Low rates punish savers, really? (55, supplement, divorce, social security)
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wouldnt it be great if we all were rich enough not to have to take any risk,even bond risk to survive retirement and inflation.
well the reality is not many of us ,self included can afford not to take any risk.
we need our money to work continually for us in order to make it through 30 years or longer of retirement .
unless you dont need the money not only do we need our nest eggs to provide enough income to beat inflation we need even more than that to survive retirement and the unknown..
the risk of taking no risk is economic scenerios like now where cash is failing to keep up.
its not un-common and it has happened many times before.
while you can endure a few years of that the fact is sooner or later you will have to take a big income hit in retirement or face a failed retirement.
it gets worse when spending down and while there have only been a few times in over 60 years of history a mix of stocks and bonds failed to last a 30 year retirement period ,history is chock full of failed retirements where cash only failed.
we need our money to work continually for us in order to make it through 30 years or longer of retirement .
It is very sad that the stated policy of the Federal Reserve is to force retirees to gamble their remaining savings on risky markets (take your pick, stocks, bonds, currency, state lottery, Las Vegas) in order to survive. It is more than a disgrace, it is corrosive to all of the economy.
but this is nothing new with cash. it has failed over and over through out history trying to keep pace at all but the smallest withdrawal rates in retirement ..
try it in fire calc or the fidelity income planner and see your results. talk about gambling on an outcome , historically cash is the spin of the wheel.
a 50/50 mix of equities and bonds have survived an inflation adjusted 4% withdrawal 96% of the time over every 30 year retirement period going back many decades.
thats a hell of alot better then cash did even in the best of its times.
no one knows what the future will bring but i think 100% cash demonstrated its the true spin of the gambling wheel just based on the past and the future for it looks even worse.
but this is nothing new with cash. it has failed over and over through out history trying to keep pace at all but the smallest withdrawal rates..
try it in fire calc or the fidelity income planner and see your results. talk about gambling on an outcome , historically cash is the spin of the wheel.
a 50/50 mix of equities and bonds have survived an inflation adjusted 4% withdrawal 96% of the time over every 30 year retirement period going back many decades.
thats a hell of alot better then cash did even in the best of its times.
Many retirees would be more than happy to just get a fair return on their savings (probably about 4% - 5% at this time) and go on with their lives. They planned properly but unfortunately, the Fed Reserve has decided to punish savers to bail out Wall Street and other gamblers. Most of the members of the Board lost heavily in the stock market crash and decided that they would bail themselves and their friends out to the detriment of savers. That is the nature of our political and economic system. Nine people decide who is going to make money and for the most part it has been the top 1%. The only reason people like yourself are still making any money is because everyone else is being punished to support the market. You can say thank you anytime you feel like it. It has nothing to do with wisdom. It is dumb luck which will eventually end.
Your dreaming if you think your seeing 5 or 6% from cash in a 1.7% inflation scenerio,......
As anyone who pays bills will tell you, real inflation is far above 1.7%. The government simply controls the reported number by simply changing the contents of the basket in order to pay out less in benefits that are indexed to inflation. This began under Greenspan. Cleverly conceived but horrible again for anyone who depends upon a reasonably accurate gauge of inflation.
I don't know what more to say. Sorry I don't live in the world you live in but good luck with your stated direction.
O.K. you two. You have now made your respective viewpoints clear and then some. If just one of you would agree to let the other one have the last word, I predict that more posters than one would be grateful.
O.K. you two. You have now made your respective viewpoints clear and then some. If just one of you would agree to let the other one have the last word, I predict that more posters than one would be grateful.
Ditto. And I don't understand the argument about bonds at all. The yield on the 10 year treasury bond is now about 1.7-1.8%. YOY CPI is now 2%. Which means - after taxes and inflation - you're just about guaranteed a negative return on 10 year treasuries. I can make a somewhat better case on some municipal bonds. But it's not like there's any easy money to be made. Robyn
We dont know about whats next going forward but capital gains on bonds have been fabulous.
I have been rebalancing every year now for years and taking profits .
At this stage the train left the station without you if you werent already in them.
The only exception at this stage is if you want to speculate on things getting worse and just go for the potential capital gains.
Its certainly not about the interest rate they pay at this point.
A flight to safety could see the 30 year spin off a juicy 30% gain if rates come down even 1%
If you really think things will get worse there is a vanguard etf called edv which is a zero coupon long term fund.
It has extreme potential for gains if your right. I may actually take a flier with this.
My own feeling is with the fed out of ammo things will get worse before they get better and with the world de-leveraging i can see long term rates being bid lower.
Last edited by mathjak107; 10-22-2012 at 04:39 PM..
We dont know about whats next going forward but capital gains on bonds have been fabulous.
I have been rebalancing every year now for years and taking profits .
At this stage the train left the station without you if you werent already in them.
The only exception at this stage is if you want to speculate on things getting worse and just go for the potential capital gains.
Its certainly not about the interest rate they pay at this point.
A flight to safety could see the 30 year spin off a juicy 30% gain if rates come down even 1%
If you really think things will get worse there is a vanguard etf called edv which is a zero coupon long term fund.
It has extreme potential for gains if your right. I may actually take a flier with this.
My own feeling is with the fed out of ammo things will get worse before they get better and with the world de-leveraging i can see long term rates being bid lower.
Yup - so what's your next move? Especially considering that taxes will be higher in 2013 and going forward. BTW - as I understand it - you are not yet retired. You are still working. So you don't have to rely on investment income to pay the rent. Right? And also - IIRC - you delayed retirement due to current uncertainties in the investment climate. Right? And you also have a wife who is getting or will get some kind of government pension. Right? If so - please don't lecture people who have already left the work force (without a government payoff) and aren't in a position to return to it.
You talk about "taking fliers". I can afford to do that. But don't. Because I am conservative (although most people wouldn't think that all my investments are conservative - and I agree with them). IMO - most retired people can't afford to think like that at all. Robyn
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