Caution, long post.
It's not exciting reading [insert your favorite actuary joke here], but today I came across several written-for-the-layman retirement papers that I thought were very good.
They get a B+ or A for sure. And at least one, on risks, may be good enough for an ER reading list.
Negatives: The more sophisticated investors on the board will probably find little new. Also, there is no specific information on early retirement.
But I've bookmarked the SOA.org site, if for no other reason than the checklist-style information will be useful for periodic check-ups of my plan.
It all started with this article on MoneyWatch -
Seven steps to a sound retirement Robert Powell - MarketWatch
- which summarizes this 63-page paper:
Segmenting the Middle Market: Retirement Risks and Solutions Phase II Report
Retirement financial planning requires a methodical approach that identifies and quantifies each important component that affects the asset accumulation, income management and product selection/investment decision processes. This has been structured as a seven-step approach, which is discussed below.
The specific steps discussed are:
I. Quantify Assets and Net Worth
II. Quantify Risk Coverage
III. Compare Expenditure Needs Against Anticipated Income
IV. Compare Amount Needed for Retirement Against Total Assets
V. Categorize Assets
VI. Relate Investments to Investing Capabilities and Portfolio Size
VII. Keep the Plan Current
Sample from the text:
When we think of assets and income, we need to remember that assets can be converted to a monthly income and that retirement savings are important as a generator of monthly income or spending power.
Likewise, income streams like pensions have a value comparable to an asset. One of the difficulties in retirement planning is that many people are not able to readily think about assets and income with equivalent values and how to make a translation between the two. Assets often seem like a lot of money, particularly when people forget that they will be using them to meet regular expenses.
Some more searching led to a paper on housing in retirement.
Although, it is missing Nords' "keep refinancing your mortgage until your payments go to zero" strategy
, I recognized all of these from posts I have seen on the board:
Options for use of housing value to help support retirement include:
• Paying off the mortgage, if possible, to reduce overall expenses
• Selling and downsizing to a smaller home, freeing up funds for investment or annuity purchase
• Selling the home, investing the proceeds and then renting
• Securing a home equity loan or secondary mortgage on the house
• Obtaining a reverse mortgage
• Renting out extra rooms
• Renting out primary residence and live elsewhere at a lower cost
• Keeping the house mortgage free, and letting its value serve as an emergency fund if needed
The best, however, was a brochure-style publication based on this list of retirement risks:
...the SOA published an informational chart in 2003 that explained the risks of retirement and served as an educational tool to help individuals prepare for them. In everyday language, the chart provided a comprehensive summary of the risks and complemented
other retirement planning material...
With the passage of time, the creators of the original chart recognized there would be value to updating it with insights into recently introduced products, legislative changes and new issues confronting retirees. As a result, the SOA is pleased to make available this new version ...
Interest Rate Risk
Stock Market Risk
Public Policy Risks
Unexpected Health Care Needs & Costs
Lack of Available Facilities or Caregivers
Loss of Ability to Live Independently
Change in Housing Needs
Death of a Spouse
Other Change in Marital Status
Unforeseen Needs of Family Members
Bad Advice, Fraud or Theft