tag:blogger.com,1999:blog-5621914599310831423.post6940784537423843049..comments2024-03-28T18:17:18.688-07:00Comments on The Retirement Café: Diminishing ReturnsDirk Cottonhttp://www.blogger.com/profile/05616143752082768155noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-5621914599310831423.post-78633236855967433622018-11-03T15:03:53.520-07:002018-11-03T15:03:53.520-07:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-54528965319444363802018-10-26T07:42:02.578-07:002018-10-26T07:42:02.578-07:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-86464035637035715642018-09-18T14:12:31.562-07:002018-09-18T14:12:31.562-07:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-27821108998014751852018-09-18T10:37:48.254-07:002018-09-18T10:37:48.254-07:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-44344029245496926482018-09-17T03:19:52.973-07:002018-09-17T03:19:52.973-07:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-5973068232227200722017-09-18T03:39:29.590-07:002017-09-18T03:39:29.590-07:00bookmarked!!, I like your web site!bookmarked!!, I like your web site!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-81253939236209274892014-03-17T14:22:56.099-07:002014-03-17T14:22:56.099-07:00Wade, thanks for the comment. By the way, if you g...Wade, thanks for the comment. By the way, if you guys aren't reading Wade's blog at http://wpfau.blogspot.com/ you're missing out on the best retirement blog available. Period.<br /><br />Back to your comment.<br /><br />Fair enough. My post creates two classes of aspirations: retirees who hope to increase their spending IF AND WHEN their portfolio grows and those that have other goals, like leaving a legacy. I'm suggesting that the latter is a better fit for stock investments than the former and that the potential to spend more in later retirement isn't that attractive.<br /><br />You are noting that there can be a third class of retirees who want to spend more EARLY in retirement, speculating that they might make up for it with future stock returns. That is speculation, of course, because upside potential may never be realized. And since it is speculation, you might well lose that bet. Still, that is a valid strategy for retirees who find that risk acceptable. (I would never recommend it, for what that's worth.)<br /><br />Also my personal opinion, "want" doesn't factor in to retirement planning. I WANT to spend 15% every year. I just don't have enough wealth to do that. You can't invest your way out of under-saving. If you were that good an investor, you wouldn't have under-saved over the previous three decades.<br />Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-14507195139178261642014-03-17T10:11:42.647-07:002014-03-17T10:11:42.647-07:00Dirk,
Great post as always, and I'm sympathet...Dirk,<br /><br />Great post as always, and I'm sympathetic to your view. But let me try to defend the probablity-based side a little here. <br /><br />You're certainly right that for someone who has saved enough to lock their lifestyle goal with safer assets, it is certainly dangerous to get greedy and risk one's goal by striving for greater upside.<br /><br />But for someone who is not quiet fully funded, I don't think the situation for them is necessarily about investing in a way that _could_ give them a chance to increase spending later on. Rather, they would probably want to _amortize_ that greater spending potential over their lifetime by spending more today as well. <br /><br />Being aggressive in retirement can mean spending more aggressively and/or investing more aggressively. Maybe they see that they could lock in 4% today safely, but they really want to spend 5% today. That's where the need for upside comes into play, but that is also where, as you wisely suggest, they could dig themselves into a further hole and only be able to spend 3% tomorrow.<br /><br />Anonymoushttps://www.blogger.com/profile/04168922717655562721noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-83355711382832596972014-03-15T07:06:52.485-07:002014-03-15T07:06:52.485-07:00Thanks, Mark! Couldn't agree more with the &qu...Thanks, Mark! Couldn't agree more with the "out of touch" comment. If I had met an advisor like you a couple of decades ago, I probably wouldn't have bothered to learn how to do it myself.Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-40511251523778793882014-03-14T19:02:36.990-07:002014-03-14T19:02:36.990-07:00HI Dirk. Nice post. I am long term advisor and h...HI Dirk. Nice post. I am long term advisor and have felt for many years that the products promoted by many investment firms and advisors are completely out of touch with how life actually unfolds for the average retiree and more in touch with the firms' and advisors' financial goals. When I have meaningful conversations with my clients - those in the middle class - they generally want security and stability throughout retirement and the opportunity to do things in the first 10 to 15 years. After that, they are realistic about their needs and fully expect to moderate their lifestyles. I also like this presentation - for me, simple is always better!Anonymoushttps://www.blogger.com/profile/16681096621814406802noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-344798271024507652014-03-14T13:33:29.144-07:002014-03-14T13:33:29.144-07:00I'm not completely sold on longevity insurance...I'm not completely sold on longevity insurance, but I think it is the best of annuity options and is certainly worth considering, depending on your individual requirements. I like a paper by Jason Scott on the subject. (Google "The Longevity Annuity: An Annuity for Everyone?" by Jason Scott. I can't include links here.)<br /><br />The spending studies don't say that spending declines for everyone, it says that it declines for the "typical" retiree. You may have higher health care costs later in life, for example, but as Blanchett notes, "High health care costs become a factor in later years, but even then, real spending was lower overall than it was at the start."<br /><br />We can't predict that everyone's spending will decline in retirement, we can only note that in the past it has declined for most retirees. Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-85822626949252890662014-03-14T12:38:04.192-07:002014-03-14T12:38:04.192-07:00Thoughtful post - and an argument for longevity in...Thoughtful post - and an argument for longevity insurance? I think its good to reflect on one's potential changing consumption patterns, but the idea that spending just declines seems flawed. I may not be taking cruises when (if!) I'm 90, but I may need to pay for help to cruise in and out of the tub?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-71114142193747881252014-03-14T10:01:36.476-07:002014-03-14T10:01:36.476-07:00My personal opinion is that management programs li...My personal opinion is that management programs like Strategic Advisors don't add value, not value that is worth the cost, anyway. I think the literature is pretty persuasive that minimizing cost is far more effective and the way to do that is by investing in low-cost index funds. I just showed a friend the cost of Strategic Advisors compared to his returns and he got out of the program. Strategic Advisors, as I recall, waives loads but does not, of course, waive expense ratios.<br /><br />70% is a lot more than I would invest in stocks, though a SPIA would allow you to invest more aggressively than if you didn't have one. Your new portfolio, exclusive of the SPIA, could decline about 30% in a bad bear market. With 15% in a SPIA, as you suggest, you would still see 85% of that loss, or about 25.5%<br /><br />Regarding your last comment, the spending declines I noted are in real dollars, so the risk of inflation is already accounted for. <br /><br />Thanks for writing.Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-18805025633430378232014-03-14T08:20:35.183-07:002014-03-14T08:20:35.183-07:00Hello. I'm new to your blog and enjoyed this ...Hello. I'm new to your blog and enjoyed this post. I'm 65, retiring next month, and my Fidelity local rep is trying to talk me into switching my conservative income-producing investments to 70% stock 15% bonds and the rest in a single premium deferred annuity or a tax deferred annuity. And of course, she wants me to pay Fidelity to manage it with the strategic advisors program at about 1%. When I asked her what the total cost would be with the expense ratios of the stock mutual funds they put me in, she suggested that I research the expenses. All that to say that even at 65, I'm not thinking I want to try for more money at 70 or 75, Just one comment about spending less as we age - maybe that's true in terms of goods and services, but the risk of inflation could have us all spending a lot more on just the stuff we buy now to get us through our day to day lives. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-47269208738943756992014-03-11T14:40:57.940-07:002014-03-11T14:40:57.940-07:00Dirk. I enjoyed and understood The Downside of Ups...Dirk. I enjoyed and understood The Downside of Upside but this one was a whole lot more fun to read and should make it clear to anyone who struggled with the first post. I am in 100% agreement about spending reducing as you age. I have seen it with my parents who have plenty of money but have no desire to spend 15 hours on airplanes to go on vacation. If I make it that long I'm sure I'll feel the same way too.Mikehttps://www.blogger.com/profile/11700795484257534574noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-48583356952737605902014-03-11T11:58:21.472-07:002014-03-11T11:58:21.472-07:00Hi Dirk, I like the first one, and this one. Don&...Hi Dirk, I like the first one, and this one. Don't think I'm willing to take the risk for additional income for all the reasons you stated at any age. It took too long and too much effort to risk it now. Enjoy the humor in all your blogs. BradAnonymousnoreply@blogger.com