What Is Your Contingency Plan?

The WSJ had a fun article titled Think You Can Drive a Bulldozer?. It recounted the experience of the article’s author trying to operate a dozer. They are apparently much easier to operate than they used to be incorporating technical innovation like almost everything else. Despite they’re being relatively easier to operate there is a shortage of qualified operators. The article did not offer an information about where to get training on heavy equipment operation but it is not like it takes two years of classroom time. By coincidence I have been writing about operating heavy equipment for years by virtue of my neighbor with his backhoe and the extent to which he supplemented is retirement income with jobs around the area. The way the economy is evolving many people with white collar careers may find themselves needing to completely reinvent themselves. That last sentence was written in a forward looking tense but of course this has been going on already since 2000 so the assertion is that the need to reinvent will touch more people. I view this as a fallback concept that won’t replace 100% of income but could fill in a decent portion of any income gap that could arise from your job being eliminated. Like with anything in life the more you put in to reinventing yourself the more you could potentially get out of it. It stands to reason that training that takes months will pay more than something that takes a couple of weeks. My neighbor with the backhoe charged $60/hour but he owned the backhoe. This is also where living below your...

Grim Savings Numbers

The other day I linked to a blog post from US News with some very grim numbers from a report published by the National Institute on Retirement Security (NIRS) about how much money Americans have put away for retirement. The numbers are really shocking. A reader on the Seeking Alpha version of my post left the link to the actual report which although grim too is an interesting read. It included the following table; The Fidelity column provides a guide of where its research says you need to be at various ages so a 50 year old should have 4 times their income to be on track. Aon Hewitt simply says you need to have 11 times your income at age 66 to be able to retire at 67. For some, the numbers in the Fidelity column will seem ridiculously out of reach and for others not so bad. Even if the number do seem out of reach I think there is something encouraging here from a behavioral standpoint for people able to employ some discipline in their lifestyles. Often in retirement planning and retirement articles there is an assumption that expenses will go down. This long held assumption has drawn closer scrutiny in recent years as not being true. Early on in retirement people tend to try to travel more and later in retirement health care expenses tend to increase. As assumption that you will be able to cut your expenses by X% on day one of retirement could be immediately plan altering. The behavioral opportunity comes from the extent to which people can start living below their...

Grim Savings Numbers

The other day I linked to a blog post from US News with some very grim numbers from a report published by the National Institute on Retirement Security (NIRS) about how much money Americans have put away for retirement. The numbers are really shocking. A reader on the Seeking Alpha version of my post left the link to the actual report which although grim too is an interesting read. It included the following table; The Fidelity column provides a guide of where its research says you need to be at various ages so a 50 year old should have 4 times their income to be on track. Aon Hewitt simply says you need to have 11 times your income at age 66 to be able to retire at 67. For some, the numbers in the Fidelity column will seem ridiculously out of reach and for others not so bad. Even if the number do seem out of reach I think there is something encouraging here from a behavioral standpoint for people able to employ some discipline in their lifestyles. Often in retirement planning and retirement articles there is an assumption that expenses will go down. This long held assumption has drawn closer scrutiny in recent years as not being true. Early on in retirement people tend to try to travel more and later in retirement health care expenses tend to increase. As assumption that you will be able to cut your expenses by X% on day one of retirement could be immediately plan altering. The behavioral opportunity comes from the extent to which people can start living below their...

Goals Based Investing

Barron’s had an article on something that is supposedly new called goals based investing. The idea is to focus on investing toward your specific objectives as opposed to benchmarking to an index. As a concept there is nothing new here but maybe the term is indeed new. Investing for your circumstances and tolerances is of course the most important thing. As I have said countless times you won’t remember whether you beat or lagged the market in some stray year 20 years ago but you will obviously know if you are 85, healthy and have money or are out of money. How you handle your finances and investments will depend on your particulars. Someone who only has $12,000 saved at age 50 will have to go about things differently than the person happily living and saving for a $50,000 lifestyle who unexpectedly inherits $10 million. The article goes on to say that goals based means having a different portfolio for each goal. It did not say a different account for each goal but that seemed to be the implication. This would seem to be a lot more work potentially which could result in advisors charging more or do-it-yourselfers needing to spend much more time on the task. I am not making a case for advisors to charge more simply pointing out that if you have an advisor he is charging based on some sort of expectation of how much time he thinks he will spend. An advisor will likely charge X% based on X amount of time. If the time required doubles then it isn’t crazy to think the...

Goals Based Investing

Barron’s had an article on something that is supposedly new called goals based investing. The idea is to focus on investing toward your specific objectives as opposed to benchmarking to an index. As a concept there is nothing new here but maybe the term is indeed new. Investing for your circumstances and tolerances is of course the most important thing. As I have said countless times you won’t remember whether you beat or lagged the market in some stray year 20 years ago but you will obviously know if you are 85, healthy and have money or are out of money. How you handle your finances and investments will depend on your particulars. Someone who only has $12,000 saved at age 50 will have to go about things differently than the person happily living and saving for a $50,000 lifestyle who unexpectedly inherits $10 million. The article goes on to say that goals based means having a different portfolio for each goal. It did not say a different account for each goal but that seemed to be the implication. This would seem to be a lot more work potentially which could result in advisors charging more or do-it-yourselfers needing to spend much more time on the task. I am not making a case for advisors to charge more simply pointing out that if you have an advisor he is charging based on some sort of expectation of how much time he thinks he will spend. An advisor will likely charge X% based on X amount of time. If the time required doubles then it isn’t crazy to think the...