U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 08-21-2013, 02:41 PM
 
Location: Alaska
5,356 posts, read 16,340,513 times
Reputation: 4023

Advertisements

Found these two links that think buying equities for the long-term isn't the best strategy:

Kent Smetters: Risk Less and Prosper

Zvi Bodie is the 401(k) Elephant in the Room - Businessweek

I haven't read the book, but I think this was the gist of their strategy:

Quote:
Instead, Bodie and Taqqu argue for a more real goal-based approach. Each goal should be matched with its own appropriate investment. Basic living expenses during retirement should be financed by low-risk investments, for example, Treasury inflation protected securities held in tax deferred retirement accounts. Only less important goals should be financed by taking on more risk. Of course, the Bodie and Taqqu approach would require additional saving and sacrifice today since the expected returns to safe investments are lower than risky equities. But don't let appearances deceive you: the larger expected return to equities is simply a reward for taking on more risk. Any advisor who tells you otherwise is selling you fool's gold.
I don't necessarily agree with it, as I'm guessing many would never be able to retire following their strategy, since it requires you to save a lot more.
Reply With Quote Quick reply to this message

 
Old 08-21-2013, 02:52 PM
bUU
 
Location: Georgia
11,879 posts, read 8,655,358 times
Reputation: 8401
Precisely. Even with an "expected" return of 6% across my entire portfolio, my retirement plan would run five years too short. I couldn't imagine that any significant number of people could fund retirement on truly conservative investments.
Reply With Quote Quick reply to this message
 
Old 08-21-2013, 04:11 PM
 
71,470 posts, read 71,652,652 times
Reputation: 49032
it is not as much the conservative investments as it is how much of a draw will you be taking. a 3% inflation withdrawal rate according to bernstein can be pretty bullet proof for 30-35 years with tips,short term bonds and later on some immediate annuities..

the difference though between drawing the proverbial 4% and 3% is about a 25% cut in income so it is substantial .
Reply With Quote Quick reply to this message
 
Old 08-21-2013, 06:29 PM
 
Location: Murrieta, CA
1,268 posts, read 1,507,279 times
Reputation: 2224
Default Confusing advise

The first link they recommended TIPS which have really gone down this year due to higher interest rates. I understand keeping your withdrawal rate low but everything I have been reading has been saying going too conservative is really the "risk".

Anyway I dumped my bonds because they were tanking and am in equities after a several year "break" from equities and now they are tanking.

I do have a balanced fund so have some exposure to bonds but am not overweighted in bonds like I was. I am about 70/15/15.

I am taking a long-term approach and hoping the experts are right. You need equities over the long-haul and even after you are retired to keep up with inflation.

I think I will ignore the noise and look at my statements in ten years, that seems to be the best plan.

I plan on living off my pension and cash until then.
Reply With Quote Quick reply to this message
 
Old 08-21-2013, 06:47 PM
 
71,470 posts, read 71,652,652 times
Reputation: 49032
One of the most successful methods is to buy an immediate annuity that covers enough to pay your living expenses and let the rest of your money run in an index fund . You eventually use the equities to inflation adjust.

Backing testing has shown you end up with more left over for heirs buying thee annuity than if you didn't and did all your own investing.
Reply With Quote Quick reply to this message
 
Old 08-21-2013, 08:35 PM
 
Location: Murrieta, CA
1,268 posts, read 1,507,279 times
Reputation: 2224
Quote:
Originally Posted by mathjak107 View Post
One of the most successful methods is to buy an immediate annuity that covers enough to pay your living expenses and let the rest of your money run in an index fund . You eventually use the equities to inflation adjust.

Backing testing has shown you end up with more left over for heirs buying thee annuity than if you didn't and did all your own investing.
Thanks Math Jak. I know you were speaking generally, not just to me. For someone like me that has a pension that will cover basically 100% of expenses it is the same idea. Instead of an annuity, I have my pension and then I use my savings to invest to protect against inflation. I am following the model in the book "Work Less, Live More" the "Rational Investing Model".

I think this plan is better than what I had prior which was mainly cash, TIPS, and some high yield Bond funds, and the TIPS were tanking, after several years of fairly good returns. But I don't see a high percentage bond portfolio as making sense anymore with rising interest rates which is why that article did not make sense to me at least in terms of promoting TIPS. I guess time will tell.
Reply With Quote Quick reply to this message
 
Old 08-22-2013, 03:05 AM
 
71,470 posts, read 71,652,652 times
Reputation: 49032
if you are following bob clyatt you are in good hands.
Reply With Quote Quick reply to this message
 
Old 08-22-2013, 09:15 AM
 
Location: Murrieta, CA
1,268 posts, read 1,507,279 times
Reputation: 2224
Quote:
Originally Posted by mathjak107 View Post
if you are following bob clyatt you are in good hands.
Thank you. Trying to stay rational.
Reply With Quote Quick reply to this message
 
Old 08-22-2013, 09:23 AM
 
Location: in the miseries
3,302 posts, read 3,577,670 times
Reputation: 3810
A personal decision, but I would never buy an annuity.
Reply With Quote Quick reply to this message
 
Old 08-22-2013, 09:30 AM
 
71,470 posts, read 71,652,652 times
Reputation: 49032
There are all different types and there are some that have no other fees like buying a cd .
Anyone who generally makes a blanket statement about never buying any type odds are has some mis-information they heard from other mis-informed people .

There are types that can serve as if you bought a pension .

They can play a key part in increasing the odds of success with lower risk and more money not less money left at the end.

Adding 25%-50% an immediate annuity to your own portfolio can leave you with more money left at the end then had you not bought it.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top