July J Fin Planning 2 articles on retirement/psychology/behavioral finance

[LOL!]

I found two articles in the July 2010 issue of the Journal of Financial Planning worth reading to folks contemplating retirement or already retired:

The Psychology of Retirement Planning I'm a sucker for behavioral finance articles, so when one comes along I always read it. Even better is when I learn some catchy new terms such as "equimortis" and "finertia". And the "layering" that happens with poker chips, credit cards, debit cards and even your kids' camp account is a nice way to hide from you how much money you are really spending.

What I’ve Come to Believe About Retirement Planning is a nice re-hash of what many of us have already experienced.

But it brings to my mind the H. L. Mencken quote, “For every complex problem there is an answer that is clear, simple, and wrong.”

Enjoy.

 

[mickeyd]

Thanks LOL. I too am a sucker for any new article on BF.

 

[Onward]

This interesting, and haunting, point jumped out at me in the second article:

Human beings have little capacity to predict their spending patterns five years from now, let alone 40 years from now.

 

[LOL!]

^ Exactly. As implied in the article, who in 1975 budgeted for their internet connection in 2010? Or their Lipitor?

 

[donheff]

I read the second article and enjoyed it but lets face it, this is an FP sewing FUD. All those complex buckets, all those unpredictable expenses - only a highly trained FP could help us through that terrifying maze. He doesn't actually say that. In fact he implies that even an FP can't figure it out. But the point still is that this is too difficult for us to handle.

Internet accounts, cell phone bills. If that is the level of uncertainty we face we are in great shape. Those sorts of items don't make a material difference in my planning.

 

[LOL!]

What would make a material difference in one's planning?

Suppose they figured out an ethical way to make your telomeres longer and keep you alive, healthy, and active until age 150 ... but it cost you an extra $100K a year for the drugs? Would only the rich get this longevity treatment?

 

[donheff]

What would make a material difference in one's planning?

Suppose they figured out an ethical way to make your telomeres longer and keep you alive, healthy, and active until age 150 ... but it cost you an extra $100K a year for the drugs? Would only the rich get this longevity treatment?

This is what Ray Kurzweill and the "singularity is near" people are predicting. If it really happened everybody would be selling the house to get the treatment. But I don't buy it. We have barely gotten Windows to work over 20 years. Fixing our biological machines will be more incremental than that. Hopefully we will make some inroads on things like diabetes and Alzheimer's but I think we can all expect to kick the bucket by 100 - at least us boomers. All bets are off for the kids.

 

[Pete]

I'm a sucker for behavioral finance articles, so when one comes along I always read it.

I read Salsbury's book Retirementology. I think you would like it if you haven't already read it. His description of the depth of the crash we've experienced and the number numbness stuff was shocking. Boy, a trillion dollars is a lot.