Join Early Retirement Today
Reply
 
Thread Tools Display Modes
A New Approach to Retirement - Zvi Bodie 2001
Old 02-29-2008, 06:58 PM   #1
Confused about dryer sheets
 
Join Date: Jan 2008
Posts: 3
A New Approach to Retirement - Zvi Bodie 2001

Hi there. I am new to this community. I have spent some time reading the excellent posts on this forum.

I wanted to drum up a discussion about a paper that Zvi Bodie wrote in 2001. It discusses a new approach to retirement savings. He recently had a debate with Jeremy Siegel, ZB taking the leverage/financial engineering approach and JS taking the more traditional equities approach.

Let me know what you think. Love the FIRECalc.

http://prc.wharton.upenn.edu/prc/PRC/WP/wp2001-8.pdf
ETFnerd is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-29-2008, 07:15 PM   #2
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
Interesting idea, it's pretty hard to estimate what the actual results would be but I do like it. I read a book in the early 80's (I think) by Harry Brown, he suggested an idea somewhat like Zvi's, he said to buy Swiss Francs, gold, and zero's I think, and then buy warrants on stocks to take advantage of the leverage. I hope to someday see reasonably priced investment products like this. Some of the upside with limited downside without the rip off fees.
RockOn is offline   Reply With Quote
Old 02-29-2008, 08:19 PM   #3
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,703
Good discussion on this idea here:

Bogleheads :: View topic - Zvi Bodie--Worry Free Investing
__________________
Emancipated from wage-slavery since 2002
twaddle is offline   Reply With Quote
Old 02-29-2008, 08:38 PM   #4
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 798
twaddle, Great link, I think if it could be done for a low enough ER in a tax deferred situation it does make sense, some disagree. What do you think?

Fixed income plus a kicker, Swedroe has a similar idea.
RockOn is offline   Reply With Quote
Old 02-29-2008, 11:44 PM   #5
Confused about dryer sheets
 
Join Date: Jan 2008
Posts: 3
There are a couple of things that bother me.

ZB assumes that you can live on your savings (creating a baseline income stream) with a risk free security earning a 0-2% real rate of return. That means that you essentially need to FIRE anyway. With money in excess of baseline he chooses the LEAPS and not futures (no premium) because the options have upside but curtail the downside to the premium.

What this presupposes is that most people can and will FIRE essentially with a low yield instrument as their savings vehicle. He is assuming that you will have a high paying career that will get you to FIRE. If you are in the 50th percentile in earnings, I don't know if you would get there. He seems a little out of touch with the everyday person.

So if you are either already rich or able to get there with a high powered career you're set. If you are average, you're SOL.

He suggests the TIPS should be in an annuity wrapper so the income part is tax sheltered (the gains are tax deferred until withdrawal) albeit at higher cost. The LEAPS are the lottery ticket, but with this you are in the same boat as the equity investors.

Here is a link to the Vanguard annuity product with the TIPS option. The cost is high at 72bp:
https://personal.vanguard.com/us/fun...FundIntExt=INT

And here is a cfa institute publication on Life cycle products a la Samuelson and Merton's research circa 1969:
CFA: Error

Btw, ZB is adamant in expressing that gold, oil and other commodities are bad hedges for stocks and inflation according to his research. TIPS by definition are perfect. Maybe except for the expense drag.
ETFnerd is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
New bucket approach modhatter FIRE and Money 5 06-08-2007 10:41 AM
Rebalancing the Portfolio - What is your approach chinaco FIRE and Money 9 05-15-2007 01:38 PM
A Phased-Income Approach to Retirement Withdrawals chinaco FIRE and Money 1 03-11-2007 06:44 PM
What's wrong with this approach? setab FIRE and Money 3 08-16-2006 09:53 AM
Rethinking my approach -- comments? brewer12345 FIRE and Money 32 10-27-2004 03:48 AM

» Quick Links

 
All times are GMT -6. The time now is 09:20 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.