No. of Recommendations: 9
http://www.washingtonpost.com/business/economy/fiscal-troubl...

There was already mounting concern for the long-term security of the country’s rapidly graying population. Then the downturn destroyed 40 percent of Americans’ personal wealth, while creating a long period of high unemployment and an environment in which savings accounts pay almost no interest. Although the surging stock market is approaching record highs, most of these gains are flowing to well-off Americans who already are in relatively good shape for retirement.

</snip>


I've never understood the retirement advice to put a large portion of your portfolio in fixed income securities. (Or worse, put money into a immediate life annuity where a large portion of the premium is lost to the insurance company's fees and costs.) At age 57 and in the 19th year of my early retirement, I have less than 7% of my assets in fixed income, about 6% in real estate (paid-for personal residence and some REITs), with the rest in stocks.

With the stock market near it's record high, the only people who are down 40% should be those that sold their stock in a panic in 2008 and kept everything in a low interest bond fund in the interim.

intercst
Print the post Back To Top
No. of Recommendations: 0
Do you still have a ton of Dell stock? If so, I guess the buyout is considered good news.
Print the post Back To Top
No. of Recommendations: 0
ResNullius asks,

Do you still have a ton of Dell stock? If so, I guess the buyout is considered good news.

Still have quite a few shares, but less than I did in the '90s.

Michael Dell is trying to steal the company at 13.65/share. I'll be voting with TRowePrice and Southeastern against the LBO.

intercst
Print the post Back To Top
No. of Recommendations: 5
With the stock market near it's record high, the only people who are down 40% should be those that sold their stock in a panic in 2008 and kept everything in a low interest bond fund in the interim.

intercst


Not that you may not have a point moving forward, but if you had your money in TIP, or BND as compared to the S&P at the beginning of the panic point, you'd be near or above the S&P now.

http://finance.yahoo.com/q/bc?t=5y&s=BND&l=on&z=...

At the lows, you're right.
http://quote.morningstar.com/ETF/chart.aspx?t=SPY&region...

I remember watching Doug Short's site comparisons with the great depression in late 2008 and 2009 and I did stick with stocks with some fear. I was younger, earning money, light on bonds, and took a terrific hit.

I acknowledge that we have international manipulation of bond prices resulting in great debt and needed higher taxes, and my personal opinion is this is trying to help the economy on the back of safety for most retirees who have saved AND their pension funds. When you put in the remedies (needed higher taxes, deleveraging, lower spending, less government intervention) I think it's a coin flip still which will be hurt more -- bonds (which recover principle fairly quickly) or stocks.

For retirees I'm just not sure that low percentage of bonds you have is a prescription most could follow. I also acknowledge that you've been darned successful at it.

As far as annuities are concerned, I again largely agree with you, especially in this ZIRP environment. But I just talked with a person who is concerned with diminished capacity that runs in his family. At an older age an immediate annuity might have some value.

Bob ... back to lurking
Print the post Back To Top
No. of Recommendations: 1
>> At an older age an immediate annuity might have some value. <<

In principle I think something like a SPIA could have some use in some situations, except that the current interest rate environment means that the cost of a guaranteed income stream is way too high.

#29
Print the post Back To Top
No. of Recommendations: 0
intercst:

A thinking man!

Far too many people are just plain DUMB about their investments or retirement, and they need not be!

SAd.

Vermonter
Print the post Back To Top
No. of Recommendations: 2
I've never understood the retirement advice to put a large portion of your portfolio in fixed income securities. (Or worse, put money into a immediate life annuity where a large portion of the premium is lost to the insurance company's fees and costs.)

Becuase the vast majority of people have no discipline, education, or patience when it comes to investing. Some of that is their fault, some of that if the fault of our society that both provides no education (mandatory or otherwise in high school), and encourages people to not educate themselves by having the employer handle much of it through target date funds.

You have to admit that what you did 19 years ago simply is not feasible for well over 90% of the population.
Print the post Back To Top
No. of Recommendations: 0
some of that if the fault of our society that both provides no education ...

A major failing of our society is promulgating the meme

"get a good education, get a good job, and they'll take care of you".

Whoever 'they' are.

Most educational disciplines push the 'someone else will do it for you'... they do NOT teach how to be a good personal finance manager. They don't even teach about 'retirement plans'.



Robert Kyosaki's message in "Rich Dad Poor Dad" counters this meme.

:-)
ralph
Print the post Back To Top
No. of Recommendations: 0
Most educational disciplines push the 'someone else will do it for you'... they do NOT teach how to be a good personal finance manager. They don't even teach about 'retirement plans'.


do they even teach how to balance a checkbook?
read a bill?

in my day, they didn't- had to learn all that from Mom
Print the post Back To Top
No. of Recommendations: 1
Robert Kyosaki's message in "Rich Dad Poor Dad" counters this meme.

While I haven't read "Rich Dad Poor Dad" (I have heard some critical comments about it), I would substitute "The Millionaire Next Door". Basically show up, work hard (for yourself), and spend less than you make.

JLC
Print the post Back To Top
No. of Recommendations: 0
do they even teach how to balance a checkbook?
read a bill?

in my day, they didn't- had to learn all that from Mom


Moi aussi. Though I was taught to WRITE a check. Can't be too soon to create a consumer don't cha know.<g>
Print the post Back To Top
No. of Recommendations: 1
Over the past few years, I was getting ready for retirement by buying individual LT bonds, with coupons in the 5% range. I think I was as high as 35-40% in fixed income and cash. With rates going so low over the past year, I've re-thought my allocation, sold a couple of bonds for a gain and I'm waiting on the others to get called. Right now I'm 25% in fixed income and cash, with the majority in cash (used to be the majority in bonds). I'll keep a portion in cash that will be used in the next couple of years and the rest will be invested in index funds over the next 6 months.

I stayed in the market over the downturn, however I did re-position the portfolio over that period. The end result is I'm well above the value before the downturn and 2-3 times above the low point. The best thing is I'm above my goal for the portfolio at retirement.

At this point, fixed income isn't part of any future allocation. Once rates rise, I'll re-think my allocation, but it will never be the 50+% that most advisers recommend. I will admit that I'm getting lazy as I near retirement, so most investments will be index funds. I'll spend most of the time on asset allocation.
Print the post Back To Top
No. of Recommendations: 3
Hawkwin:

...the vast majority of people have no discipline, education, or patience when it comes to investing. Some of that is their fault, some of that if the fault of our society that both provides no education (mandatory or otherwise in high school), and encourages people to not educate themselves by having the employer handle much of it through target date funds.

And why is that, do you suppose?

I have long stated that our "education" system tends to try to perpetuate lofty goals of "broadening" students, while too often not teaching them anything really useful, except in the sciences!

I may be biased. I worked my way through college many years ago, working night and day, because I was told I needed a degree to get a job. Great. I memorized a lot of what I thought was crap, spit it back on tests, and soon forgot it because it was of little real use. I'm not proud of that, but it's how it was and is. Yes, it was in "liberal arts".

I did pretty well, but my career was in a field in which almost everything I needed and learned was via OJT. The degree was really pretty useless, except to get my foot in the door.

In any event, it seems to me that we're now seeing an especially pathetic and sad tragedy in which countless thousands of kids are incurring HUGE debts to get degrees, only to then find they often have little or no real training in much that they can use in the workplace, but they still must repay those huge debts!

You won't find the colleges seeking to tell them otherwise, either. After all, they make their money by sucking in all these students!

Call me a cynical old curmudgeon if you like. I just smile.

Vermonter
Print the post Back To Top
No. of Recommendations: 3
I did pretty well, but my career was in a field in which almost everything I needed and learned was via OJT. The degree was really pretty useless, except to get my foot in the door.

While the actual stuff you memorized may be useless, I've said for decades that what my college education taught me was how to approach a problem and solve it. Essentially, I learned how to learn.

To that end, I will never consider my degree "useless". YMMV

-murray
Print the post Back To Top
No. of Recommendations: 3
...the vast majority of people have no discipline, education, or patience when it comes to investing. Some of that is their fault, some of that if the fault of our society that both provides no education (mandatory or otherwise in high school), and encourages people to not educate themselves by having the employer handle much of it through target date funds.
=============
And why is that, do you suppose?


Why not let folks in government who have no discipline, education, or patience when it comes to anything take control of your finances for you?
Print the post Back To Top
Advertisement