American baby boomers in general are not prepared for retirement. Many experts call this a crisis in the making. The crisis is that many of us will have to work into our 70′s to make ends meet, if we are healthy enough to do so. Others may not be that fortunate. Retirement will be forced upon them by health or other circumstances. They will live in relative poverty. It turns out that we are not alone. The crisis is world-wide.
Have you read about the “4-box strategy” for matching your retirement income to your retirement expenses? You should because it makes sense for the careful planner worried about retirement income survival.
A researcher (Ph.D. in Economics) with the National Graduate Institute for Policy Studies has recently published a provocative paper on how to most efficiently produce retirement income. A somewhat radical conclusion is that for a 65 year old married couple using a 4% withdrawal rate to meet retirement spending needs, bonds (or bond funds) should not be part of their retirement portfolio.
I have spent a lot of time thinking about the best way to estimate how large of a nest egg we will need to retire. I have concluded that there is only one practical way to do this and it involves creating a comprehensive retirement spending budget. Many so-called experts suggest using an income replacement ratio or an income multiplier to arrive at a retirement “number.” In my humble opinion, that is a flawed approach.
After the black swan market events of 2008-2009, baby boomers and financial planners continue to search for new strategies for providing a secure retirement income. I have written about many of them, including the “Failsafe Retirement” plan that we are using. This week I read about another combination strategy for avoiding what the authors refer to as retirement “money death.”
If you are a baby boomer contemplating retirement, stock market gyrations are bad for your fiscal and mental health. A common reaction in recent years is to leave the market entirely and put your nest egg in cash and cash equivalents. Regular readers may recall that I agree with this strategy but only in part. More about that in a minute.[Continue Reading]
How often does a retiree or retiree-to-be think about or ask this question: Can I have an adequate retirement income without taking risk? In almost every case, the answer will be “no.” A reader of Money Magazine recently wrote in with such a question.[Continue Reading]
I’ve written quite a bit about the infamous 4% withdrawal rate rule. I say “infamous” because I don’t like it. It may have worked in the past. Now this rule of thumb is more like a rule of “dumb.” We are more prone to black swan market crashes and burdened by less predictable market returns. This requires alternative strategies for procuring a lifetime of investment income from our retirement portfolio. It starts with liability-focused investing rather than pure wealth building.[Continue Reading]
A big part of retirement planning is risk control and management. By this I mean identifying and understanding the bad things that can happen to your money, your job, your health, and life in general. Then you must try to build into your plan as much protection against these risks as you can afford. Unfortunately, it seems we must add private pension benefits to the list.[Continue Reading]