CNBC reports Stanford Center on Longevity take on best retirement strategy (55, grandparents)
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It's best to glance through or read the full report from the Stanford Center on Longevity (based on joint research with the Society of Actuaries) on which she based her radically shorter CNBC article:
most people have no option to delay because they do not have the resources to lay out safely if they retire and delay ss .
the fact is a balanced fund and filing early would provide the same level of income as delaying ss if you had to spend down invested assets , maybe even more depending how long you live .
the choice really narrows down to do you want to be more dependent in markets ,rates and inflation for the rest of your life or more dependent on longevity and what amounts to a gov't bond for the rest of your life .
the 70% larger check at 70 makes you far less dependent on markets and rates . both delaying and filing early can see about a 5% real return by age 90
Use low cost index, balanced, and target date mutual funds.
Although I currently own an Index Fund, I disagree with much of the hype surrounding these and Target Date Funds. Index funds can result in significant losses during a down market, and someone living 30 years after retirement will be certain to see two of these. Balanced funds provide both growth and income but will the income part be enough for today, and will the growth part be enough for living costs 30 years in the future? Target Date funds are not the "Set It and Forget It" type of investments many people think they are. I got burned big time in the Great Recession by one of these. An investor needs to circle the wagons and pull money from Target Date funds into cash positons during down markets to preserve their previous growth. I still invest in Target Date funds but with my eyes wide open now.
In my view a person needs to watch and maintain their investments in Retirement, or have a trusted paid advisor do it for them.
Although I currently own an Index Fund, I disagree with much of the hype surrounding these and Target Date Funds. Index funds can result in significant losses during a down market, and someone living 30 years after retirement will be certain to see two of these. Balanced funds provide both growth and income but will the income part be enough for today, and will the growth part be enough for living costs 30 years in the future? Target Date funds are not the "Set It and Forget It" type of investments many people think they are. I got burned big time in the Great Recession by one of these. An investor needs to circle the wagons and pull money from Target Date funds into cash positons during down markets to preserve their previous growth. I still invest in Target Date funds but with my eyes wide open now.
In my view a person needs to watch and maintain their investments in Retirement, or have a trusted paid advisor do it for them.
there is so much myth here , and i really hope you do more research on this before you do what you suggest .
modern portfolio planning does not rule out these crashes and downturns . they allow for them , they plan for them and they expect them as part of the plan and no you don't sell out and circle the wagons raising loads of cash .
so far over the 117 30 year cycles we had, a 50/50 mix ( WITH NO CASH I MIGHT ADD ) made it through at a 4% inflation adjusted draw 96% of the time with no pay cut and plenty of money left over . .
this includes the great depression , the wars , the crashes , 2008 , the dot coms and the high inflation 70's .
so far nothing , not even if you retired in 2008 made that mix not a good idea .
i think you are basing that opinion on what you think and not what facts , research and figures show us .
by the way , 90% of those 117 time frames had you ending with more than you started with . 70% of the time you had 2x or more and 50% 3x what you started with .
so if anything raises along the way were in order . it counts on things being so bad that we we have not seen the likes of what is anticipated already in the plan, so far in 50 years .
so thinking crashes and downturns are not expected would not be correct and certainly circling the wagons and raising lots of cash has never been warranted and can be quite risky . in fact the draw rate is based on the worst of the worst outcomes or it could be about 6.50% .
40-60% equities has worked just fine.
as far as your comment about will the income side be enough to cover you today . that is not how it works . it is the total portfolio value and total return that supports you and determines your draw , either via rebalancing or by a bucket system . but in any case equities provides the inflation adjusting ability but both count as far as drawing an income .
i use a dynamic system . every year i base my spending goal posts on 4% of THE TOTAL PORTFOLIO BALANCE . . if markets are down i take either 5% less than last year or 4% of the balance ,which ever is higher .
i do agree with your view of target funds . they are to mis-leading that one size fits all as well as they have no regard for risk tolerance , individual financial situation and what is happening in the world around them . i much prefer a balanced portfolio where individual funds can be swapped to fit the bigger picture .
Last edited by mathjak107; 01-25-2018 at 05:06 AM..
and I give you permission to shoot me too Cabound.
The article said "work part time" as one of the options.
There are a ton of people walking around who collected Social Security at age 62 since it was "free money", spent themselves down to zero over a few years, and are now really struggling. The median benefit for retired workers is $16,101. Good luck living on that.
roughly the 1 million can produce 40k pre tax safely INFLATION ADJUSTED FOR 30 YEARS plus the social security . with your figures that is about 64k pre tax . depending where you live that can be a lower end life after healthcare costs and insurance .
here in ny i would not have retired on 64k pretax . i would have kept working , it would be a very low end life and certainly we could not live where we do .
roughly the 1 million can produce 40k pre tax safely INFLATION ADJUSTED FOR 30 YEARS plus the social security . depending where you live that can be a lower end life after healthcare costs and insurance .
It was intended to be a Guide as people will have different investments. Which is why I specified NOT including that. I do not invest in the stock market so my return is 3%.
How do you get it returning $40k without ANY RISK at all? We do not need to go into inflation risk for this discussion, pure cash flow to live on.
there is no such thing as no risk . in fact the highest risk , which failed more often than not is not using equities .
YOU WOULD BE MAKING A HUGE MISTAKRE IGNORING INFLATION .
at 4% inflation adjusted , using fixed income only , that portfolio failed almost 60% of every 30 year period we have had since 1871 . it is unacceptable and the riskiest choice you could have made
50/50 has passed 95% of them very nicely . equities (diversified funds ) become one of the safer choices over the long term unless you want to draw 3% or less from savings . to me that is inefficient use of your savings .
here is how you would have done over the 117 rolling 30 year periods so far with no equities , just fixed income . under 90% IS CONSIDERED UNACCEPTABLE
FIRECalc looked at the 117 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 117 cycles. The lowest and highest portfolio balance at the end of your retirement was $-526,987 to $2,317,282, with an average at the end of $174,615. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 67 cycles failed, for a success rate of 42.7%.
here is 50/50
FIRECalc looked at the 117 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 117 cycles. The lowest and highest portfolio balance at the end of your retirement was $-223,952 to $4,145,063, with an average at the end of $1,136,507. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 94.9%.
here is 40/60
FIRECalc looked at the 117 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 117 cycles. The lowest and highest portfolio balance at the end of your retirement was $-187,735 to $3,751,122, with an average at the end of $894,135. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 8 cycles failed, for a success rate of 93.2%.
Last edited by mathjak107; 01-25-2018 at 08:08 AM..
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