The Retirement Crisis

In keeping with the series of articles on retirement, Gary Simms sent me a link to this PDF file on The Retirement Crisis.  I had problems opening this file using Firefox due to some add-ons they are attaching to their software.  If you have a similar problem, try Safari or Chrome browsers.  As the article points out, this is another financial crisis.  PERS programs are also in disrepair as too much was promised during the go-go years of the late 1990s.  Unfortunately, the lessons of the late 1960s were not learned so here we go again.

When planning for your own retirement, set the withdrawal rate to no more than 4%.  For example, if you are currently living on $70,000 per year, you will need to save $1,750,000 if you have no pension or social security income.  The 50% of our population that put away $10,000 in savings will not be living very high on the hog.

A less pessimistic retirement projection is the need to save 12 times your final salary.  $70,000 x 12 = $840,000 or still a tidy sum.

If you are not able to read the Crisis PDF file, let me know.  First try  a different browser.


Retirement Rule #6: Develop Your Own Strategic Asset Allocation Plan

Continuing the theme of retirement planning, at some point one needs to develop an asset allocation plan.  If you neglect this suggestion, you have already made a decision.  To make no decision is to make a decision.  One may as well set up a plan with some logic and reasoning behind the process.  To develop a SAA plan, one needs to understand the options available or Rule #5.

There are a number of plans available on this blog.  Search for Dashboard and one will find lots of examples.  The younger you are the less you need to allocate to bonds and income.  In fact, this asset class may have an allocation of 0%.  My suggestion is to keep it very simple at first.  Begin with U.S. Equities and the ETF I recommend is VTI.  After launching this asset class, branch out to emerging markets (VWO), domestic real estate (VNQ), and possibly international real estate (RWX).  Watch a few of the portfolios discussed on this blog and then set up your own Strategic Asset Allocation plan.  I highly recommend learning how to use the TLH Spreadsheet as it contains information helping with setting up a plan and monitoring the plan.

Portfolio evaluation is available to Platinum members.  You do need to provide tickers (max of 40) and the percentage invested in each.

Brief Update of Schrodinger Portfolio

Since the last review of the Schrodinger, shares of VWO were purchased to rebalance the emerging markets asset class.  Checking over past records, rebalancing occurs approximately twice a year when the target limits are set at 20%.  I would not set the limits much lower unless one wishes to do more rebalancing.  Twenty (20%) to thirty-five percent (35%) seems to be about right for target limits.  I only use the higher value for smaller portfolios so as to reduce trading.

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