In WSJ’s “New funds pitch steady income to retirees” Tom Lauricella reviews new funds which aim to provide “steady”, though not necessarily stable, income to retirees without having to lock funds into an (expensive) annuity (see also my December 9th Hot Off the Web ). He mentions Fidelity’s Income Replacement Funds, Russell Investments’ LifePoints target date funds, Vanguard’s Managed Payout Funds (3, 5, and 7% payouts, with correspondingly more aggressive portfolios; payouts are reset annually based on past performance) and T. Rowe Price. These vendors approach withdrawal levels from a starting point that one can, with a reasonably high probability without depleting the principal withdraw about 4% annually from a properly constructed portfolio without exhausting it over a retirement span of over 30 years. While investors could do that themselves, these vendors offer professional management for the funds and take somewhat different approaches for implementation, they typically shift to a more conservative asset allocation with the increasing age of the retiree. Some try to preserve capital (Vanguard) while others explicitly aim to liquidate capital by a specified date (Fidelity). While the concept behind these funds is right, unfortunately, they are U.S. mutual funds and are not available to Canadians; hopefully, similar funds start becoming available in Canada and with reasonable management fees, also some of these funds may become available in ETF format thus making them more accessible.)

John Heinzl in Globe and Mail’s “An appetite for the food boom” reports Donald Cox’s advocacy for investing in agri-based assets. His arguments are driven by the growing income driven westernization of diets of the Indian and Chinese populations and the corresponding increases in prices of agri-commodities, revenues/profitability of agri-based businesses (Potash Corp, Monsanto, Agrium, and other fertilizer and machinery producers).

Jonathan Clements relies on Charles Farrell’s work in “Age appropriate nets-egg” to assess how well you are doing if you are planning to retire in 20 years. The result is reported in terms of required savings-rate (of 27%, 20%, 12%, 5% and 0%) versus the savings-to-income ratio (of 1,2,3,4 and 5) for an individual. These calculations are based on the assumption that if an individual retires with 12 times their final annual income and can decumulate at 5% per year, then with the added Social Security income, (s)he would be able to retire with about 80% of pre-retirement income (make that 70% for Canadians, who have a lower CPP/OAS to contend with). These figures assume an income rising at the inflation rate; a faster rising income would make achieving retirement objectives more challenging. Those with target retirements in less or more than 20 years are advised to go to http://www.dinkytown.com(which by the way has a Canadian tab as well) to calculate their specific savings rates.

WSJ’s Alan Murray in “The market braces for the boomers”  reviews Jeremy Siegel’s analysis on the implications of the approaching retirement wave of boomers. Some of the questions raised include: who will buy the securities accumulated by the boomers when they start selling to generate retirement income? Who will be producing the goods and services required for boomers/society and the ongoing economic growth once boomers stop working? Who will pay the required taxes once boomers retire to keep government services in step with boomer requirements? The answers (conjecture at best) range from: more boomers in the pipeline, to foreign workers/buyers (emerging countries), to immigration (not politically credible), to boomers keep on working (very possible by necessity and greater expected longevity), and to accelerating productivity.