It is hard to say what drives market behavior, but as volatility returns there seem to be a few drivers. A record bull run is a big part of this as correction fears loom larger. Announced tariffs and a prospective trade-war may be the most direct influence. Regardless, volatility is back and likely to stay through the balance of the cycle. The real question becomes what do you do about this? Let’s focus on the here and now. Next time we will return to looking at the macro view of optimizing your retirement.
While this is a couple of weeks old now it presents an interesting framework for analysis of market conditions. Not surprisingly valuation appears as a problem. Somewhat surprising is that most other data points are not that bad. Where Do We Go From Here?
The same author provides a useful framework in this older article. If you want to be proactive and apply some hedge to your portfolio, take a look. You likely can update the numbers in the analysis yourself to get a more accurate picture. The concepts hold true, though, when volatility returns, if you are interested. 27 ETFs To Consider For Hedging Your Portfolio Risk
Why worry when the fundamentals look so good? ‘It could be a deep correction.’ – J.P. Morgan co-president warns of a 40% stock pullback
Volatility Returns: Time to Consider Dividend Stocks
A common drumbeat here revolves around the very best dividend stocks as a staple investment. That holds true when volatility returns as well. By maintaining its income producing capability your portfolio can mitigate valuation corrections. It may be worth considering focusing more on income producing and less on market appreciation. 9 Safe Dividend Stocks to Buy for “Timely” Retirement Yield This is dated, I encourage you to update the analysis, but ETFs may be a more efficient way to access dividend stars. These Are The Top Dividend ETFs
Lastly, some travel tips as we approach spring break and, dare I say, summer travel. 10 Travel Safety Tips You Can Learn from the CIA
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
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
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
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
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?
It always seems to be the best advice to focus on what you can control; right now that means Refocus on Retirement. As satisfying as a snarky Facebook post or march to Trump Tower may be, it will not improve your life. Getting your retirement strategy straight and working on your retirement account and assets, that will matter. Indeed, with only so many hours in the day, you are far better served by getting your retirement in order. You might find value in spending time with your loved ones after that. To this end, we return to our core value proposition here, delivering insightful reading on retirement topics.
Refocus on Retirement: Navigate a challenging environment
With equity markets on an extended tear, one must wonder when it ends. Market timers never prosper, but vigilance is very much in order.
As ETFs have prospered many have shifted from active strategies to passive. Is that still a good idea? When markets correct what happens to indices? What drove the performance in the first place? What if Everybody Became an Indexer? Financial Advisor Daily Digest US ETF Industry Growth Shows Signs of Maturity
Be prepared for a downturn by repositioning assets as needed. No magic, just an open mind: How to survive a ‘worst-case’
The uncertainty driven by the Trump Administration has generally worked favorably for US markets. Will that continue, or should you seek shelter now? Emerging-Market ETF Strength is More than Meets the Eye
In the same vein, volatility may be a decent play as the Administration finds its footing. Market Volatility Bulletin: VIX Back in Bed?
Refocus on Retirement: As always, find ways to optimize your retirement income
One obvious way to optimize your retirement income is though income generating investments. This REIT Yields 7.4% and Could Return Over 50%
Stay current in your awareness of dividend stocks. Dividend Champions for February 2017
Another great way to improve your retirement is leveraging the tax code. Retirement: Use extra cash to cover retiree health costs
Refocus on Retirement: As promised, your getaway section for this post
A getaway may simply be in your mind. Try these on for size, it won’t take long. 25 Shortest Jokes Ever
Here is a classic case of careful what you wish for … look at the budget numbers! Still, worth a side trip, at least. The world’s first “acoustically perfect” concert hall opens in Germany
Since we advocate saving money and traveling (well). These sites might help. The Checking Accounts That Let You Avoid Foreign ATM Fees The 12 Best Travel Sites and Apps You Need Right Now
With Thanksgiving behind us we are into the Holiday Push. Hopefully you are closing deals at work. Holiday shopping is in full swing. You simply do not have time for this retirement stuff. Our regular readers know there is no time like the present to enhance your retirement. With the incoming Trump administration caution is likely the best watchword.
Holiday Push: Always keep doing the right things.
Doing the right things always start with watch your fees. How an extra 1pc investment fee will cost you 16 years of retirement income (don’t be fooled by the UK spin here, the math is the same!)
If you are a small business owner, a large business decision maker, or an employee interested in helping yourself and your fellow employees, consider this. Get Your 401(k) Fees Down Because Your Employees Deserve Better
In the spirit of the season, I’ll give you a contrarian position on fees, too … that is, sometimes active managers actually do earn their fees. Royce Special Equity Fund Earning It’s Fees
If you are in the income phase – retired already – then be sure you are generating income. You will find some interesting thoughts on that in these pieces: Despite Mistakes, a Dividend Growth Investor Retires Early, Part 1 Despite Mistakes, a Dividend Growth Investor Retires Early, Part 2 Good Grief, Don’t Jump Off This Dividend Machine High-Dividend Stock Yields 9%, Pays Monthly, 4 Dividend Hikes in 2016, More in 2017
This one is really interesting, if for no other reason than to understand how convoluted the oil and gas industry has become. Sunoco LP: a 15.2% Yield with Significant Upside
Holiday Push: In December we will ease off retirement focus and give you other valuable leads.
Stay alert, particularly during the holidays, to nefarious doings on your phone. What is spyware? How secret programs can see into your iPhone and record your calls
About that Taiwan phone call … what’s up? Donald Trump is aggressively provoking China. What is he thinking?
Do you realize that yesterday a milestone anniversary passed quietly by your door? Is it time to revisit the thinking behind the words? 20 Years Later, Greenspan’s “Irrational Exuberance” Has Become Even More Irrational
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