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Interesting Life Cycle Paper
Old 07-27-2007, 09:05 AM   #1
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Interesting Life Cycle Paper

I thought this paper would be an interesting read for those just starting out saving and those closer to retirement. It's fairly readable, and has lots of pictures for those who aren't very math inclined. It's a little long [130 pages], but what else do you retired folks have to do all day anyway?

Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance By Roger G. Ibbotson, Moshe A. Milevsky, Peng Chen, and Kevin X. Zhu

Interesting stuff.

- Alec
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Old 07-27-2007, 09:40 AM   #2
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Appears to be very annuity oriented. I'm kind of tired of reading justification articles for annuities. 100+ pages of it is a bit much. It may be someone else's cup of tea, however.
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Old 07-27-2007, 01:37 PM   #3
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Appears to be very annuity oriented. I'm kind of tired of reading justification articles for annuities. 100+ pages of it is a bit much. It may be someone else's cup of tea, however.
Hey, thanks for the heads up! I downloaded it earlier and was going to peruse it at a later date when I had the time. After your post, I glanced over the table of contents...yep, too much annuity/ins. sh*t for my taste!

It just hit the virtual round file!!!

Thanks!!!

goon
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Old 07-27-2007, 01:42 PM   #4
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Hey, thanks for the heads up! I downloaded it earlier and was going to peruse it at a later date when I had the time. After your post, I glanced over the table of contents...yep, too much annuity/ins. sh*t for my taste!

It just hit the virtual round file!!!

Thanks!!!

goon
Some of you guys are a case study for ill informed snap judgments. Oh yes, and for the "no new information please" bias.

Ha
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Old 07-27-2007, 01:55 PM   #5
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Actually, I did look at it. Decided after informed study, that it was not my cup of tea. Maybe I wasn't clear. Or maybe you made an ill informed snap judgement about my post.
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Old 07-27-2007, 02:27 PM   #6
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Actually, I did look at it. Decided after informed study, that it was not my cup of tea. Maybe I wasn't clear. Or maybe you made an ill informed snap judgement about my post.
Feeling defensive? Unless your name is "some of you guys", I don't see where I addressed you at all. Someone did explicitly state that he looked at the table of contents and chucked the paper.

So maybe you do act on scant information after all?

Ha
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Old 07-27-2007, 02:36 PM   #7
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Some of you guys are a case study for ill informed snap judgments. Oh yes, and for the "no new information please" bias.
...

Feeling defensive? Unless your name is "some of you guys", I don't see where I addressed you at all. Someone did explicitly state that he looked at the table of contents and chucked the paper.

So maybe you do act on scant information after all?

Ha
And you are a case study for making uninformed, incorrect, judgemental, insulting comments about other people.

They say that tolerance, wisdom, and patience come with age. Apparently for you, age comes alone.
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Old 07-27-2007, 02:39 PM   #8
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And you are a case study for making uninformed, incorrect, judgemental, insulting comments about other people.

They say that tolerance, wisdom, and patience come with age. Apparently for you, age comes alone.
Well, could be. At least that clearly does not apply to you.
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Old 07-27-2007, 02:45 PM   #9
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Let me interrupt the bickering for a moment to point out that Milevsky is the "human capital" guy who advocates aggressive investing for the earning years:

"The present monograph finishes the story and makes scientific financial planning, which goes beyond conventional asset allocation, possible for individuals by adding in human capital and human capital–contingent assets (life insurance and annuities). With all these arrows in the quiver, an investment adviser can guarantee a target standard of living, rather than merely minimize the likelihood of falling below the target, which is all that can be accomplished with conventional asset allocation."

Milevsky's work may someday be ranked alongside the guys who advocated index investing and asset allocation. Milevsky's earlier papers have persuaded Roy Weitz of FundAlarm not to own any bond funds in his retirement portfolio. (FundAlarm - Highlights & Commentary Archive) If Milevsky's good enough for a guy like Weitz then it's good enough for me. I doubt Milevsky has suddenly taken stupid pills and turned into an annuity shill.

OK, sorry to stop the sparring. Opponents take your places... kyun-yet... fighting stance... kae-sok!
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Old 07-27-2007, 02:49 PM   #10
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Let me interrupt the bickering for a moment to point out that Milevsky is the "human capital" guy who advocates aggressive investing for the earning years:

OK, sorry to stop the sparring. Opponents take your places... kyun-yet... fighting stance... kae-sok!
LOL! Hey, Ibbotson is no slouch either!

Ha
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Old 07-27-2007, 02:58 PM   #11
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ok...I bow to Milevsky. Just be warned there are 407 uses of "annuity" in that paper. Milevsky may advocate aggressive investing for the earning years, but that paper advocates annuities for the retirement years.
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Old 07-27-2007, 03:02 PM   #12
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ok...I bow to Milevsky. Just be warned there are 407 uses of "annuity" in that paper. Milevsky may advocate aggressive investing for the earning years, but that paper advocates annuities for the retirement years.
Considering the state of financial literacy among 78 million Baby Boomers, I'm not sure that they can in good conscience recommend anything else.

Except working that human capital until they drop in their cubicles...
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Old 07-27-2007, 03:27 PM   #13
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What is it with people on this site. I thought retired people were supposed to be mellow. All I hear is a bunch of bitching, carping old fartz. Lighten up. It would be nice to have civilized conversations on subjects relating to retirement. I guess some people just need to argue and put other people down. Sad.
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Old 07-27-2007, 03:30 PM   #14
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OK, I went to the virtual round file and picked out the PDF. Granted, I still didn't read it word-for-word, but I did read through the chapters pertaining to what they refer to as the 3rd and final stage of life: Retirement. (and since stage 1 = adolescence, and stage 2 = the w*rking part of one's life, no longer apply to me, I skipped them).

In Chapter 6, "When To Annuitize", it states,
Quote:
"In Chapters 4 and 5, we made the point that payout annuities, either variable or fixed, have a rightful place in an individual investor's optimal retirement portfolio. We argued that,...., the investor should have a substantial portion of total wealth allocated to annuities that provide some form of guaranteed income for life."
I personally don't care much for annuities, and I certainly don't think that a "substantial portion of total wealth" should be held in annuities. A lot of the rest of the discourse continues on with annuities and life insurance. And though I said that I don't care much for annuities, I should clarify that a bit. I do have a DB pension (cola'd) that is, for all practical purposes, an annuity. That one, I really like! However, that said, I prefer not having other annuities....fixed or variable. They don't fit in my portfolio.

As for life insurance, I do have a term life policy which I purchased a couple of years ago "just in case". It's a rather small one that will cover all the expenses of my demise, and give my beneficiaries a few years worth of nice vacations.

In my original post, my intention wasn't that the document was totally worthless. Only that it was pretty much worthless to me.

As far as the "no new information please" statement, the primary reason I come to the ER forums is to glean new information that is pertinent and beneficial to me.

No offense taken, nor any intended. Just a little clarification.
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Old 07-27-2007, 03:31 PM   #15
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With all these arrows in the quiver, an investment adviser can guarantee a target standard of living, rather than merely minimize the likelihood of falling below the target, which is all that can be accomplished with conventional asset allocation.
Fair enough, but one needs to remain educated on the costs of that guarantee. Its not free. The Crimson Permanent Assurance gets its cut.

And theres no upside to it.

Which if thats what makes someone sleep at night, its a good thing.

As far as asset allocation, annuities are definitely a slice to be evaluated. They just dont make it into the top 5-6 slots on my list and these days i'm only filling the first 3 slots.

So for some people, simply knowing what it is may be satisfactory for dismissal without too much presumed brain shrinkage having occurred.
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Old 07-27-2007, 03:35 PM   #16
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What is it with people on this site. I thought retired people were supposed to be mellow. All I hear is a bunch of bitching, carping old fartz. Lighten up. It would be nice to have civilized conversations on subjects relating to retirement. I guess some people just need to argue and put other people down. Sad.
Didn't ya ever see "Grumpy/Grumpier Old Men"?
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Old 07-27-2007, 03:39 PM   #17
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I've been tempted to buy an annuity for retirement to sort of give myself a 'pension'. However, I have some additional upside in that, if I bought an annuity, the entire commission would be paid into my annuity as additional premium.

That's the overly conservative side of me that wants to make sure there's always something there... even if the potential upside of not being in that investment is far greater. I think I can sucessfully keep that side silent for a while.
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Old 07-27-2007, 03:41 PM   #18
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No offense taken, nor any intended. Just a little clarification.
Very gracious response Goonie. I apologize if you were offended by my post.

I am on a personal crusade within myself to widen my openness to new information. Someone posted a paper by Mauboussin a few days ago that reviews congnitive errors that investors can make. I've made plenty but I would like to make fewer. A common error- and for me too- is to let one's original idea keep out competing or especioally conflicting new ideas. Hence one becomes more and more wedded to a position. Often this is good, becaue the original idea was correct. But not always.

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Old 07-27-2007, 03:42 PM   #19
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Didn't ya ever see "Grumpy/Grumpier Old Men"?
Hey! Quit stealing my lines.

You owe me two dollars!
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Old 07-27-2007, 03:48 PM   #20
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Hey! Quit stealing my lines.

You owe me two dollars!
The check's in the mail!
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