Retirement

[John Ranalletta]

A lot of investors have difficulty understanding themselves.  Some are driven by "optimize gains/take more risk" while, on the other end of the spectrum, some want "no regrets".  Advisory services have questionnaires that seek to place a new client on that spectrum but they really don't get a true picture until the market moves against the client.   

 

At my age and given family health histories on both sides, I tend to be very, very conservative in my choices which brings opportunity costs.  Will Apple go up more?  Sure, but I don't want to be holding it when it tanks, which it will (reversion to the mean).  To "get back to even" after a 30% loss requires 40% return.  "Risk management" to me is avoiding/limiting losses first.

 

I tend to be attracted to Nassim Taleb's philosophy, roughly stated, "Invest the majority of your portfolio in safe if not low-return markets and put a very small portion at high risk where the payoff can be huge but the downside small."   

 

This morning's RIA show, they addressed the question this ad asks:

 

 

 

[Mike]

I retired three years ago, at 62. My wife hit the “eject” button from her corporate job last year, and we started a new business, a travel agency, on January 1. That kind of unretired me, as I now play a role that consumes a fair amount of my time. Incidentally, we were actually in the black with the new biz until the lockdown, at which time it largely evaporated. Good timing, eh?

Anyway, when I jumped ship we were debt-free, owned both of our homes, and had a pretty good amount in savings. I took SS at 62. Not a lot of in-depth analysis with that choice. I just liked the idea of a little extra per month, have a brother who suffered a debilitating stroke at 70, and disliked the idea of not taking advantage of something I’d paid into for 40-plus years, before I checked out.  None of this was the result of amazing planning, just some periods of good fortune. The savings will continue to grow, and we may not have to touch them. Maybe for an occasional splurge?

Anyway, what I’ve found is that we haven’t had to touch any of our retirement savings yet.  Key to that was being completely out of debt. If you aren’t there, I’d try to get to that point as soon as you can. Over the past few months, our income has gone from being equivalent to our combined pre-retirement income to presently being maybe 60-70% of that amount, and we seem to be getting by just fine.  As I mentioned, we have a fair amount in savings, so we can start tapping into that at any point. We’re just trying to be prudent and avoid that until the need arises.

But, we really haven’t deprived ourselves of much. One of the key factors has been the fact that we now spend most of our time at our Wisconsin home, where many costs are substantially lower than around the Chicago suburbs. And, of course, our travel has been curtailed over the past few months. If I had to offer any advice, it would first be what I’ve already shared: pare down your debt as much as you can. Shed the extra expenses that don’t bring you joy. Be willing to jump back into work that you’ll enjoy, even if it’s below your level of ability and training.

But, go with the flow (prudently, of course).  At 65, I’m seeing a fair number of my contemporaries kicking the bucket. My job stressed me to an enormous degree, and I paid a price in terms of lost sleep and constant preoccupation with my responsibilities.  Around two weeks after I retired, I realized that I was actually sleeping through the night, something that I hadn’t experienced for probably 30 years or so. As far as I know, we only get one shot at life on this planet, and the thought of not living my remaining time on my terms—whatever the Almighty determined the timing to be—was not a life i wanted to continue living.

[Patallaire]

1 hour ago, John Ranalletta said:

Some are driven by "optimize gains/take more risk" while, on the other end of the spectrum, some want "no regrets".  Advisory services have questionnaires that seek to place a new client on that spectrum but they really don't get a true picture until the market moves against the client.   

Warren Buffett said, " When the tide goes out, you find out who is swimming naked!"   Many clients when the markets go up or are going up want risk, when the markets go down, the phone rings, they forget that it is more than likely a 30 year plan, and one month has little impact, and they want out or lower risk.  That is where the Behavioral part of our process takes place.  We ask them focus on the plan and the time frame.  It is sometimes a push as fear and greed are the only two things that move a market.  

 

1 hour ago, Mike said:

Key to that was being completely out of debt. If you aren’t there, I’d try to get to that point as soon as you can

This is the best advise.  Debt, unless it is investment debt covered by cash flow, is the anthesis of wealth creation. 

[West_Coaster]

Anyone have a recommendation for a financial planner in San Diego CA?

[Stir]

On 10/13/2020 at 5:28 PM, John Ranalletta said:

 

The dividend rate is an expression of the risk a buyer takes.  In a zero rate environment, AT&T has to pay nearly 7.5% - nearly 700% more than the rate paid by USTreasuries to entice investors.  It could work out, but I'd use stops and puts to hedge.

 

What we don't know about AT&T is how many customers who haven't made their rent and mortgage payments have also stopped paying their communications bills.  I'd sure like to see an aging of their accounts receivable.

A legit question.  But unlike rent or utility bills, mobile providers CAN turn off your service.  People don' tlike going without their cell service.  But that said, AT&T has other sources of income.  They will get rid of that dog, DirectTV.  That won't bring in much unless they can convice a Chinese country that it's a good deal.

 

[Jake]

I will soon mark my 30th year working for one of the largest financial services firms on earth in a management capacity.  My Dad was a C-suite executive for a major firm, my Father in law retired after 40 years of providing investment advice, and my wife is an advisor.  I help to manage over 250 employees in our territory, and I have come to personally know the businesses of hundreds of advisors, which includes both major Broker/Dealers and RIAs.

 

I would trust my money to maybe 4 people.  Most in the industry are hard working, honest, and do a fine job, but only a few are really gifted.  Only a few care the way you do.

 

A fee-only planner may very well be in a position to help, but you (any of you) have to be lucky to find the right one and may have to kiss a lot of frogs first.  The fee-only part is more marketing fluff than an assurance that they are actually good at what they do.  Their compensation arrangement has little to do with character.  Let's say you do find the right person, but in reality you may be the problem.  If you aren't the advice taking type, the best guidance in the world won't help much.

 

Then there is the timing thing.  Of all of the studies out there regarding retirement planning as it pertains to investment strategy, the reality is that you have to be lucky enough to retire at the right time in a market cycle.  That sounds obvious, but said another way, if you retire at the wrong time thus relying on your savings/investments in the absence of your employment income, all of the best advice and guidance can't stop the pain could follow. The two year long bear market of 1973-74 can and will happen again.  If you were that unlucky brand new 1973 retiree with a shiny new investment portfolio, you most certainly bailed out of the markets shortly thereafter to stop the pain of a 37% loss. It would take years to recover from that.  Perhaps you would have felt so burned that you stopped being an investor.  No recovery for you, then.

 

So, it can be scary.  

 

The only way to have peace of mind going into retirement is to be fully armed and ready for war.  That means you should have more funding than you think you need, and be in a position to endure financial adversity.  That adversity can come from health, family circumstance, spending, or something really unlikely such as a global pandemic.

 

Much like many my age, I am starting to nest in preparation to give up the corporate grind.  I have 4 years and 4 months to go.  Retirement house gets paid off next year, and work house will be sold.  2 motorcycles are gone, and the the fun convertible will soon be replaced by a sturdy truck. I am getting back into military shape, but know that I will just have to settle for grandpa bod.  I am reading every retirement story I can find (I do enjoy early-retirement.org as referred to earlier), as I learn from each of the stories.  Despite my career,  I am terrified that I will not be ready the way I should have, could have been.

 

So, in short, I have nothing useful to add, but I am right there with ya.   I do want to be like Mike, still, as he always seems to be doing it right.  :-). 

[Patallaire]

On 10/15/2020 at 8:39 AM, realshelby said:

They are sales people. Just like sales people, there are some that know what they are talking about.

[West_Coaster]

I reached out to my Tax person who is also a financial planner and will see him in 2 weeks. He is an aggressive guy, much more risk tolerant than me. I am going in with an open mind and will be completely open with him. I figure, I don't HAVE to do anything.

 

Since I started this thread, I have learned that I do not know much at all about retirement nor investing. Reading your posts has made me think I may have missed the boat on some things. I know little about annuities, dividend stocks, and a bunch of other stuff, I have been a pretty straight forward 401K and CD kind of guy. Sure I get the basic concepts of these things, but I have not been comfortable enough to invest my money in them. I don't have a rental property, second home or any of that stuff. I do like the idea of having investments that pay a "dividend" and you live off that, however I don't want to die with a lot of money, I want to spend it when I'm still enjoying it. 

 

I know now that I want to speak with someone who does retirement planning and start preparing myself properly. I don't care if I have to work 2-4 more years to get there, I am having a pretty good time doing what I'm doing now. 

 

 

[Patallaire]

It appears you had the discipline to accumulate, that is one of the prerequisites of wealth creation.  So congratulations on that accomplishment.  I speak on Retirement Income distribution strategies at various seminars and know  that the distribution side of the equation  is the dark horse in our industry.  We all know how to accumulate, distribution is different both psychologically and in reality.  You have consumption risk, inflation risk, medical risk, LTC risk, tax change risk, sequence of return risk, government risk, headline risk and longevity risk, etc. all of which can derail the best of plans.   The money is going out, not much except Social Security and RMD's are coming into the accounts. If you are comfortable with your accountant then he is the guy.  Stay within you risk comfort level, and he should have you fill out a basic risk profile.  Have your wife fill one out also, not verbally in front of him but separate from you and he.  There will be a difference, if my experience is any guide.  If you want a second opinion, e-mail me.  I don't charge for those.  You are still young, I would venture that working until age 66 or 67 would put you in a much stronger position.  You would be eligible for Medicare as well as a higher benefit from SS.  Guaranteed cash flow and little or no debt makes for a comfortable retirement.  

59 minutes ago, West_Coaster said:

I don't want to die with a lot of money, I want to spend it when I'm still enjoying it. 

A problem!  If you know the future date of your death, the calculation is simple, in the absence of that it becomes a SWAG. {Sophisticated Wild Ass Guess}.  As a planner, we need to err on the side of caution as we don't want to receive the phone call or make the phone call, that says you  are running out of money.  Share this with your accountant/Planner.  I am sure he can guide you. 

 

Good luck.  

[West_Coaster]

I know the exact day I'm gonna die, the judge told me. 

[Hosstage]

1 hour ago, West_Coaster said:

I know the exact day I'm gonna die, the judge told me. 

 

Some do-gooder will probably revue your case and get the conviction thrown out, then you'll be screwed!

[John Ranalletta]

2 hours ago, West_Coaster said:

I know the exact day I'm gonna die, the judge told me. 

 

At the end of my annual physical two weeks ago, my doc told me to make another appointment for next year, so, I'm good for at least a year.

[West_Coaster]

2 hours ago, John Ranalletta said:

 

At the end of my annual physical two weeks ago, my doc told me to make another appointment for next year, so, I'm good for at least a year.

 

 

My doctor gave me a year to live, but I didn't pay my bill and got another year.  (snare drum sounds in the distant background)