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Financial Planning for Families with a Disabled Child
For most of us, retirement planning involves saving money consistently, helping it grow through investment and the power of compound interest, and eventually spending down our nest egg at a sustainable rate to fund a comfortable retirement. If something remains at the end of the line, that’s great, but not really that important. Your grown children, whom you have loved and nurtured, and perhaps helped through college, are able to fend for themselves. But what about the parents of a child with a serious physical or mental health disability? This child may be unable to work and may need assistance to accomplish daily activities that most of us take for…
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Should You Hire a Financial Manager? Human or Robot?
There’s nothing like a raging pandemic to bring home the reality that your mortality is not just a theoretical possibility. Not unlike the effect of knowing one will hang on the morrow, the current situation has motivated me to give some serious thought to what happens when I’m gone. While I’m quite comfortable managing our finances, my wife’s ability to find an excuse whenever I try to sit down and go over things makes me realize that she doesn’t share my zest for this financial stuff. So what would happen if I were no longer around to monitor our far-flung accounts, rebalance things periodically, and hunt for the best CD…
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The Market Just Crashed! What Should I Do?
As I write this post, the Dow Jones Industrial Average has just dropped 1,000 points – the sixth 1,000 point move in the last 12 days. The Dow and the S&P 500 are 13% below their most recent high, well into correction territory. The interest rate on 10-year Treasuries, a safe haven in times of market turmoil, has dropped to a record low 0.7% — substantially less than inflation and only slightly better than stuffing your money in a mattress. (The interest rate on Treasuries, as with all bonds, is inversely related to its price. As panicky buyers bid up the price, the corresponding interest rate is driven down.) The…
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Make Your Own Retirement Spreadsheet — Part II
In the previous post, I suggested reasons why you might want to create your own financial planning spreadsheet, and described the nuts and bolts of setting one up. But there’s still the problem of choosing reasonable inputs and interpreting results in a way that gives you insight into your financial future — rather than leading you astray. In this post, I go over how to make the most effective use of your spreadsheet plan: how to handle inflation, what you might assume about investment rate of return, how to do sensitivity and what-if analyses, and how to check your results against other tools. Inflation — What to Do With It…
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10 Great Retirement Planning Blogs
There are quite a few excellent financial planning blogs out there – so many that I sometimes wonder why I’m adding my own site to what is already a crowded space in the blogosphere. Then I recall how much of what is out there is misleading, self-serving or just plain incomprehensible. My goal is to provide sound retirement financial planning ideas and advice, written in plain English, without any underlying agenda. I believe investing and financial planning are really quite straightforward if you can tune out the noise. I try to provide enough explanation and references that the curious reader doesn’t just have to take my word for what I’m…
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What the Heck is Monte Carlo Analysis?
In reading about personal finance, you may have come across references, often hushed and worshipful, to a mysterious thing called Monte Carlo analysis. Perhaps you wondered: What is it? Is it really the gold standard for financial planning? Are there any alternatives? If this sounds like you, read on! What is it? Monte Carlo analysis, developed by mathematician and nuclear scientist Stanislaw Ulam while working at Los Alamos in the 1940s, is an important tool for modeling a complex system when a key variable is unpredictable, but whose possible values can be described with a distribution (such as a bell curve). Monte Carlo essentially substitutes an entire probability distribution…
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Use Online Retirement Calculators to Check Your Work
Welcome back! If you’ve read my blog posts up to this point, you should have a pretty fair idea of your financial fitness for retirement: Do you (or will you) have enough money to retire (see this post); How should you manage your money once you stop working (see this post); When should you begin taking social security retirement benefits (see this post and this one); and How can you protect yourself from things that might go wrong (read this post)? You may have reassured yourself that you’re financially on track, or perhaps you’ve identified some weaknesses in your plan that need shoring up. But how do you know you…
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What Could Go Wrong – Part II
Welcome back! In this post, we continue talking about the financial shocks that could derail your retirement – and what you can do to protect yourself. Read the first post here. Long-term care We left off the last post with a discussion of the importance of good health insurance – fortunately largely covered by Medicare for most people over 65 (and by Obamacare for those under). But what about long-term care? If you’re 65, there’s a 50/50 chance you’ll need it someday. It’s not cheap; the median cost is $85,800 per year for care in a nursing home, although there’s significant variation by state (average cost in Texas is $54,800,…
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Retirement – What Could Go Wrong?
You’ve worked hard for 30 or 40 years, raised a bunch of kids and launched them into adulthood, and now you’re excited to embark on the next phase in your life – stepping back from the daily grind, traveling to far-off lands, having time to enjoy your hobbies, and trying new things. You’ve managed to accumulate a tidy nest egg and, with Social Security, don’t anticipate needing to withdraw more than 4% of it per year. (Bill Bengen would be proud!) Your mortgage is paid off, you have a plan for the future, and you’re still in love with your spouse. Things look good. What could possibly go wrong? Unfortunately,…
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Should I Use a Bucket Strategy in Retirement?
When you hear the term “bucket,” do you get a far-away look and daydream about climbing Mt. Kilimanjaro, learning to play the flamenco guitar, or communing with century-old Galapagos tortoises? Or do you furrow your brow and try to recall what that financial adviser you met with a year or so ago was talking about? While it behooves us all to consider what we’d like to do while on this earthly realm, this post focuses on the second, more prosaic question – the use of buckets as a way to manage a retirement portfolio. What exactly is a bucket strategy? There are many variations on the bucket theme (approximately as…