Do you like the simpilicty and low cost of index funds? But want some personalized advice to structure your portfolio.
The Retirement/Investment Complex calls it your "retirement income replacement rate." It's the percentage of your pre-retirement income you "need" to sustain your standard of living in retirement.
We call it "replacement bait." The percentage is set so high that it requires us to save an excessively large portion of our income. This endows the financial services industry with fees and commissions on our savings for decades before our savings will do anything for us. We need to remember that our retirement savings are their lunch.
They say we should target a retirement spending level that is roughly 80 percent of our pre-retirement income.
Spending goes in only one direction. Up.
This is a fundamental law of the universe. It is always possible to spend more money. This was true when I got my first job out of college, a whopping $500 a month in 1962. It is still true 46 years later. My wife and I can easily spend more income than we have, in spite of enjoying an income far larger than we ever expected.
Many readers can say the same. It’s just the way it is. This is a world filled with beautiful objects, things to want, meals to have, wine to drink and moments to celebrate. And America is the Land of the Infinite Upgrade.
Note that I’m not talking about going broke.
Variable annuities have a tough row to hoe. Doomed to being measured against better alternatives, they simply can’t overcome the burden of their fees or the higher tax rates investors must pay on their returns. The last year has been no exception.
In spite of these disadvantages, a hard-working sales force trudges on and racks up big-time sales--- $41.6 billion in the first quarter of this year. The sales for the quarter brought the total assets in variable annuities to nearly $1.4 trillion.
That’s a lot of retirement savings.
And there’s the rub.
The consumer price index for July increased 0.5 percent. It increased the CPI-W to 216.304. The increase over the prior year was 6.2 percent. Here’s the press release: http://www.bls.gov/news.release/cpi.nr0.htm
In case you missed it, my Sunday August 1 column explained why senior citizens were likely to get the largest benefit increase in 25 years, estimating the boost at about 6 percent. That estimate was based on typical “core” inflation increases of 0.2 percent in July, August and September. Here’s a link to that column: http://assetbuilder.com/blogs/scott_burns/archive/2008/08/01/want-a-good-raise-retire.aspx
With this unexpectedly large increase for a single month, it’s now nearly certain that the January increase will be
A new study indicates that most Americans will die broke. You may think that’s just more bad news, but read on. I’ll tell you why things may be better.
Ernst & Young LLP, a major accounting firm, recently completed research on financial security in retirement. The study examines the retirement savings and other resources for Americans with $50,000 to $100,000 of pre-retirement income. It considers investment returns, volatility, health-care expenses, and takes into account the eventual death of a spouse. The study concludes that households with a defined-benefit pension as well as Social Security and retirement savings are far less likely to outlive their savings than households that don’t have a defined-benefit pension.
