Retiring for the Second Time - Financial Concerns in this Economy.

[Lsbcal]

I happened to look at my bond data for one long rate rise period and it occurred to me that the result is relevant here. Note that the trend was up but there was plenty of sharp ups and downs along the way.

My data from 5 year treasury constant maturity shows the following real rates:

1954 to 1961: 1.1%
1961 to 1971: 0.9%

Not too bad for this component of the portfolio in isolation. During this time the rates moved from 1.9% up to 5.3%. So 16 years of up trending rates with decent though not great real rates.

The current 5 year treasury rate is 0.7%. So it's worse then in 1954.

 

[Wasting]

I think we need to get past deflation before worrying too much about inflation ...

 

[MichaelB]

I think we need to get past deflation before worrying too much about inflation ...

Hi wastin talent, welcome to the forum. Why not stop by and introduce yourself here Hi, I am... - Early Retirement & Financial Independence Community

As to deflation, you have a point. But a good early retirement plan will work if there is deflation and also if there is inflation. Or both, which is what I would bet on.

 

[samclem]

Thanks I figured it out. Still seem to come up with 0 failures but show a low that is scary.

I think we all have trouble imagining just how scary it would be to be riding on that line in real time and not be able to see where it goes. "This method always worked in the past" will be very little comfort.

 

[samclem]

Here's a post I made in another thread recently. It provides a link to an article Brewer mentioned about a roll-your-own Equity Indexed Annuity. ShWaRi: This would allow you to participate in the potential appreciation offered by stocks without risk of losing any principal.

It comes at a cost (in complexity, forfeited stock appreciation opportunities and falling behind to inflation) but for an investor who just can't stomach any volatility it might be better than some other options.

 

[Wasting]

Hi wastin talent, welcome to the forum. Why not stop by and introduce yourself

Thanks, I will. I just need to think about it a little bit as I'm a fairly private person. If I omit all the relevant stuff, well, its quite boring

 

[Wasting]

The problem with SPIAs in my opinion is the risk of insolvency of the insurance company. The state guarantee funds are generally inadequate to rely on to save you in that event.

Absolutely, plus they are very inflexible (if you don't like them later, too bad). The income they produce is taxable as ordinary income which is the worst kind IMO.

 

[clifp]

ShokWave

I finished reading a short ebook by a William Bernstein, a well known financial writer. The thread on the book is here.
In the book he talks about having a safe income stream. Berstein says that you really shouldn't count on safe money doing anything more than keeping up with inflation. This simplifies retirement planning. You take your current assets and divide by your best case life expectancy (I'd think early 90s for you and your wife). If you got enough to live on then you are fine with a zero risk portfolio.
http://www.early-retirement.org/forums/f28/bernsteins-new-ebook-62041.

 

[ShokWaveRider]

ShokWave
This simplifies retirement planning. You take your current assets and divide by your best case life expectancy (I'd think early 90s for you and your wife). If you got enough to live on then you are fine with a zero risk portfolio.

This is exactly my thinking at THIS juncture. Again for those who think I am not listening, or my Zero Risk Blinkers are in the way. I perfectly understand inflation risks, especially if they get a lot worse. I am just choosing at this point to put them on a back burner as we have a lot larger fish to fry..... HEALTHCARE. This is the main consideration at the moment. Remember the bankruptcy thing again. Once this dilemma is cracked, I can move to other longer term obstacles like inflation etc. The problem I am dealing with is that this one may require a move to Canada as the only cost effective solution excluding any miracles.

Back to Gaucho Marx, if you have enough of the treasuries, they will last.

At the current desired burn rate, our assets will last about 30 years assuming ZERO return and no SS payments (Being VERY conservative here for assessment purposes). This is just a few years off of our desired ideal. This is based on just a simple subtraction and withdrawal from the mattress every month, and not including our home and other assets. While we know that is impractical for the long haul, it does make good for some basic reassurances. Once releaved of the other burdens of a second retirement decision, we can then investigate other avenues of return. Perhaps even in the somewhat less volatile Canadian Stock Market.

SWR

 

[Huston55]

At the current desired burn rate, our assets will last about 30 years assuming ZERO return and no SS payments (Being VERY conservative here for assessment purposes). This is just a few years off of our desired ideal. This is based on just a simple subtraction and withdrawal from the mattress every month, and not including our home and other assets. While we know that is impractical for the long haul, it does make good for some basic reassurances. Once releaved of the other burdens of a second retirement decision, we can then investigate other avenues of return. Perhaps even in the somewhat less volatile Canadian Stock Market.

According to Bernstein (and many others), I think you're there; you've won the game.

Find health care and stop 'playing.'

 

[rescueme]

I would love to die penniless.

I would rather die with money than live without it ...

IOW, don't live "too close to the bone", just to be able to retire earlier than you probably should, from a financial standpoint. Just my POV.

 

[Michael108]

I have been reading about SPIAs today. I feel that it is not the best time to get them right now though. However, even now $500k brings about $2500 pm for me and DW for life as long as I do not go to Berkshire Hathaway who seems to want $300 pm for the privilege. So $5k pm for $1m. More than enough for us. Plus we have (what I consider to be) lot more cash in qualified accounts to spare for a rainy day along with DW's income...... When I am 62 I can get about $1500 PM based on the last estimate from SS. Even if we go back to Canada to solve the Healthcare problem and have to pay 50% more for a home it could be doable.

Now, how does one research the viability on SPIA insurance companies? SPIA premiums are NOT insured and what is to stop even mega companies like Allianz and American Equity filing bankruptcy?

Any Canadians out there? Does Canada have SPIAs or what is the equivalent name over there? I trust Canadian financial institutions a little more than US ones at the moment given all the Fraud that is taking place lately. But when UK banks like Barclays are under investigation seems like the only safe place is the Bank of Mattress!

SWR

Yes, in Canada we just call them life annuities.
There is a widely used service that will provide a list of the top 15 quotes from various companies that many/ most insurance offered use.
The top list can change daily, so get a level first to decide your options (I.e. guarantee periods) and then another just before you are ready to apply.
Cheers.

 

[Katsmeow]

.

At the current desired burn rate, our assets will last about 30 years assuming ZERO return and no SS payments (Being VERY conservative here for assessment purposes). This is just a few years off of our desired ideal. This is based on just a simple subtraction and withdrawal from the mattress every month, and not including our home and other assets.

As long as you are showing your withdrawals increasing due to inflation then this works and your nest egg increasing the same amount each year then that is fine. That is, if you need $50,000 a year now and you were planning for 30 years and had $1,500,000 invested to match the inflation rate then you are OK. But if you had $1,500,000 in the mattress thereby not matching the inflation rate and need $50,000 a year for 30 years you aren't OK unless you are planning on that $50,000 buying a lot less in 20 or 30 years and you reducing your standard of living substantially because it will get eaten away by even low inflation.

Now if you are putting $1,500,000 in the mattress and you figure withdrawals for 30 years starting with $50,000 the first year and you adjust by some inflation percentage each year for 30 years and you still have enough to last 30 years then that is different.

 

[clifp]

Now if you are putting $1,500,000 in the mattress and you figure withdrawals for 30 years starting with $50,000 the first year and you adjust by some inflation percentage each year for 30 years and you still have enough to last 30 years then that is different.

30 years is fine planning period for a 65 year old couple. If my math is correct his wife is 54 or 55. So a 30 year period is not long enough for a portfolio where the principal will be reduced. The more I think about the OP is actual a perfect candidate for buying either an SPIA or a deferred annuity (aka longevity insurance)

 

[Meadbh]

ShokWave, I suggest you read Moshe Milevsky's "Pensionize your Nestegg". All you ever wanted to know about annuities, and Canadian content to boot.

 

[Michael108]

ShokWave, I suggest you read Moshe Milevsky's "Pensionize your Nestegg". All you ever wanted to know about annuities, and Canadian content to boot.

Yes, a great book by a great author on inflation, longevity and sequence of return risk.