Category Retirement Finance
Spending and risk tolerance in retirement: How much can I spend in retirement?
In a nutshell The risk of outliving retirement savings is a persistent worry of those approaching or in retirement. A tool was built to help answer the “How much you can spend each year without running out of money?” question based on givens (age, assets, income/pension, risk-free rate and tax rate), maximum stock allocation (based […]
Rebalancing in retirement
In a nutshell The primary application of rebalancing for most DIY investors should be risk management. Most other rebalancing reasons/approaches are essentially active calls on market direction with guaranteed costs without guaranteed benefits. Using appropriate (capitalization weighted) passive broad-market index fund(s), the risky part of the portfolio gets most/all rebalancing achieved automatically; the only required […]
Don Ezra’s “Most people need longevity insurance rather than an immediate annuity” (A review)
In a nutshell Ezra argues that the vast majority of retirees will be better of purchasing a longevity annuity rather than an immediate annuity. He opines that “the so-called annuity puzzle is not a puzzle…(but) if longevity insurance were widely available but still shunned, then that would indeed be a puzzle for social scientists to investigate.” […]
Will that be annuity or lump-sum?
In a nutshell The annuity vs. lump-sum decision is explored as a function of lump sum offered. Qualitative and quantitative considerations are reviewed, as well a tool is provided to allow consideration of: the required break-even return rates and stock allocations under various conditions, the impact of age when 60% (survivor benefit) kicks in, and pensioners’ […]
On-track to retirement? Objectives, plans and feedback to align: savings rate, retirement age, and expenses
In a nutshell An annually exercisable feedback mechanism in tax-deferred retirement accounts (e.g. 401(k), IRA or RRSP) is provided to assess whether a pre-retiree is on track to achieve financial objectives for retirement and identify corrective steps required to align plan execution and expectations. Shortfalls to objectives can be eliminated by adjusting: annual savings-rate, retirement age and if necessary the planned retirement […]
When switch from ‘Taxable-to-tax-free (TSFA)’ and ‘High-to-Low MER funds in taxable accounts’ makes sense?
In a nutshell Selling and re-investing after-tax proceeds in the same or similar stock funds can be a ‘no-brainer’ when going from taxable to tax-free (TFSA) accounts. However when switching from high-to-low MER funds within a taxable accounts additional considerations come into play, such as: the tax on the unrealized capital gain, expected long term […]
Stocks in retirement? Asset allocation considerations in retirement
In a nutshell How much stock allocation can I have, need to have and should I have in my retirement? Asset allocation considerations in retirement are determined by your personal: goals/objectives, overall financial picture (assets/income and fixed/discretionary expenses), risk tolerance (ability/willingness/need to take risk), required returns, withdrawal rates, taxes and capital market expectations. Management of […]
“The only spending rule article you’ll ever need” by Waring and Siegel- A review
In a nutshell Waring and Siegel’s “The only spending rule article you’ll ever need” proposes a dynamic spending rule based on ARVA or Annually Recalculated Virtual Annuity”. ARVA effectively recalculates each year the income that you would get if you could buy a fairly priced level payment fixed term real annuity based on current: (1) […]
Annuity/Pension vs. Lump-sum- Part 5: Putting it all together
In a nutshell Putting it altogether, you are now ready to explore your own personal situation for the annuity/pension vs. lump sum decision. If you are reading this Part 5 blog post of the final one of this series, then you have already ploughed through the first four parts: Annuity/Pension vs. Lump-Sum- Part 1: Making […]
Annuity/Pension vs. Lump-Sum- Part 4: Monte Carlo simulation to explore retirement income trade-offs with and without annuitization
In a nutshell In this blog post (Part 4 of this series) we use Monte Carlo simulation to explore the range potential outcomes given assumed Capital Market Expectations, (risk tolerance and corresponding) Asset Allocation, in the context of personal circumstances (Age, Assets, Expenses, Other Lifetime Income sources and the resulting required withdrawal rate) and compare […]
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