Tag Archives: longevity

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

Core Investing Skills

I usually focus on a particular area in these posts, but today we consider two core investing skills. These may apply to your accumulation or distribution phase. Either way they are valuable skills to have in your arsenal.

Core Investing Skills: Protecting your principal balance.
No matter whether you are in the accumulation phase or the distribution phase, you want to protect your principal. Now, you do not want to do that at all costs, i.e. zero risk investing. You still need to grow your principal, you just do not want to lose it all – even on a paper basis. This article introduces a great term ‘margin of safety.’ Notionally you devote some portion of your principal to risk coverage. It seems like a good way to think of the concept. What to Do About Fading Stock Market Momentum
The article on stock market momentum does not tell you how to create your margin of safety. There are myriad ways to do so, and they depend – to a degree – on where you are in the retirement life cycle. A Qualified Lifetime Annuity Contract (QLAC), for instance, is a great element of a margin of safety for someone in the distribution phase. This article delivers a very specific, rather unusual approach. It focuses the majority of assets on a steady return and a very small portion on ‘home run’ investments. It is not for the faint of heart, or is it? The Holy Grail of Investing – The Barbell Approach
If that is too crazy for you, you may consider options as a means of delivering your margin of safety. This provides a nice primer for you to start. Options Strategy and Tactics: Diagonal Spreads

Core Investing Skills: Delivering consistent income in retirement.
As noted above, the QLAC is a great vehicle, if you can get it, for creating margin of safety in the distribution phase. It is also a great way to deliver consistent income in the distribution phase. Indeed, this article does a nice job of summarizing the prudent role an annuity can play in retirement security. It points out some of the key decision points – health in particular – and notes that annuities work beyond the QLAC. A Simple Way to Get Guaranteed Income in Retirement Whatever your preconceived notion of annuities, you need to do this research. This is Not Your Father’s 401(k): The Retirement Product You Should Know About Finally, another one that touches on the salient points around immediate annuities (outside your plans). The right way to get the retirement income you need
The other basic way we talk about delivering consistent retirement income is through dividend stocks, good ones. This is a very good article about the why of dividend stocks. Response to ‘Should You Build a Portfolio of Dividend Stocks?’
This piece takes a somewhat different tack, arguing that dividend growth investing works in both accumulation and distribution phases. It is a very valid perspective, and one worth considering. The Dividend Growth Investing Mindset
Finally, we all know the very best dividend stocks tend to be fluid and opportunities present themselves. High-Dividend Stock Yields 10%, 11 Straight Dividend Hikes, Pullback Buying Opportunity and 10 High-Yield Dividend Aristocrats Worth Considering

Have a Retirement Plan

With all the focus on process here it goes without saying that you must Have a Retirement Plan. Still this latest study indicates that it may not be that simple. We all know that many, many Americans have little or no retirement savings. I suppose that should indicate a lack of a plan, but more often assume it is simply an unfortunate prioritization. That makes it no less vital to focus, plan and execute for your later life. 10 alarming facts about women and retirement risks

Have a Retirement Plan: It starts with the fundamentals.
The simplest retirement plan begins with saving as much as possible as early as possible. Take advantage of time and compounding. Be consistent in saving for retirement. Take advantage of tax advantaged savings vehicles. Scary as it may be, be more aggressive than you think you should – more equity weighting.

Have a Retirement Plan: Sweat the small stuff.
Fees will kill your retirement savings returns, always be diligent about them. Maintain a diversified portfolio. There is no such thing as a set and forget retirement plan – at least not a successful one. Plus, remember the key risks you face in retirement: longevity risk, medical expenses, sequence of return risk, and others. You must face reality in the magnitude of the challenge and keep your eye on the ball.

Have a Retirement Plan: Change your mind set in retirement – distribution not accumulation.
While you must stay invested and saving (if you can) in retirement you also have to change your mindset. Now is the time to draw down your nest egg – this is the distribution phase. That may translate into different types of investments. Dividend stocks are often highlighted as ways to throw off income and maintain principal. Like everything, dividend stocks are a moving target. So, we are back to remaining diligent … even in the distribution phase. Dividend Champion Portfolio March Update
Another way to tackle the distribution transition is to consider lifetime income products – like Qualified Lifetime Annuity Contracts or other, similar solutions.

Have a Retirement Plan: No matter how you tackle it, get started.

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?

Retirement: How Long, How Much?

We often highlight the impacts of longevity on retirement. This week we look at Retirement: How Long, How Much? What are the practical implications of a longer life? What is a safe withdrawal rate? Save as much as you can when working, that is the first step. Knowing how much you can take and how long you need to take it is vital.

Retirement: How Long, How Much?
So, just how long will you live in retirement? No one knows for certain, but it is wise to know the odds and the outside shot.  Retirement Planning for a 115-Year Life Expectancy
Once you have a sense for how long you will be in retirement you can start on how much you need in retirement.  Use the FI Formula to Find Out How Much You Need to Be Financially Independent
That FI Formula still leaves the open question about the 4% rule. Just how much is a safe withdrawal rate? Look at the actual study to fill in some of the gaps in that story. Safe withdrawal rates
Not surprisingly Vanguard has an opinion on withdrawal rates. It makes sense, but is it right for you? Vanguard’s New Model for Retirement Spending in Low-Yield Market

Retirement: How Long, How Much? – Perhaps there are other ways to think about it.
Some of you may be thinking about running away from the US after November 8. We have covered the topic before, but here are some reminders on what to consider. How to Manage Your Finances When You Retire Overseas
If you don’t want to bite the bullet and move overseas, this option still gets you offshore? 6 Reasons a Cruise Ship is the Best Retirement Option
Keeping with the overseas perspective, are we doing everything right here? Australia and New Zealand certainly are better positioned and here’s why. Our legislators should take note. What U.S. Retirees Can Learn from New Zealand and Australia
Regardless your view of longevity and even safe withdrawal rate, generate as much income as you can. Dividends are one approach worth considering. There are always new options to consider. This Dividend ETF Does Your Investing For You
Is dividend investing right for you or as part of your investment strategy? This article might help you consider just that. Why do Some People Like Dividends So Much?

Retirement: How Long, How Much? – What comes after November 8.
So, will there be an implication on the economy? Here’s an interesting viewpoint. Could Hillary Clinton be the Next Herbert Hoover?
Maybe it will happen, maybe it is already priced in already. Is there a smart answer to hedge your bets? How to Hedge the S&P 500 with a Minimum Return of 7%
Maybe you are better off reading a book. Top 10 Books that Will Change Your Life in 2016

Longevity Quandary

With each installment, I find the best thinking on retirement, and this week is a treasure trove of commentary on the longevity quandary. Michael Phelps presumably just wrapping his competitive swimming career is a great model for longevity. Both Michael Phelps and Usain Bolt competed in four Olympic Games … and neither won a medal the first time. There may be an analog here because that is not what you remember about either of them. The lesson for the rest of us is to work harder, longer on your savings because you will be retired longer.

Leverage the longevity quandary by watching expenses in your retirement accounts.
Sad to say I would not think to ask a Department of Labor employee for advice on retirement. This former one, however, makes a series of worthwhile points about common mistakes. I encourage you to read it. 10 Retirement Mistakes Baby Boomers are Making
We always harp on costs. When you consider the longevity impact on costs, it is even worse. So you must strive to lower your total investment cost structure. It can be as easy as having a simple, effective strategy and sticking with it. A financial planner says most people don’t need to pay someone to manage their investments

Leverage the longevity quandary by ensuring you save enough for retirement.
Here is a really good, comprehensive piece on just what challenges longevity brings, and ways to address them. The Longevity Paradox
We have mentioned HSAs before, but this drives home the point about. Fact is you will spend a lot of your own money on healthcare in retirement. An HSA is a way to save pre-tax money now, not get taxed on growth, and not get taxed when you withdraw for medical expenses … there is simply no better answer. Why Advisors Need to Know about HSAs
Just in case you forgot, or simply don’t believe me, here’s the latest on medical expenses in retirement. Health Care Expenses for Retired Couples Hit Record $260,000 : Fidelity
On a related note, long-term care insurance is an important thing to consider … just weigh the cost/benefit wisely. These tricks can help tilt the balance in favor of buying. 4 Tax-Friendly Ways to Pay for Long-Term-Care Insurance
Here is an advisor’s eye view of these medical costs in retirement. More importantly, the implications of the DOL fiduciary rule on advice you will get on them. It lays out some hard dollar costs and is promising in anticipating incorporation into plans under the new rule. Add this to your DOL checklist: health, LTC costs in retirement

Leverage the longevity quandary by focusing on building an income stream for retirement.
Switching mindset from accumulating wealth to generating income is a key retirement transition. Longevity, though, may have some bearing on when you make that move. Longevity and Your Retirement
Changing your mindset should begin with understanding your needs. This piece helps you put your retirement income needs into perspective. How to Solve the Retirement Income Equation
Here is some interesting insight on IRAs, and 401(k)/403(b) for that matter. They may not be the best in retirement vehicle for you when you consider longevity risk. IRAs are for retirement planning, not for retirement
Here is a fascinating, refreshing look at the retirement income puzzle. Is retirement spending a level pattern? Should you use a simple rule like the 4% rule? This says no. What is the “Retirement Spending Smile”

Optimizing Your Retirement

With tax season and tax freedom day behind us, let’s refocus our energy on Optimizing Your Retirement. There are three core philosophies we expound most often: keeping your investments efficient by optimizing costs and returns, focusing on income generation during retirement, and staying focused on the interrelated topics of longevity, healthcare costs, and making your nest-egg last.

How can you be as efficient an investor as possible?
Optimizing your retirement starts with keeping control over the costs in your portfolio. That includes all your buckets of money, 401(k), IRA, 403(b), investment accounts, everything. Some are harder than others to determine, but do your homework and get the best bang for your buck.  Expense ratio continuously impacts the NAV of a fund and How to Increase Your Retirement Savings Without Saving More both provide great tutorials
On a reasonably timely note, taxes, too, are a drag on your retirement savings … a cost, and a big one. 7 tax strategies the rich don’t want you to know

Focus on income generation during retirement.
We talk often of dividend paying stocks, and that is one great way to generate income. Don’t fall into the trap of monitoring current yields, though, because your yield is relative to your basis. That way you can take credit for appreciation, too – that’s a great start to optimizing your retirement! Dividend Stock Investors: Pay Attention to Your ‘Yield on Cost’
Here is another interesting analysis tool for selecting your dividend paying stocks, value. Dividend Growth Investors: Create Your Own Sense of Value
Good news is that the ETF world is responding, too. New High Dividend ETF with Free Cash Flow Focus by Pacer
Be smart about your Social Security, too. Ready to retire? Don’t rush your Social Security start date

Stretch your retirement savings as far as possible.
Recognizing that most people will not, really have enough money when they retire, when optimizing your retirement it may help to have some examples to follow. How to Retire and Live to 100 with $875,000 in Net Worth
There are behavioural tricks, too, to help stretch your nest-egg. 3 Easy Moves to Make Your Money Last Your Lifetime
Of course just plain saving money helps, too, i.e. be as thrifty as you reasonably can.  One great way is with ebates, the website and app automatically applies coupon codes and gives you cash back on purchases you plan to make anyway … sometimes even in the store. Check it out and sign up now, you will be glad you did. ebates This seems like a similar service, but only for the Chrome browser This Lazy Online Shopping Tool Actually Saves You a Ton of Money
Clearly, apps, bots and websites will be your best friend when it comes to saving money, and it gets easier every day. Hotel Tonight is another app we have used, and while it means doing short notice bookings (they sell unsold rooms at steep discounts), it often works out well. How to stay in luxury hotel rooms all over the world for less and Google Flights Now Shows Cheaper Fares From Different Services