oh goodie! i just can't wait to have gov't take over my financial affairs -- it does such a good job with everything else.
Annuity post to end all annuity posts...
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unclemick
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Yep - clearly the government can do a much job than any/all the ding dongs in private industry - with the possible exception of Vanguard provided they stay 'mutual' or at least put up the front.
Still - my pessimistic side says that Congress may ignore academic data or Civil Service may try to feed to heavily at the trough of pay and benefits. But all in all government is the only way to do it right.
I am not as gloom and doomy as Wm Bernstein nor do I wish to Google up his look at the 401k situation and depress myself.
As a group we Americans have totally screwed the pouch. However those on this forum can give ourselves an 'Atta Boy.'
This forum is 'The Few, The Proud, The Cheap - er frugal.'
Right!heh heh heh -
.explanade
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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She's not suggesting all personal investments get managed by the govt. Just 401ks, which have pretty much displaced pensions.
And isn't offered by all companies. Nor is the participation high enough even in those companies which offer 401ks.
But the key point is, annuities purchased with much higher participation should yield better payouts than individuals buying directly from insurers.
And isn't offered by all companies. Nor is the participation high enough even in those companies which offer 401ks.
But the key point is, annuities purchased with much higher participation should yield better payouts than individuals buying directly from insurers.
yes, so to improve the payout for the few we should required all to suffer?
explanade
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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How do you know you would?
You're sure you can do better managing your 401k than having professionals who manage big pension funds manage your retirement accounts?
Again, we're not talking about ALL your personal investments, just the portion which now comes from 401k accounts.
You're sure you can do better managing your 401k than having professionals who manage big pension funds manage your retirement accounts?
Again, we're not talking about ALL your personal investments, just the portion which now comes from 401k accounts.
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Steve O
Recycles dryer sheets
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Hi new here.
I really liked this strategy.
Harold Evensky and Deena Katz, who run their own advisory firm in Coral Gables, Fla., are authors of several books about investing and are among the most prominent figures in the financial-planning industry. The couple (they're married) have used their "cash-flow-reserve strategy" to create regular paychecks for retirees since the 1980s, and they've successfully weathered difficult markets in 1987 and 2000-2002.
The approach was born out of the pair's dissatisfaction with two commonly used strategies for generating cash from a nest egg. Strategy No. 1, relying solely on income from dividends and/or interest, simply "makes no sense," Mr. Evensky says. Such a nest egg requires a hefty percentage (typically 50% or more) of bonds or bond funds to generate needed cash, and, thus, limits one's stock holdings. Stocks, of course, have historically provided the growth needed in a portfolio to guard against the loss of purchasing power.
Strategy No. 2 -- steady withdrawals from a nest egg regardless of market conditions -- can result in "reverse" dollar-cost averaging. With traditional dollar-cost averaging, a fixed schedule of purchases can spread out (theoretically) the cost of an investment over several years, providing protection against market fluctuations. But if you're following a fixed schedule of withdrawals from your savings, and if markets are falling, that money is gone for good. It won't be there when markets begin to rise, and any growth in your nest egg will be based on a smaller starting figure. That's "reverse" dollar-cost averaging.
Initially, Mr. Evensky and Ms. Katz came up with a "five-year" plan for their clients. Let's say a retiree has $1 million in savings and needs $40,000 a year to supplement other income (like Social Security). With that in mind, $200,000 (five years x $40,000) would be set aside in say, a money-market account. The remaining $800,000 would be invested in a well-diversified portfolio. The money-market account would be used to pay monthly bills, and the account would be "refilled" (periodically) from gains in the investment portfolio.
The thinking: The "real risk" with a nest egg, according to Mr. Evensky, is having to sell holdings when markets are falling in order to meet spending needs. (Remember: reverse-dollar-cost averaging.) Carving out five years of living expenses would all but eliminate that risk; if markets were falling, the five-year cushion would provide funds to buy groceries, etc., and the client could wait until markets rebounded before refilling the money-market account. The problem: Setting aside a full five years of cash in a vehicle with relatively low returns (like a money-market account) put a significant damper on the nest egg as a whole.
So, the couple tinkered with their formula, and today provide clients with three accounts. The first is a simple checking account. The second is a "cash-flow reserve portfolio" with approximately two years of spending money. Half of that money (or one year of spending) is placed in money-market funds; the other half is invested in a low-cost bond fund, with high-quality short-term (meaning one-year duration) municipal bonds. Once a month, the client transfers a "paycheck" from the reserve account to his or her checking account.
The rest of the nest egg goes into the third account: a long-term investment portfolio. Here, about 70% of the money is invested in stocks and 30% in bonds -- typically divided among those with one- to three-year maturities, three to five years, and five to 10 years. When it's possible to sell stocks without significant losses, a client moves money from the investment portfolio into the cash-flow reserve to bring the balance back up to two years of spending power.
What happens if there's more than a year with significant losses in stocks? At that point, Mr. Evensky explains, the client turns to the bonds in the investment portfolio, which function as "second-tier emergency reserves." No matter how bad the markets get, bond investments are unlikely to have significant losses; thus, you could refill the cash-flow reserve by liquidating some bonds, and buy time to defer the sale of stocks in a bear market.
In practice, a client with a $1 million nest egg -- where that client needs income of $50,000 a year -- would have about $100,000 in a cash-flow-reserve account (two years of spending) and about $900,000 in a long-term portfolio. Again, about 30% of that $900,000, or about $270,000, would be invested in bonds of varying maturities. The rest would be invested in stocks. In all, the client would have more than five years of spending money in relatively safe vehicles (money-market funds and bonds) -- enough to ride out the worst kinds of storms the stock market has seen during the past century.
Starting retirement in this fashion helps head off panic when markets fall, Mr. Evensky says. "You need to design a portfolio to weather all kinds of economic environments," he says, "since we don't know which one is coming next.
Problem is Im only 39 and Im gonna have to use 72 t to avoid paying the 10% penalty when I start taking the $$$.
Im not sure how one would go about doing this
The one guy I have talked to recommended setting up an annuity through an insurance company for the 72 T
Are there any good books or links y'all can recommend that deal with 72T?
Im gonna talk to at least 5 more $$$ guys before I do anything. I just wanna be as informed as possible before I start talkin to em
I really liked this strategy.
Harold Evensky and Deena Katz, who run their own advisory firm in Coral Gables, Fla., are authors of several books about investing and are among the most prominent figures in the financial-planning industry. The couple (they're married) have used their "cash-flow-reserve strategy" to create regular paychecks for retirees since the 1980s, and they've successfully weathered difficult markets in 1987 and 2000-2002.
The approach was born out of the pair's dissatisfaction with two commonly used strategies for generating cash from a nest egg. Strategy No. 1, relying solely on income from dividends and/or interest, simply "makes no sense," Mr. Evensky says. Such a nest egg requires a hefty percentage (typically 50% or more) of bonds or bond funds to generate needed cash, and, thus, limits one's stock holdings. Stocks, of course, have historically provided the growth needed in a portfolio to guard against the loss of purchasing power.
Strategy No. 2 -- steady withdrawals from a nest egg regardless of market conditions -- can result in "reverse" dollar-cost averaging. With traditional dollar-cost averaging, a fixed schedule of purchases can spread out (theoretically) the cost of an investment over several years, providing protection against market fluctuations. But if you're following a fixed schedule of withdrawals from your savings, and if markets are falling, that money is gone for good. It won't be there when markets begin to rise, and any growth in your nest egg will be based on a smaller starting figure. That's "reverse" dollar-cost averaging.
Initially, Mr. Evensky and Ms. Katz came up with a "five-year" plan for their clients. Let's say a retiree has $1 million in savings and needs $40,000 a year to supplement other income (like Social Security). With that in mind, $200,000 (five years x $40,000) would be set aside in say, a money-market account. The remaining $800,000 would be invested in a well-diversified portfolio. The money-market account would be used to pay monthly bills, and the account would be "refilled" (periodically) from gains in the investment portfolio.
The thinking: The "real risk" with a nest egg, according to Mr. Evensky, is having to sell holdings when markets are falling in order to meet spending needs. (Remember: reverse-dollar-cost averaging.) Carving out five years of living expenses would all but eliminate that risk; if markets were falling, the five-year cushion would provide funds to buy groceries, etc., and the client could wait until markets rebounded before refilling the money-market account. The problem: Setting aside a full five years of cash in a vehicle with relatively low returns (like a money-market account) put a significant damper on the nest egg as a whole.
So, the couple tinkered with their formula, and today provide clients with three accounts. The first is a simple checking account. The second is a "cash-flow reserve portfolio" with approximately two years of spending money. Half of that money (or one year of spending) is placed in money-market funds; the other half is invested in a low-cost bond fund, with high-quality short-term (meaning one-year duration) municipal bonds. Once a month, the client transfers a "paycheck" from the reserve account to his or her checking account.
The rest of the nest egg goes into the third account: a long-term investment portfolio. Here, about 70% of the money is invested in stocks and 30% in bonds -- typically divided among those with one- to three-year maturities, three to five years, and five to 10 years. When it's possible to sell stocks without significant losses, a client moves money from the investment portfolio into the cash-flow reserve to bring the balance back up to two years of spending power.
What happens if there's more than a year with significant losses in stocks? At that point, Mr. Evensky explains, the client turns to the bonds in the investment portfolio, which function as "second-tier emergency reserves." No matter how bad the markets get, bond investments are unlikely to have significant losses; thus, you could refill the cash-flow reserve by liquidating some bonds, and buy time to defer the sale of stocks in a bear market.
In practice, a client with a $1 million nest egg -- where that client needs income of $50,000 a year -- would have about $100,000 in a cash-flow-reserve account (two years of spending) and about $900,000 in a long-term portfolio. Again, about 30% of that $900,000, or about $270,000, would be invested in bonds of varying maturities. The rest would be invested in stocks. In all, the client would have more than five years of spending money in relatively safe vehicles (money-market funds and bonds) -- enough to ride out the worst kinds of storms the stock market has seen during the past century.
Starting retirement in this fashion helps head off panic when markets fall, Mr. Evensky says. "You need to design a portfolio to weather all kinds of economic environments," he says, "since we don't know which one is coming next.
Problem is Im only 39 and Im gonna have to use 72 t to avoid paying the 10% penalty when I start taking the $$$.
Im not sure how one would go about doing this
The one guy I have talked to recommended setting up an annuity through an insurance company for the 72 T
Are there any good books or links y'all can recommend that deal with 72T?
Im gonna talk to at least 5 more $$$ guys before I do anything. I just wanna be as informed as possible before I start talkin to em
That's easy, start looking at :
Welcome to 72t on the Net
They are the experts, ask any question, they will help you.
As far as the plan, looks like the bucket strategy to me.
Welcome to 72t on the Net
They are the experts, ask any question, they will help you.
As far as the plan, looks like the bucket strategy to me.
Ha - (belated) thx for the explanation of your investing approach, and while it looks like a lot of work (is this your ER hobby?) I know some very smart retired wall st types who follow basically the same approach. In fact, I hope the portfolio managers I 'hire' in some of the actively managed funds are doing the same thing!
The Evensky approach (thx Steve O) is interesting and one I've heard before. But holding up a 50% fixed income strategy as some sort of hopelessly retro inferior solution is a little much coming from him, since if you do the math, his approach gives you 37% fixed income with a lot of that in money markets. While 37% is less than 50%, of course, it isn't so different as to be drawing such a bright line about how heavily invested in equities their approach is.
I happen to think 40% fixed income (37%-43% - whatever) is a good number, too. But rather than have all the rest of the 60% in equities, I say spread it around. Thus 40% is in equities of all stripes (big, small, US, foreign) and 20% is in that slicer-dicer's dream "Other" category, which lets me pick up everything from foreign REITS to Oil and Gas wells to commodities, and investing in the local dry cleaner (or medical office building) along with a flier with market neutral hedge funds or similarly over-priced magic ways of making money in any market (just a few percent!)
The Evensky approach (thx Steve O) is interesting and one I've heard before. But holding up a 50% fixed income strategy as some sort of hopelessly retro inferior solution is a little much coming from him, since if you do the math, his approach gives you 37% fixed income with a lot of that in money markets. While 37% is less than 50%, of course, it isn't so different as to be drawing such a bright line about how heavily invested in equities their approach is.
I happen to think 40% fixed income (37%-43% - whatever) is a good number, too. But rather than have all the rest of the 60% in equities, I say spread it around. Thus 40% is in equities of all stripes (big, small, US, foreign) and 20% is in that slicer-dicer's dream "Other" category, which lets me pick up everything from foreign REITS to Oil and Gas wells to commodities, and investing in the local dry cleaner (or medical office building) along with a flier with market neutral hedge funds or similarly over-priced magic ways of making money in any market (just a few percent!)
Rich_by_the_Bay
Moderator Emeritus
Agree. The main differences to me are that Lucia calls for a bit more in cash and offers a more sophisticated withdrawal strategy. He also has modeled and tested his plan more thoroughly - Evensky's is more anecdotal.
