion piece. Here’s Jeff Gundlach’s full presentation on expensive stocks, the economy under Trump, and the Federal Reserve
Financial Wisdom: Always optimize the incentives Government provides.
I will start by saying Social Security is not given to you by Government, you fund and earn it. Still, there is an art to extracting the most value. This is the surefire way to maximize your Social Security benefits
Another really popular topic here is Health Savings Accounts (HSAs). We will not rest on this one until you fully appreciate the value of these. How Health Savings Accounts Work
Financial Wisdom: You need to be very, very attentive to your longevity risk.
You saw it above in the piece on Social Security and this article, too, deals squarely with longevity risk. Many find fault with annuities as a solution, but the guarantees have value and should not be dismissed. The biggest problem with traditional retirement planning
Financial Wisdom: Invest as wisely as you possibly can.
One thing vital to your planning is to understand that it is never a ‘set it and forget it’ process. This article helps drive that point home. Investor’s Alpha: Proper Asset Allocation
Then again, things are subject to change … what impact will Artificial Intelligence have on individual retirement investing? This article may give you some insight and hope. Artificial Intelligence Hedge Funds Outperforming Humans
Investing wisely also means being aware of your environment. This article, just published this morning, shares a Monte Carlo simulation for market performance in March. As with all prognostications, take it for what it is worth, but it is fascinating. I recommend reading it through. A Monte Carlo Simulation of the S&P 500 for March 2017
We have turned our focus back to your retirement and plenty of disgruntled people out there will be well served by Optimizing Trump. What that means is identifying the potential implications of a Trump presidency for your retirement and addressing them now.
Optimizing Trump: Locking in things as best you can before it gets any crazier.
One of our common themes is income generation in retirement. Whether using tools like longevity annuities or investing in the finest dividend stocks, securing income streams matters.
Plenty of dividend stocks and funds, and plenty of tips on them, too. This one is intriguing, though. One of the Best Dividend Growth Stocks Around Regardless of the State of the Economy
This is way, way in the weeds for most, but it portends something worth understanding. The bottom line is that the Fed bought up lots of stuff in propping up the economy. Now, they are thinking about exiting some, specifically mortgage backed securities. It is good to be aware, at least. Everyone is suddenly worried about this U.S. mortgage-bond whale
Optimizing Trump: Finding weaknesses before they overwhelm.
Safe to say whether you like Trump or not, you probably expect there will be turmoil at some point. Turmoil equals uncertainty, and uncertainty drives volatility. If Trump Flares Up Uncertainty, Profit from These ETFs
Optimizing Trump: always focus on the fundamentals … fees, longevity, etc.
It has been some time since we have harped on the fact that you will live longer and that means you will need more savings. Perhaps the oracle of The USA Today will lend some credence to the argument. How much do you need to fund retirement? More than you think.
Now a somewhat different angle on the same topic…your spouse is likely not the same age. That matters. Retirement Planning? Couples, Mind the Age Gap
The election is behind us, the rancor is dying down, and we are coming off the turkey high … time for a Thanksgiving Respite. That means nothing too heavy this week, mostly light reading.
Thanksgiving Respite: One heavy one – do yourself a favor, read it.
There was plenty to dislike about the election which just past. One thing that particularly irks me, though, is the lack of focus on the Federal Debt. This Looming Crisis Could Ruin Many
Thanksgiving Respite: Miscellany to lighten up your long weekend.
Most of you likely listen to classical, if not, you should. Why Our Brains Respond Differently to Classical Music
If you are like me, you run your iPhone storage to the limit. Here’s a trick worth knowing. Instantly Free Up Storage on an iPhone by Downloading (then deleting) a Huge App
If you enjoy traveling and our National Parks, you will love this site. Browse & Download 1,198 Free High Resolution Maps of US National Parks
Speaking of traveling, I always advocate saving money on tickets. 4 Apps Airlines Don’t Want You to Know About
If you like completely useless information (perhaps even depressing), or fast food, this site is for you. These maps show how 15 fast food chains dominate in America
If you are a closet geek, or just like to prove things now and again, you will love this one. Microsoft co-founder’s academic search engine adds neuroscience
Thanksgiving Respite: One truly valuable tip for your weekend.
It is not all dumb stuff, here’s something you might need. iPhone update adds a hidden way to call police in an emergency
I am always looking for the finest analysis to share, this week I turn to Folksy Investing. This article Getting Asset Allocation Right for Retirement struck me with how simple and folksy it was. No doubt Henry is a retired aeronautical engineer … or line worker … from Boeing, still his advice is simple. Sometimes I think it pays to go with what feels right.
Folksy Investing: Henry uses 105 as a baseline, how long will your retirement go?
It is a common refrain here, longevity is a giant variable in your retirement planning. Annuities can often help moderate that longevity risk. Are You Missing Out on Guaranteed Income Because of These 5 Misconceptions?
We often talk about healthcare costs in retirement and inflation is a concern, too. In this low return world even low inflation can make a difference. Inflation is Coming Back – What Does That Mean for You?
Speaking of healthcare cost in retirement, here’s another good primer on that. Retirement health care estimates vs. reality
Finally, here is a nice summation of the risks you face, including the three we are focusing in on today. Navigating 5 critical retirement risks
Folksy Investing: Some more good tools and tips for your retirement.
We often highlight dividend stocks as a means of generating income. How will they fare in any downturn, though? You certainly don’t want to lose a whole lot of principal. 3 Reliable Dividend Stocks Yielding 7% or More
So how do you handle the ups and downs of markets? Your nest egg will vary in value over time, is there a way to account for that? Here is one idea. Ratcheting Up Retirement Spending
So what are the odds markets will correct? Who knows? Some say the election will do it, if Trump wins. Others say it is all ‘baked in’ already. Perhaps ask yourself are things as good as markets would indicate? Unemployment rate is 4.9%, but a more realistic rate is higher than that and The Story of Durable Goods is the Story of the (Global) Economy
This may be too little, too late, given the proximity of the election, but … The philosophy of Marcus Aurelius is supposed to make you be more resilient and at peace – here’s how to master it in 7 days
Speaking of the election, you may want these tips, too. A new travel app is offering the lowest flight prices we’ve ever seen and Surprise! This Cruise is Actually on a Luxury Yacht, and It’s Everything Anti-Cruisers Could Hope For
Retirement planning is vital to achieving a happy, sustainable lifestyle after work. The earlier you begin planning … and executing your plan … the more likely you will achieve your goals. It never hurts to validate your planning and to be aware of the environment. Those two things are our focus this week.
Retirement Planning – never stop validating your plan.
It never hurts to get tips, especially if they are from “experts.” You know I like #7 and #10 on the list. Financial Experts Reveal Retirement Planning Secrets
This article hits a few of our common themes like healthcare costs and longevity. It also touches on some details you do not want to miss. It takes a lot of work to be ready to retire. Don’t forget these things.
It is always good to consider the pitfalls in planning. Hopefully this will help you avoid these common traps. 25 Hidden Obstacles That Keep You From Retiring Comfortably
This is a little bit in the weeds, but an interesting comparison. How should you manage your money as you save for retirement? Betterment vs. Vanguard: Which Should Retirement Investors Choose
If you are still young, and I hope you are, these tips will help, too. How much a 20-something needs to save every month to retire with $5 million
Retirement Planning – understand the environment.
Plenty of doomsayers out there these days, after a long, bull run on Wall Street. Still, this seems to be a pretty well reasoned view, and it warrants consideration. Recession in 2017 for Clinton, Trump or Johnson
In the same vein, albeit focused on Wall Street, this article makes some good points. Most notably, it highlights the cheap money fuel for the Wall Street run. Markets Could Be in for a Long Correction
That fundamental weakness highlighted above positions the market for this issue. As ‘smart money’ pressures the weakest stocks down. Short-selling could sweep stock market if inflation pushes up borrowing costs
This is not just a US or US/EU problem. Chinese banks might need as much as $1.7 trillion in capital
Retirement Planning – maintain a normal, non retirement planning, life, too.
Everyone likes to save money. This is an easy one with Amazon. Hot! Amazon $60 Total Credits Towards Tablets, Cameras & More Prime Members
Inasmuch as we are trying to save money, doing so on airfare is particularly satisfying. How to Find Airline Mistake Fares (Get Ridiculously Cheap Flights)
Since you are flying somewhere cheap, might as well have a goal. The Best Airplane Bars: Yes, There are Mixologists in the Sky
If you are an iPhone user, become a better iPhone user. iPhone memory full? How to free memory on your iPhone. The 25 best hidden features and tricks in your iPhone’s latest update
In a small twist on our normal approach we seek to help you improve your outcome. Retirement planning is a multi-faceted issue, and our regular focus on cost and strategy will get you to a better place. Sometimes, though, it is worth taking a bigger picture view to understand the landscape. We believe you can improve your outcome by having a better handle on the investing environment.
Improve your outcome by doing the right things during the accumulation phase.
We talk a lot about the active vs. passive investment debate raging in the industry. No doubt the bull markets since the bottom in 2009 have helped passive investments. It has also made it hard to outperform as an active investor. The tide continues to flow from active approaches to passive. Investors Have Pulled $109 Billion from Active Equity Funds in 2016: Here’s Why At the same time, the debate rages on in ever more unpredictable ways. Are Index Funds Communist? and Why the hottest investment trend in the world could have worse economic outcomes than Marxism
We should not miss the other rising star in the investment community, robo-advisors. Here is an interesting introduction and comparison of the robo advisor approach to the passive. Robo-Advisors vs. Passively Managed Funds: Which is Better? (WFC, SCHW)
Improve your outcome by understanding your retirement options.
We like to give you as much information as possible about your expenses during retirement. That is one key – along with longevity – to understanding how much you need to save in your working years. Here is a good overview to help you understand your retirement expenses from Forbes. How to Budget for Retirement
Hopefully by now this does not bring a lot of new information to you, but it does summarize a number of salient points with respect to your likely retirement cornerstone. 14 Things You Really Should Know About Your 401(k) Retirement Plans
Improve your outcome by understanding the data.
We talk about longevity often and healthcare costs in retirement about as much. Here is a damning piece on just what our expensive healthcare system buys the US compared with the rest of the world. Life expectancy vs. health expenditure over time (1970 – 2014)
As if that were not bad enough, the implications worsen with lower incomes … and geography. The Rich Live Longer Everywhere. For the Poor, Geography Matters
Improve your outcome by improving your world view.
We rarely venture to the trivial any longer. Since it is August, why not indulge in some mind expanding beyond the retirement arena? 20 Gifs That Teach You Science Concepts in Seconds
If you want to talk really big picture, try on the Fermi Paradox for size. The Fermi Paradox
Since we are talking big picture things beyond your retirement, how about solving the potable water problem? The solar-powered sculpture that could desalinate 1.5 billion gallons of drinking water for California