Jonathan Clements

[Chuckanut]

I've liked Jonathan Clements advice ever since I first read his column in the WSJ years ago. I think his latest column on the Humble Dollar website is one of his best retirement overview columns. It's something I want to keep aside so I can use it to educate friends and family who ask me for advice. This happens just often enough to keep my fragile ego in good shape.

Here it is. It's not a one size fits all but a good starting point for how to think about funding retirement. My 2¢. YMMV.

https://humbledollar.com/2023/11/retirement-roulette/

A few quotes:

IT’S HARD TO OVERSTATE how challenging it is to generate retirement income: We need our money to last at least as long as we do, and yet we don’t know how financial markets will perform, what the inflation rate will be, whether we’ll get hit with hefty long-term-care costs and how long we’ll live.

More important, we should be skeptical of the notion that steadily growing lifetime income can be generated from volatile investments. And even if it’s doable, most retirees won’t do it. Instead, faced with a market crash and accelerating inflation, their instinct will be to spend less—and that’s a good instinct, I’d argue. My advice: Treat the 4% rule as a guideline and not a withdrawal strategy to be followed robotically.

Overseeing a portfolio of stocks and bonds, and calculating how much we can safely withdraw each year, might seem easy enough in our 60s. But will we be up to the task in our 80s?

 

[marko]

Quote:
Overseeing a portfolio of stocks and bonds, and calculating how much we can safely withdraw each year, might seem easy enough in our 60s. [B]But will we be up to the task in our 80s[/I[/B]].

All good points except I'd argue that in our 60s we have a 30 year problem while in our 80s its a 10 year problem....much easier to plan for and more room for error IMO, plus you've had 20 years of practice.

From personal experience, never underestimate the acuity of a 90 year old when it comes to money! (especially if he thinks he's getting screwed) It's breathtaking how quickly they can shift gears from doddering old coot to razor sharp.

 

[MarieIG]

A very sensible, balanced article in my opinion.

I did, however, have a nightmare last night, that I was back at work. (That may have been triggered by getting a package in the mail from the 401k provider which I skimmed to see if they were still overcharging. Yep.)

 

[LateToFIRE]

Quote:
Overseeing a portfolio of stocks and bonds, and calculating how much we can safely withdraw each year, might seem easy enough in our 60s. [B]But will we be up to the task in our 80s[/I[/B]].

All good points except I'd argue that in our 60s we have a 30 year problem while in our 80s its a 10 year problem....much easier to plan for and more room for error IMO, plus you've had 20 years of practice.

From personal experience, never underestimate the acuity of a 90 year old when it comes to money! (especially if he thinks he's getting screwed) It's breathtaking how quickly they can shift gears from doddering old coot to razor sharp.

+1

exactly what I was thinking as well

 

[Chuckanut]

FWIW, The link below will take you to Johnathan Clements retirement funding plans as of today. It’s interesting and may be worth a look if you are debating about how to fund life after work.

https://humbledollar.com/2023/12/happily-ever-after-2/

In late 2021, I split my portfolio in two. One part I’ll use to fund my retirement, while the other part I’ll leave to my two kids. This “bequest” portion consists of my three Roth accounts, which are roughly a quarter of my overall portfolio. Because I don’t foresee ever touching this money, I’ve invested the entire sum in stocks.

And yet, through all this, I’ve given scant thought to my Vanguard Total World holdings. At this point in my life, that’s exactly what I want. I have no clue which parts of the global stock market will shine in the years ahead, so I’m happy to own the whole shebang, confident that—while companies and even entire markets will fall by the wayside—the global economy will keep chugging along, and Vanguard Total World will go along for the ride.

 

[Badger]

" Quote:
Overseeing a portfolio of stocks and bonds, and calculating how much we can safely withdraw each year, might seem easy enough in our 60s. But will we be up to the task in our 80s?"

Years ago I put together a plan on how and when to withdraw from our various investments with the intent to prevent making bad decisions by either myself or wife in case we are having mental challenges. It is also the instructions for our advocate. The plan is in chronological order to withdraw.
The first item is a warning to NOT make any changes. Whether it will work or not it is the best I can do. Only time will tell.

Cheers!

 

[Chuckanut]

I’ve been a growth oriented, total-yield kind of guy since I first started investing in my 20’s. But, as I grow older my needs and concerns change, and I like to remain open to other ideas of how to invest. No, I am not talking about inventing my own crypto currency or buying shares in Scotch Whiskey barrels stored in caves located in the Highlands of Scotland.

But, I did find this article interesting since I does reflect portions of my stage of life.

https://humbledollar.com/2023/12/yielding-results/

A few quotes……

Why focus on yield? Some say everyday investors overemphasize the importance of dividends, and maybe that’s true of me. But with much of the U.S. stock market richly valued—and now that I’m only five years from retirement—I feel pretty good about my portfolio’s yield, currently around 3%.

Will dividend yields rise if the bull market in stocks goes to sleep? He also invests in some funds of foreign stocks that have a high yield. Hmmm… not sure about that.

Indeed, if the stock market’s price-earnings multiple stops its upward trajectory of the past 40 years, dividends should become a greater part of total return than in the past. Likewise, with the decades-long bond bull market probably over, yield will be an even more important driver of returns for bond investors going forward.

I’m not sure about “junk” bonds:

I also own some conventional bonds through my two balanced funds, and I’m slowly building a position in high-yield “junk” bonds with my 401(k) contributions. High-yield bonds are a new asset class for me. Why bother? With the U.S. stock market so pricey, I wanted to take a bit less risk with the aggressive side of my portfolio, while still having the chance for rich returns.

Overall, some interesting ideas. I’m not sure I will adopt them for several reasons, one of them being I am trying to simplify my investments so they will be easier to manage as I age and for my kids to handle well when I have to depend on them. Still I like to read about new ideas that haven’t occurred to me.

 

[audreyh1]

I have been steadily simplifying. Initially it has been shifting from active to index funds in taxable accounts as possible tax-wise to reduce future investment income. But this simplification also benefits the aging investor.

I will also stop all sector related rebalancing soon, just going for the gross equity versus intermediate bonds, short-term bonds and cash. All distributions are already taken in cash. Fixed income is already high quality credit.

 

[RetMD21]

I think the immediate fixed annuities he mentions make sense for some people but we overshot on savings and can live off the dividends.