Ten Rules to Follow in Preparation for Retirement

Over the next few days I will lay out ten fundamental ideas or rules that will serve readers well as they prepare for retirement.  I know many of you are already well into retirement and have gone through this process while others are just beginning their investment journey.  For the veterans, you may pick up a few ideas and have others reinforced.  If you have words of wisdom for other readers, post them in the comments section.  I’ll end this series of posts with an analysis of a possible retirement portfolio.  Keep in mind – there is no one right portfolio for everyone.  Use these ideas as guidelines for retirement preparation.

No one familiar with this blog will be surprised by Rule 1.  Obey The Golden Rule of Investing – “Save as much as you can as early as you can.”  Stay disciplined in your saving play.  Set aside a specific amount each month and pay yourself first.  I think the ideal is to have money withdrawn from the paycheck so the employee never sees the money.  It just “vanishes” into a retirement savings account to be invested.  How it might be invested will come in a later post.

Scattered throughout this blog are words to encourage savings.  Here are a few links or corollaries to Rule 1.

The Power of Consistent Saving

Who Is Responsible for Your Retirement?

Save Early

Is It Too Late to Start Saving?

Maxwell Portfolio Review: 3 December 2012

First up this week for review is the Maxwell Portfolio.  One month ago the commodities ETF, DBC, was priced below its 195-Day EMA so we sold off most of the holdings.  This is in keeping with the ITARR model, of which the Maxwell is one of five portfolios we are using to test this model.  Since that November sale the price of DBC rose in value and it is once more priced above the “critical” Exponential Moving Average.  This morning I placed a limit order to buy back those shares we sold a little over a month ago.  The limit order was priced below the price we sold as I would not surprised if we did not see some sort of retracement over the next few weeks and I don’t want to lose money on this risk reduction transaction.  If the price of DBC rises, the loss could be significant.  Right now it is minor.

Maxwell Dashboard:  Other than commodities and cash, all asset classes are in balance.  Yes, there is minor tweaking we can do to push and pull several asset classes closer to their targets, but overall, there are no significant problems with this portfolio.  I do have another limit order placed to buy a few shares of VWO so as to bring the emerging markets class closer to target.  Otherwise, this portfolio will go into “neglect” mode for another month.  Fourth quarter dividends will not likely throw any asset classes out of balance.

American Workers Unprepared

ITA Wealth Management is not so much a blog of how to make money as it is a blog to help investors achieve retirement goals.  According to recent Department of Labor statistics on retirement sufficiency, U.S. workers retiring in the 2050s will have saved only enough in their 401(k) accounts to replace an average of 22% of their pre-retirement income.  What is staggering is that 37% will have no savings at all.  Can you imagine a society where over one-third of the population will have no money set aside for retirement?

These statistics have not changes since I published this two years ago.  In fact, the situation has degraded since the summer of 2010.

My assumption is that most Platinum members are doing something about preparing for retirement.  Index investing, disciplined saving, and living a simple life are key to having sufficient money to make it through retirement without going broke.

This week several portfolios are up for review and we will be watching the market closely in an effort to protect profits.  Congress does not have many days before financial problems begin to kick in.  Expect to see volatile markets this week.  Before the market opens this morning, all the key ETFs we are tracking are priced well above their 195-Day Exponential Moving Averages so we have a little cushion.