What Retirement Calculators Get Wrong (respect, dates, raise, best)
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In practice, I haven't seen it. In many places, like where I live, you couldn't pay the property taxes on the amount you could get renting out the property.
Rents are based on what the market will bear, with an adjustment for over and under-supply. Unfortunately since the housing market crashed, many people will rent their vacation/second homes, and perhaps the house they inherited from parents, at a loss--in hopes that the market will recover a bit and they won't have to give away the property they're renting for next to nothing. That creates an oversupply, further reducing rental prices.
Before the economy crashed we held our rent levels low to keep all units filled, and had no problems covering mortgage, insurance and taxes [about 20% below the neighborhood average].
Now there is a surplus of housing and I am not sure if lowering the rent levels could get tenants.
We have one tenant who is still employed, the others have lost their jobs and I think are nearing the end of their unemployment [if they have not lost their unemployment benefits yet].
Turnips have no blood, and the unemployed have no cash.
I have no idea at this point how to get a tenant in this economy.
We have had rentals since 1985 and they have served us well all along up until this recession.
You might want to read the thread on retirement investing. We have discussed this issue quite a bit. If you pulled your investments out of equities during and/or after the 2008 downturn, then it seems that you bought at a high price and sold at a low price. Obviously that was a serious mistake. If you do not currently have a high mix of equities, then you also missed an opportunity to buy at a low price and sell later on at a good price. I would also suggest that you be cautious about bonds. If you currently bought bonds at low interest rates, then when/if rates increase you will be at risk for considerable losses.
good reply. I haven't really done any market timing. I manage my portfolio as if it is a Target date mutual fund which gradually gets more conservative. When the market went down though, I did not sell or buy, I just rode it out.
Good point about bonds. Any thoughts about bond mutual funds? I have some Money in Vanguard Total Bond Market in my 401k but am thinking of shifting that money into a stable value fund which earns about 3.5% per year. I still have about 55% stocks in the 401k
good reply. I haven't really done any market timing. I manage my portfolio as if it is a Target date mutual fund which gradually gets more conservative. When the market went down though, I did not sell or buy, I just rode it out.
Good point about bonds. Any thoughts about bond mutual funds? I have some Money in Vanguard Total Bond Market in my 401k but am thinking of shifting that money into a stable value fund which earns about 3.5% per year. I still have about 55% stocks in the 401k
Do some research about bonds moving forward as inflation begins to kick in and yields increase. Bonds could prove to be shakey moving forward. Lots has been written and discussed about. Check and see what your total bond fund is holding with regards to maturity date and yield.
good reply. I haven't really done any market timing. I manage my portfolio as if it is a Target date mutual fund which gradually gets more conservative. When the market went down though, I did not sell or buy, I just rode it out.
Good point about bonds. Any thoughts about bond mutual funds? I have some Money in Vanguard Total Bond Market in my 401k but am thinking of shifting that money into a stable value fund which earns about 3.5% per year. I still have about 55% stocks in the 401k
i still like intermediate term bonds ..with very little real inflation pressures intermediate term bonds and bond funds still are not bad deals ...
we have more real deflationary pressures right now.
as things get better credit ratings can rise offsetting any rate increases. also dont forget where short term rates have no where to go but up a rise in short term rates can be good for longer term rates if investors see the rising short term rates as a plus for holding down inflation.
i have about 40% of my portfolio in fidelity bond funds . about 10% of it in fidelity short term bond, and 30% in fidelity investment grade bond and vanguard intermediate investmnt grade and until i see inflationary pressures ill hang out longer in them. the interest is far better then the other choices and worth a slight risk
whats interesting is intermediate term rates on treasuries soared over the last year rising 70% knocking the price of treasuries way down. on the other hand the corporate credit upgrades have corporate bond funds rising negating any rate rises by an amazing amount
Last edited by mathjak107; 04-24-2010 at 03:39 AM..
I just tried the T. Rowe Price retirement income calcualtor (google it and you'll find it). It allows you to adjust the assumptions easily.
I use Financial Engines. Its free to Vanguard investors
The CNN retirement calculator seems pretty good as well. You can view a detailed cash flow projection.
I would be interested in any discussion on asset allocation as one approaches retirement. Currently I am 55 and have about 37% in stocks, but part of my money is earmarked for college fund expenses. I was spooked by the 2008 downturn and want to have a pretty conservative asset allocation as I enter retirement in about 5 to 10 yrs. By pretty conservative, I mean having say, 30 to 35 percent in stock at age 65
* Inflation
* The massive tidal wave of money the US needs to raise in the coming years, which will increase the supply of Treasuries (driving prices down and rates up).
“Bonds have seen their best days,” Gross said in a Bloomberg Radio interview today from Pimco’s headquarters in Newport Beach, California. “We are focused more in spread space than in yield space. Durations should be shorter than index and you should be taking a little more risk in terms of spreads.”
Yields on two-year U.S. Treasury notes are likely to rise to 1.25 percent to 1.5 percent from 1.08 percent in the next year as the economy strengthens and the Federal Reserve begins to increase interest rates, Gross said.
The above is all from the links and provides thoughts from a highly regarded bond fund manager.
absoluetly dump treasuries , i wouldnt buy them at this stage. they have been dropping like rocks since last year. treasuries are up 70% in rates since 12/31/08
corporates are still rising though even in spite of rising treasury rates....
opposite of 2009.. treasuries soared as rates dropped and corporates took a beating and fell like stocks. now treasuries are getting beaten up and corporates have been following stocks lead upwards
lets not forget bill gross also made some very wrong predictions in the past also... 2008 being one of the years when he predicted long term treasuries would fall big time and they actually soared upward almost 30%....
if spending deficits caused inflation and higher rates we would all be shopping with trucks full of money.
the greatest financial minds in the world wrote volumes after world war ii about the coming hyper inflation as we were now a debtor nation.
well folks here we are 60 years later and we would kill for the old 5-1/4% passbook savings account.
as long as old debt gets financed with new bonds what we owe is smoke and mirrors and will go on for ever as long as we can sell bonds.
one thing about financial predicting , if you predict long and ofton enough eventually you will be right. even a broken watch is right 2x a day
Last edited by mathjak107; 04-24-2010 at 06:15 AM..
The inflows through yesterday are running almost five times higher than deposits during the first three months of 2009, according to Brad Durham, co-founder of Emerging Portfolio Fund Research Inc., a Boston-based firm that tracks investor flows worldwide into mutual funds and exchange-traded funds. Investors reeling from losses during the financial crisis poured record amounts into fixed-income funds last year, missing the biggest stock market rally since the 1930s.
“The continued inflows make you scratch your head,” Miriam Sjoblom, a bond fund analyst at Chicago-based research firm Morningstar Inc. said in an interview. “We’ve seen time and again investors make these kinds of tactical decisions at the wrong time.”
the above is from the link
http://www.businessweek.com/news/201...best-days.html
Investors should avoid the debt of the U.K. and invest in shorter-maturity U.S. and Brazilian securities and longer- maturity German and “core” Europe bonds, Gross, 65, recommended in a commentary yesterday. Under what Pimco calls the “new normal,” Investors should expect lower-than-average historical returns with heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.
like we discussed earlier even if rates rise the duration of most intermediate term bond funds is between 3 and 4 years... rising rates really wont hurt them drastically and the fact is unlike a individual bond you actually benefit from the new bonds the fund buys by getting these higher rates.
as long as you stay put long enough you will gain back in higher interest what the share price falls.
thats alot different then going out and buying a 10 year treasury and actually having a 10 year time frame.
with the weakness in the euro predicted to last a decade by some im not so sure european bonds may be a good thing.
actually up until late 2007 bill gross failed to beat 90% of his competitors , never beat the lehman index long term i believe and hit it lucky late 2007 with treauries which made his long term record look great. but it really had not been.
he even predicted stocks were way to high last year. he may even be right one day but if you bet the ranch on bill grosses words you missed the greatest modern day runup in history.
i still think bill gross is very very smart but his predictions are no more right then wrong.. he still has the same crystal ball we all do.
like we discussed earlier even if rates rise the duration of most intermediate term bond funds is between 3 and 4 years... rising rates really wont hurt them drastically and the fact is unlike a individual bond you actually benefit from the new bonds the fund buys by getting these higher rates.
as long as you stay put long enough you will gain back in higher interest what the share price falls.
thats alot different then going out and buying a 10 year treasury and actually having a 10 year time frame.
with the weakness in the euro predicted to last a decade by some im not so sure european bonds may be a good thing.
actually up until late 2007 bill gross failed to beat 90% of his competitors , never beat the lehman index long term i believe and hit it lucky late 2007 with treauries which made his long term record look great. but it really had not been.
he even predicted stocks were way to high last year. he may even be right one day but if you bet the ranch on bill grosses words you missed the greatest modern day runup in history.
i still think bill gross is very very smart but his predictions are no more right then wrong.. he still has the same crystal ball we all do.
I don't think you and Bill Gross disagree that much. He is talking becoming more diversified across his fund and you are already diversified across your portfolio. I think the issue he and others are concerned about are people putting 90% or more of their investments in bonds as a flight to safety and thinking they will get the same returns moving forward that were realized previously. I don't think you would put baskets 2 and 3 all in bonds.
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