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Current studies by dr pfau and michael kitces show a rising glide path adding about 1% a year to increase equities allocations through retirement work best . starting out at 30% or so as we enter retirement and maxing out at 70% equities down the road has the best success rate for those without pensions who want to draw 4% inflation adjusted or so.
that seems to duplicate the very highly successful results a mix of equities and annuities saw without using the annuities.
I have no idea how many people "underestimate their resources", so I admit you could be right, but I am still curious how you came to that conclusion. People you know personally? Articles about the issue? 85% is a whole lot of people. Can you elaborate as to how, exactly, so many people are missing the boat with their estimates? Are they over-estimating investment returns? Over-estimating how much they will be able to save before retiring?
Personal knowledge of people I know very well; people who live in the retirement city I spend almost half the year in, and all of them that had to go back to work or drastically cut back on their standard of living. We actaully discuss this stuff a lot.
People short themselves several ways. First, they don't really look into the actual costs they will incur given what they expect to do. Secondly, it takes A+ budgetary skills to keep from overspending. I have to admit, even a tightwad like me can slip to a C- at times. It's human nature. Most importantly, you cannot EVER predict the future...how long will you live? is a biggie. Most unpredictable is something you mentioned...investment returns. Do you realize that just 5 years ago a CD got nearly 7%? Are you aware how many years people could assume that on retiring they would get a significant return on their cash saviings? And are you aware that you never ever put your saved money at risk (stock market, etc.) once you are retired..unless you plan on going back to work. So do you realize at this point in time, you can expect a zero return on your money. Makes it simple. You add up what you need and retire when you acquire that money. Period. A classic in your face illustration of this is the nearly empty restaurants bars shopping centers and amusements that charge money....ever since the market went kerplunk years ago in my middle to upper class retirement city. These folks got dinged bad and they are literally pinching pennies. And a good number of them are reluctantly getting up and going to work and they despise it but they have no choice.
The only exception to these "rules" is if you are so flush with money that if you lose a bunch, who cares. Life goes on. Maybe the kids get less. But that's a lot of money.
I always say add 25% to your estimate because 10% is too little...you have to retire to see how that works. Everything always goes up in price. You have no idea how much it will go up in cost - or, for that matter, WHAT will.
Last edited by StuffedCabbage; 12-13-2013 at 09:39 PM..
you keep stating a falsehood about not investing in the markets after you retire. that is wrong advice, and leads to more failed retirements time and time again than market investing.
there is data on 146 years of rolling 30 year retiement time frames that says you are dead wrong in your belief..
you keep stating a falsehood about not investing in the markets after you retire. that is wrong advice, and leads to more failed retirements time and time again than market investing.
there is data on 146 years of rolling 30 year retiement time frames that says you are dead wrong in your belief..
I think there is a lot to possibly be learned from his post. He mentions his middle to upper middle class retirement city which makes me think a 55+ community. Many discussions on those communities especially in Florida mention the sameness of thought that is encouraged and in some cases socially punishable if not embraced. That can create sameness of behavior and outcome so in their world what they observe may well be the norm. Doesn't make it universal but we are all at time guilty of transferring our world to others. I know I stand guilty. Just a thought.
transfering ones world to others is usually called believing your own bull-sh*t .
many take all the things they hear , experience or think they know and believe their way is the correct way. the problem is as humans we only know what we know and all the things we don't know never get factored into our logic.
we all hear avoid equities if you retire from mis-informed folks daily here in at least one of the forums.
yet the actual data and numbers show utilizing equities is exactly the path one needs to take to be able to pensionize their own income from their nest egg unless they are very rich or have other sources of income and do not need much over 2% withdrawals.
the best research to date shows a rising glide path in equities through retirement is the safest route.
what that means is this:
lets say you are 70-80% equities pre-retirement. a few years before retiring you start to reduce the amount to say 30% equities.
since the biggest danger to your retirement is in the first 5 years if markets are bad you have a very low equity exposue going in.
you now increase it by 1% every year up to 70% if you live long enough . kind of dollar cost averaging back in. that will give you the growth and inflation protection you need and if markets are poor early on in your retirement odds are down the road as your position grows markets will run up again just as we saw happen over and over.
after a while even if markets fell 50% you are still well ahead where you would have been if you avoided risk totally ...
Last edited by mathjak107; 12-15-2013 at 04:09 AM..
transfering ones world to others is usually called believing your own bull-sh*t .
many take all the things they hear , experience or think they know and believe their way is the correct way. the problem is as humans we only know what we know and all the things we don't know never get factored into our logic.
we all hear avoid equities if you retire from mis-informed folks daily here in at least one of the forums.
yet the actual data and numbers show utilizing equities is exactly the path one needs to take to be able to pensionize their own income from their nest egg unless they are very rich or have other sources of income and do not need much over 2% withdrawals.
the best research to date shows a rising glide path in equities through retirement is the safest route.
what that means is this:
lets say you are 70-80% equities pre-retirement. a few years before retiring you start to reduce the amount to say 30% equities.
since the biggest danger to your retirement is in the first 5 years if markets are bad you have a very low equity exposue going in.
you now increase it by 1% every year up to 70% if you live long enough . kind of dollar cost averaging back in. that will give you the growth and inflation protection you need and if markets are poor early on in your retirement odds are down the road as your position grows markets will run up again just as we saw happen over and over.
after a while even if markets fell 50% you are still well ahead where you would have been if you avoided risk totally ...
You know that from your associations, readings and what you have immersed yourself with. Others haven't and often follow similar associations, readings and immerse themselves with similar beliefs as themselves. We may disagree but it is not just their BS it is a collective view of the world and things that they subscribe to just as we subscribe to a different view. Some really believe we are in a depression and share that collective belief within much of their valued world. We all hope and believe we are right and history will help vindicate or condemn us. You and I know what the history of the post equity meltdown has been so far and we all live personally with that history.
the idea is to use accurate ,logical data when you review those collective views before you adopt them as your own.
most do not , they use the collective data of the other mis-informed. then that becomes their view until they fail or do not do anywhere as well as they had the potential to do.,.
then they complain how they can't keep up with things. it is always the same circle.
we all hear avoid equities if you retire from mis-informed folks daily here in at least one of the forums.
Anyone who is interested in this topic -- and open-minded -- really needs to read Ages of the Investor and Deep Risk by William Bernstein, who is neither misinformed nor uninformed.
And are you aware that you never ever put your saved money at risk (stock market, etc.) once you are retired..unless you plan on going back to work.
Posting this same ridiculous statement over and over doesn't make it any less ridiculous. It's still asinine.
I'm no longer dumbfounded at the financial illiteracy of some; but the vehemence of their defense of their illogical opinions still manages to surprise me at times.
i read ages of the investor , it had some good ideas and info but i think his avoiding stocks in his basic retirement plan totally is not a great idea . thats just my opinion and what the heck do i know. i do respect bill alot so i won't say he is wrong but it isn't something i would do .
i am not convinced tips and short term bonds are enough to pull the wagon going forward even with annuities sprinkled in..
perhaps those who need under 2% may get way with it but if anyone is thinking they can do that and pull the proverbial 4 or 5% they are very wrong.
i know bill states anything over 2% is not bullet-proof but the fact is people being people will not heed that sentance or even remember he said that. they will just withdraw as much as it takes that year to live and unlike conventional investing you have no real cushion for awe craps...
.
Last edited by mathjak107; 12-15-2013 at 09:09 AM..
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