Hi All,I heard Mr. Pollan on the radio this weekend andhe said something that absolutely blew my mind!It sounds to good to be true so I would like torun it by a few fools before I actually go out andact on it.My investing background:I have been following Bob Brinker's advice (that'swhere I heard about fool last weekend) for about5 years. Aside from Bob's emphasis on mutual fundsover individual stock, I think that the fool'sstrategy and Bob's both fall under the category ofconventional wisdom (CW) on retirement. Let me definewhat I consider the CW.Assumption: You are a person who relies on 401(k)'s and IRA's to prepare for retirement.While you are young, say under 45, your retirementmoney is 100% in equities. As you approach 65, yougradually shift to a 50/50 mix of equities and fixedincome investments. You then try to live off acombination of the interest from the fixed and beginto draw down on the equity.The major problem with the CW is that you run therisk of outliving your money if you draw down theequity portion too quickly. Since we all have deepseeded images of eating cat food we decided to erroron the conservative side and only use a small portionof the money and rationalize that we can pass ournest egg along to our heirs.The RADICAL WISDOM (RW) offered by Pollan is that weshould take the money we have when we turn 70 andbuy annuities instead. The advantage is that we nolonger run the risk of out living our money!! Atthis moment a 70 year old can buy an annuity thatwill pay 12% !!!! for the remainder of his life. Atthis high rate we also don't need nearly as muchmoney to generate the same amount of retirement incomeas does someone who follows the CW. This meansyou can spend more now while you are alive, ratherthan passing it along to your heirs and uncle samewhen you are dead.In summary:1)there is no risk of out living your money!2)you don't need as much money!Well, there is more to his theory than what I presentedhere, but this is the most exciting part. I wonderedwhat my fellow fool's think of his idea.----John Power
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Ra