Hi Sharon! That's an interesting concept that Michael Kitces and Wade Pfau have recently published. What makes it especially interesting is that it goes against the grain of what we have always been led to believe. The numbers appear to work but like most things in financial planning, it depends on your personal circumstances and what you are trying to achieve. I spend a lot of time with my clients convincing them that the object of the game is to meet your own personal goals. We'll need to keep watching this as time goes on.
Sharon, also, I'm familiar with that study and my initial thought on it is there are things that work well in a lab, but perhaps are not practical when placed in the real world. I do not see most of my clients being comfortable with increasing risk. I also think there are many more variables that go into managing a portfolio that we can not model (emotional variables not the least)!
Hi Todor, I guess I'll do a shark tank here and say, I don't have clients investing in the majority of items you've listed and I'm not sure there's a "safest" investment offering aggressive returns . . . For those reasons on this one, I'm out.
Hi Todor, it appears you are, smartly, trying to evaluate different advisers and a variety of different investment strategies. Such exercises are beyond the scope of this live chat. If you'd like to share your email address with us, we may be able to have individual advisers respond to you privately after the chat.
Todor - I would suggest to you that if you can invest $50-$100K per year, you have strong capacity to meet your retirement income goals without focusing on such specific investments. Consider broadening your perspective.
Hi Todor, 'safe' investments are not as safe as you may want to believe. If we have inflation, most of those items you mention will lose. I'm completely against Equity Indexed Annuities as they are just formulas that are constantly changing. Most I work with have buyers remorse. I think you may benefit from sitting down with someone that has a contrary opinion on these, plus the risks you will face over the next 40-50 years, and who perhaps can give you some thoughts on the economic situation we will be in... whether or not "safe" is truly "safe."
Private REITs have had many issues in the past as well.
Hi Jay, sometimes! We develop a 'visual retirement paycheck' for clients which shows the source, amount, and timing of various income streams for their household (including Social Security). When we do that, sometimes it's obvious it makes sense to tap Social Security. Most of the time we'd like to have clients earning $$ at something they love as long as they can, then use cash and taxable assets, then Social Security, and then IRAs . . . but it is client specific.
Jay, often when we run SS scenarios for clients we find that if you live to 90 (or think you will), delaying SS may be the most optimal approach. However, keep in mind that if you have a spouse, deciding when to take SS also impacts the survivor benefit. So it's a two-pronged question. 1) What benefits me? 2) What will best benefit my spouse.
Hi Jay! Sometimes. It depends on your personal circumstances. When I have clients retiring at an early age with big IRA's, I encourage them to spend the IRA while they are they are in a lower tax bracket. This minimizes the required distribution and the taxes that goes with it. Like most things here, it depends on your individual circumstances. I'm biased but I don't think retirement planning should be a "do it yourself" project and I'm going to suggest that you spend some time with a fee only planner and work through the numbers.
Jay, the Kiplinger article makes that point (client specific) clear because they're illustrating the point on a certain size portfolio and tying it to taxes (which are important!) and I encourage you to have your particular situation evaluated understanding that over the course of a 30 year retirement, taxes are a real moving target.
DickP - you should be eligible for COBRA which can extend your current benefits for 18 months, although usually at the normal premium which can seem high. After that you will probably need to purchase an individual or family policy depending on your needs. It's important to keep or obtain the Certificate of Continuing Coverage (or something like that) which indicates you have had no gaps in your coverage. You would get that from your employer health insurance company. Good luck.
DickP - sorry about the loss of your job. Do you have the option of keeping current health insurance for any period of time? If you are going into the general market you could do a couple of things - if your state has the healthcare marketplace you can start there, talk to a private seller of health insurance or go to one of the websites like ehealthinsurance.com As for Dental, if you know you have a lot of crowns, etc coming up, dental coverage often covers half that cost so that might be determined by your family's needs.
Hi Dick, on Dental, I have had clients who have had issues that benefited from and love their insurance. If you are just using it for cleanings, it may not be the cheapest route, though my believe is as insurance against high costs, it can save you in an emergency.
Joanne, You bet! Go to www.NAPFA.org and look for an advisor in your area. You should be able to see their profiles and how they charge. Most offer a free initial meeting.
Joanne, I think you've already done some research there in finding NAPFA! Start with that... there are other organizations of fee-only advisors as well like Garrett Planning Network you may start your search with.
Joanne -- We're happy to help! Check out www.napfa.org to search for a fee-only adviser in your area.
Hi Peter, It may be tight to retire if the $75,000 is post tax and if you have any extreme longevity in your family or significant health care costs since you'll want to bridge any gap in insurance between 62 and 65. On the Social Security issue, I suggest a specific report for your household after certain facts are gathered - see your fee-only planner for this.
Peter- With the assets you have, expenses of $75,000
Peter- With your planned spending number you seem to be right in line with the expense figure in mind. You also seem to have a good amount in cash so you would most likely need to not pull from the portfolio in a down market. We consider holding off on social security until FRA (full retirement age) especially not knowing your wife's earnings history.
Hi Peter - It sounds like you and your wife have been diligent in preparing for retirement depending on your income needs. Since most of your questions revolve around Social Security, I'll comment there. Most people underestimate their own life expectancy. In fact a recent insurance industry study found that they underestimate by 8%. Taking SS too early can end up being a compounded mistake if you live past 80 or so. You could be a good candidate for the so-called switching strategies--file and suspend, delay till 70,
spousal benefits, etc. On the surface, it would appear that you are well prepared for retirement. Watch out for long term health expenses, as they can be quite high!
Peter, it does sound like your assets may grow to a level that would be sufficient. I agree with indexing, you may benefit at your portfolio level from diversifying those indexes and your income a little more. You may also benefit from Social Security strategies as others mention rather than tapping it early, and having a tax plan for withdrawals.
Hi Christopher, the equation (unfortunately) never changes: 1) reduce expenses (you may already be doing that), 2) earn more, 3) some combination of the two. Small sums really do add up - can you manage small sums on a consistent basis?
Christopher - if you can manage small sums consistently, you could save those in an online Ally bank account for example and then move those to investments when they get bigger.
Christopher- Do you have an employer sponsored retirement plan? If so, you should look into first deferring enough to receive the full match if any is available. Next, you could look at creating a budget listing all discretionary and non discretionary expense to see what you could reduce and start paying yourself first.
Christopher, many people have found themselves in a similar predicament at some point in their lives. However, over time income usually rises and then you can put the extra money to work for you. The first place to plan is through your employer's retirement plan, if they have one. If not, you can save in an Individual Retirement Account (IRA).
Christopher, if you have a 401(k), save on a pre-tax level at least to your company match. If there is no match, just try jumping in at 5% and set a note to increase this by 1% annually or every six months. If no 401(k), set-up an IRA or Roth IRA and just start sending something to it automatically, again, increasing the contribution. This may seem painful for a few months or a year, but as your income increases, it will fit right in and you'll be used to saving. The key is to just start and make it automatic.
Christopher, the first thing I would do with extra money is build up an emergency fund equal to about six months of living expenses. After that, attack your debt like it was your worst enemy (it is) and get rid of it. Assuming you are investing enough for retirement, you can start building up a nest egg with a low cost no load mutual fund. Vanguard and Fidelity have them as do others. I like the Vanguard Star Fund and the Fidelity Puritan Fund. It's easy to get started. Just call them.
Wsledge, could certainly suggest one but as you have likely noticed from this chat and the large amount of articles on this topic, there are many, many ways to do this and they are different for each family based on their own circumstances. I don't think I can provide any real value to you in an answer unless we ran a report with your specifics applied. Please consider seeing your planner to do this.
Wsledge, others may be more comfortable with giving off the cuff advice on this topic, I find the nuances to be too complex, especially when considered in the context of income needs, than to sit down and run a report as Bonnie suggests.
wsledge - Did you know you can sit down with Social Security staffers and have them run the income you would receive under different scenarios? I've done that with clients and then determined the best route for them.
wsledge, you or your wife could claim and suspend (only one - not both) at full retirement age and the other claim spousal benefits while you both delay claiming your own benefit at age 70. I think I read where there are 3500 different claiming strategies for married couples. Many of us have specific software to make these calculations for us. Like Robert and Bonnie suggest,get professional help. The decision is too big to leave to chance. It looks like Walt has had good luck with SS staffers. Some of us have not been so fortunate.