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Re: less you need social security, earlier you should claim

Under current rules, if you haven't claimed yet, it is easy to change your mind. If you have already claimed, it is not so easy. This could be taken into account when you "make" a decision, ... :thumbsup :thumbsup Yes. There are about 95 points where if you delay at 62 you can change your...
by bobcat2
Sun Apr 13, 2014 6:22 pm
 
Forum: Investing - Theory, News & General
Topic: less you need social security, earlier you should claim
Replies: 39
Views: 2715

Re: less you need social security, earlier you should claim

Since actuarially (for a single person) SS benefits are neutral across the claiming range UTTER NONSENSE . If SS benefits were neutral across the claiming range for a single person the benefits would be different for males and females. They are not. If you are single, SS is a better deal if you are...
by bobcat2
Sun Apr 13, 2014 6:13 pm
 
Forum: Investing - Theory, News & General
Topic: less you need social security, earlier you should claim
Replies: 39
Views: 2715

Re: Rebalancing the whys and hows of it

Bobcat First, if you expect 7% returns and get 8% or 6% it isn't going to make any difference, that's noise. Second, I did not state it because that point has nothing to do with rebalancing. It's about the AA decision. Larry That's true, but expecting 7% and getting 13% or more, or 1% or less does ...
by bobcat2
Wed Apr 09, 2014 11:06 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing the whys and hows of it
Replies: 25
Views: 2219

Re: Rebalancing the whys and hows of it

larryswedroe wrote. For example as you note when returns are much greater than you expected (and you're late in your career and have accumulated significant assets already) that lowers your need to take risk and you should adjust your AA to reflect that, and then rebalance from that level. It's why ...
by bobcat2
Wed Apr 09, 2014 9:26 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing the whys and hows of it
Replies: 25
Views: 2219

Re: Rebalancing the whys and hows of it

Bobcat IMO you are confusing strategy with outcome. The investor choose an asset allocation because of the expected returns and risks met his goals and risk profile. Rebalancing keeps that profile, though one should also adjust over time for expected returns to make sure that the AA still meets the...
by bobcat2
Wed Apr 09, 2014 4:36 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing the whys and hows of it
Replies: 25
Views: 2219

Re: What is risk tolerance?

When assessing risk we want to think in terms of risk capacity and risk tolerance, and risk capacity is primary. Briefly your risk capacity consists of objective measures of your risk profile such as do you have a lot of debt, do you have a secure job, do you have a reserve or emergency fund, are yo...
by bobcat2
Wed Apr 09, 2014 3:01 pm
 
Forum: Investing - Theory, News & General
Topic: What is risk tolerance?
Replies: 12
Views: 508

Re: Rebalancing the whys and hows of it

You are equating "controlling risk" with "reducing risk" and that's not what is meant so the Japanese investor who never rebalanced had a risk level that did not stay constant but reduced over time as the stock market fell. The Japanese investor held constant the variance in the...
by bobcat2
Wed Apr 09, 2014 1:58 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing the whys and hows of it
Replies: 25
Views: 2219

Re: Rebalancing the whys and hows of it

First, the perhaps of rebalancing isn't to generate any "bonus"--it's to control risk. Benjamin Graham had this to say, pretty smart guy: "The essence of investment management is the management of risks, not the management of returns." A 30 year old Japanese investor at the end ...
by bobcat2
Wed Apr 09, 2014 11:23 am
 
Forum: Investing - Theory, News & General
Topic: Rebalancing the whys and hows of it
Replies: 25
Views: 2219

Re: How has a Taleb-esque portolfio done recently?

Shorting treasuries is a no-brainer? Wow. This guy reminds me of Howard Ruff. Disaster is always around the corner. Very bold statements. But both turned out to be very wrong over time. These type of folks are right once at the exact right time and then are afforded undeserved guru status. The hype...
by bobcat2
Mon Apr 07, 2014 12:37 pm
 
Forum: Investing - Theory, News & General
Topic: How has a Taleb-esque portolfio done recently?
Replies: 34
Views: 3544

Re: How has a Taleb-esque portolfio done recently?

It's funny, I came to post that same quote, but a different part that I think sums him up better... "... that’s the trade.” Taleb also recommends betting on hyperinflation using options to buy gold and silver and sell Treasuries. “You have a very small probability of making money ,” he said. “...
by bobcat2
Sun Apr 06, 2014 8:43 pm
 
Forum: Investing - Theory, News & General
Topic: How has a Taleb-esque portolfio done recently?
Replies: 34
Views: 3544

Re: How has a Taleb-esque portolfio done recently?

Nassim Talib advice given on February 4, 2010. Financial guru Nassim Taleb says everyone on earth should short Treasuries, thanks to the exploding U.S. budget deficit and potential inflation. He said at a conference that investors should keep a majority of their portfolio risk free and apply maximum...
by bobcat2
Sun Apr 06, 2014 6:01 pm
 
Forum: Investing - Theory, News & General
Topic: How has a Taleb-esque portolfio done recently?
Replies: 34
Views: 3544

Re: Wade Pfau: Lifecycle Finance

Hi learning_head, Suppose R40 didn't give a hoot about when she retired. Instead she came to you for advice in the following situation. I want very little risk in my portfolio, but I want the portfolio to consist 100% of emerging market small cap stocks. What AA advice would you give? Might you cons...
by bobcat2
Sun Apr 06, 2014 2:09 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: How has a Taleb-esque portolfio done recently?

Here is Taleb's investment advice given at a conference in 2013. The 20% zero-risk, 80% high-risk portfolio: Noting that advisors will find this principal the most applicable to their field, Taleb detailed his strategy for robust portfolio construction. Rather than selecting an array of medium-risk ...
by bobcat2
Sun Apr 06, 2014 1:54 pm
 
Forum: Investing - Theory, News & General
Topic: How has a Taleb-esque portolfio done recently?
Replies: 34
Views: 3544

Re: How has a Taleb-esque portolfio done recently?

A little defense of Taleb, or at least explanation as I understand it... - The main rejection, or reality he is trying to avoid, is that in stock market investing you are putting all the money at risk in order to get a small expected return. It's not roulette, where you might lose everything and yo...
by bobcat2
Sun Apr 06, 2014 12:45 pm
 
Forum: Investing - Theory, News & General
Topic: How has a Taleb-esque portolfio done recently?
Replies: 34
Views: 3544

Re: How has a Taleb-esque portolfio done recently?

Whether a 10/90 portfolio is better than a more standard 60/40 portfolio depends on the goal. If you are only a few years from retirement and on-track to reach your retirement goal without taking much risk, then a 10/90 portfolio makes a lot of sense. If you are thirty years old and intend to retire...
by bobcat2
Sun Apr 06, 2014 9:25 am
 
Forum: Investing - Theory, News & General
Topic: How has a Taleb-esque portolfio done recently?
Replies: 34
Views: 3544

Re: Wade Pfau: Lifecycle Finance

The point of the question was HOW IN PRACTICE with TODAY's products could R40 take the least amount of risk to get the $25k floor (inflation-adjusted)? The way for R40 to take the least amount of risk to get the $25k floor (inflation-adjusted) is to work longer. The fact that R40 doesn't like the l...
by bobcat2
Sun Apr 06, 2014 8:44 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Taleb often changes his investment advice

One thing you have to realize about Taleb is that he frequently changes his investment advice. Taleb hasn't advocated the investment advice discussed here, 90% Treasuries-10% risky assets, for several years. Taleb's investment advice at the beginning of 2010 was not that people should own Treasuries...
by bobcat2
Sat Apr 05, 2014 11:23 am
 
Forum: Investing - Theory, News & General
Topic: How has a Taleb-esque portolfio done recently?
Replies: 34
Views: 3544

Re: Help me understand

Yesterday it was announced that Thomas Piketty, the author of the second book, Capital in the Twenty-First Century , would be speaking here in Washington later this month. I tried to register for the event a few hours after the announcement, but all the seats had already been taken. Thank you, Bob....
by bobcat2
Fri Apr 04, 2014 2:27 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 164
Views: 8090

Re: Liability Matching Portfoloio

If you are in your mid -60s this advice may be too late, but the best current liability matching strategy is to delay SS or db pension benefits. Because of the prevailing low real interest rates, these annuities are much better deals than private annuities or TIPS. SS and db pensions are based on av...
by bobcat2
Fri Apr 04, 2014 1:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: Liability Matching Portfoloio
Replies: 15
Views: 854

Re: Liability Matching Portfolio

Here are additional resources at Bogleheads on the general topics of liability matching and life-cycle finance. http://www.bogleheads.org/wiki/Matching_strategy http://www.bogleheads.org/wiki/Investment_risk_management http://www.bogleheads.org/wiki/Life-cycle_finance http://www.bogleheads.org/forum...
by bobcat2
Fri Apr 04, 2014 12:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: Liability Matching Portfoloio
Replies: 15
Views: 854

Help me understand

Help me understand a different question about Flash Boys . While Flash Boys in its first week of release is the #1 selling book in economics this week at Amazon, another book in economics, which is in its first week of release in english, is #3 and sold out at Amazon. The second book in its original...
by bobcat2
Fri Apr 04, 2014 9:48 am
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 164
Views: 8090

Re: How did you determine your "number" for retirement

A good way to target your retirement goal is to estimate how much income you will need in retirement to fund your desired standard of living in retirement. Price what a real life annuity would cost at your retirement age to generate that amount of annual income. Add to the price of the annuity the a...
by bobcat2
Thu Apr 03, 2014 3:53 pm
 
Forum: Personal Finance (Not Investing)
Topic: How did you determine your "number" for retirement
Replies: 51
Views: 3272

Re: Wade Pfau: Lifecycle Finance

It doesn't matter what strategy you pursue or what financial products will become available in the foreseeable future. Most people are going to have low retirement income, if they want to save less than 3% of their income or retire no later than age 50. :(

BobK
by bobcat2
Thu Apr 03, 2014 3:18 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

Let's imagine a simple scenario: someone with wierd name R40 who wants to retire at 40 and provide a floor of $25k/year. grayfox's advice provides R40 with a ceiling of $25k/year, not a floor. Assuming the floor is truly a floor, R40 won't have anything like $474,000 leftover to invest in stocks. M...
by bobcat2
Thu Apr 03, 2014 2:30 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

There is not any strategy that can help much, if you are only going to work to age 40, or even 50. There are simply too few years of work compared to many years of expected retirement. You have to be either wealthy, or be willing to live a simple inexpensive lifestyle in retirement. Thanks for your...
by bobcat2
Thu Apr 03, 2014 11:52 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Really confused by Bernstein

AIG gets New York's help in accessing $20 billion September 15, 2008 (Reuters) - Embattled insurer American International Group Inc received New York state approval to post $20 billion of policyholders' assets as collateral as it seeks to stave off a liquidity crisis and works with banks to fix its...
by bobcat2
Wed Apr 02, 2014 4:31 pm
 
Forum: Investing - Theory, News & General
Topic: Really confused by Bernstein
Replies: 168
Views: 12693

Re: Really confused by Bernstein

Since the late 90s there have been two episodes (2000-2002 & 2007-2009) when the stock market declined about 50% and American investors lost trillions of dollars*. Over that same time span I am not aware of anyone who purchased a life annuity in the US and lost a penny. This is in part because ...
by bobcat2
Tue Apr 01, 2014 7:07 pm
 
Forum: Investing - Theory, News & General
Topic: Really confused by Bernstein
Replies: 168
Views: 12693

Re: Really confused by Bernstein

BTW, I'm not trying to be argumentative... I'd love for annuities to be a risk-free move to create a floor (I've started threads on the topic trying to work this out). My point was though if we're in a 2008 type situation, where your stock/bond AA is really threatening your retirement, it was also ...
by bobcat2
Tue Apr 01, 2014 3:37 pm
 
Forum: Investing - Theory, News & General
Topic: Really confused by Bernstein
Replies: 168
Views: 12693

Re: Wade Pfau: Lifecycle Finance

BobK, ... . I have a similar kind of question as Richard. Let's imagine a simple scenario: someone with wierd name R40 who wants to retire at 40 and provide a floor of $25k/year. I think following assumptions would be reasonable: - R40 accumulated $300K in tax-advantaged space (due to restrictions ...
by bobcat2
Tue Apr 01, 2014 9:52 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Merton's course on life-cycle investing & retirement finance

Here is a link to videos of Robert Merton's MBA course at MIT on life-cycle investing and retirement finance. The portion of the course dealing with retirement finance begins with the (3/14/12) video. Link - http://robertcmerton.com/retirement-finance-lifecycle-investing-and-asset-management-spring-...
by bobcat2
Sun Mar 30, 2014 4:31 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

I have (some) very basic questions. After reading the wiki and some of the articles, my interpretation is that a "floor" plus upside approach, say 10 - 15 years of TIPS in a non rolling ladder used to spend as income, and a coventional portfolio with the intent to extend the ladder at som...
by bobcat2
Sun Mar 30, 2014 12:08 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

Life-cycle finance (LCF) approach to retirement planning compared to Mean/Variance (MV) approach Why LCF approach gives higher probability of reaching retirement goal Here's another way of thinking about this. Those that favor the mean/variance (MV) approach want to call it the Probability Based ap...
by bobcat2
Sun Mar 30, 2014 11:14 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Why LCF approach gives higher probability of reaching goal

Life-cycle finance (LCF) approach to retirement planning compared to Mean/Variance (MV) approach Why LCF approach gives higher probability of reaching retirement goal There are many variations on LCF but all share the following two features. There is a conservative or floor income goal and a higher...
by bobcat2
Thu Mar 27, 2014 8:03 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: retirement income strategies

At least meeting your retirement income aspirational goal - lifecycle finance (LCF) approach has higher probability. Is this true even if the aspirational goal is more than slightly higher than the floor income goal? Yes. LCF is goal based. If you focus on a goal, rather than a goal or more, you ha...
by bobcat2
Thu Mar 27, 2014 2:59 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: retirement income strategies
Replies: 17
Views: 2069

Re: Wade Pfau: retirement income strategies

Some quick thoughts without going into a lot of detail. First of all calling the calling the mean/variance (M/V) approach probability based makes little sense. Here are the outcomes of the two approaches based on probabilities. Exceeding your retirement income aspirational goal - M/V approach has hi...
by bobcat2
Thu Mar 27, 2014 10:47 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: retirement income strategies
Replies: 17
Views: 2069

Use square root rule to estimate economies of shared living

The rough and ready estimate for the economies of shared living among adults is the square root rule. So if the living costs of one person is set to 1, then the living costs of two people living together is about 1.4, compared to one person living alone. Dividing that by the number of people in the ...
by bobcat2
Tue Mar 25, 2014 3:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: The least productive post ever
Replies: 18
Views: 1660

Re: Wade Pfau: Lifecycle Finance

Hi Wade, The specific methods Merton uses are not public knowledge, but the principle applied is central to finance. He is using the no-arbitrage principle. Anyone can apply that. Basically he is saying that going for more than the goal is not a free lunch, which is true, but something the mean-vari...
by bobcat2
Wed Mar 19, 2014 10:18 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

I think probability-based is appropriate for the alternative approaches based on Modern Portfolio Theory. They rely on statements like "your plan has a 90% chance for success" and are comfortable trying to use volatile assets to meet basic expenses. About which approach offers the best ch...
by bobcat2
Wed Mar 19, 2014 12:23 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: "How Much Should You Pay a Financial Advisor?" by Mike P

I think I'm missing your point(?) You not suggesting I should let an investment adviser tell me if I should downsize or do a reverse mortgage or eat lentils 5 times a week or whatever, are you? Seems like if you want an adviser, you make all your lifestyle decisions, maybe even SS, then tell him th...
by bobcat2
Tue Mar 18, 2014 2:00 pm
 
Forum: Investing - Theory, News & General
Topic: "How Much Should You Pay a Financial Advisor?" by Mike Piper
Replies: 64
Views: 4832

Re: "How Much Should You Pay a Financial Advisor?" by Mike P

This misses the essential point that you cannot reasonably decouple SS claiming decisions from investment advice. If you take SS at 64 good investment decisions are different then if you take SS at 70. Not only that, but one of those decisions is better than the other and the best investment advice...
by bobcat2
Tue Mar 18, 2014 1:12 pm
 
Forum: Investing - Theory, News & General
Topic: "How Much Should You Pay a Financial Advisor?" by Mike Piper
Replies: 64
Views: 4832

Re: "How Much Should You Pay a Financial Advisor?" by Mike P

I don't see how it is possible to get good investment advice that decouples decisions about saving and investing for retirement from Social Security decisions. Nowadays you don't have to go to a financial advisor for Social Security advice, although they all use it to draw you in. You can pay $40-5...
by bobcat2
Tue Mar 18, 2014 11:30 am
 
Forum: Investing - Theory, News & General
Topic: "How Much Should You Pay a Financial Advisor?" by Mike Piper
Replies: 64
Views: 4832

Re: "How Much Should You Pay a Financial Advisor?" by Mike P

From Mike Pipers blog post. In short, basic portfolio management and basic portfolio-related advice are both available at a very low cost these days. Paying anything more only makes sense when you need (and are going to receive) more specialized or more thorough services (e.g., a retirement plan tha...
by bobcat2
Tue Mar 18, 2014 9:45 am
 
Forum: Investing - Theory, News & General
Topic: "How Much Should You Pay a Financial Advisor?" by Mike Piper
Replies: 64
Views: 4832

Re: Reverse mortgage as retirement emergency funding?

My understanding is that the basis of a reverse mortgage is that they can be reasonable in times of high interest . We are not there. Why not sell the home and buy something smaller or even easier, rent something smaller? A reverse mortgage is a loan you take out from the bank. When you leave the h...
by bobcat2
Mon Mar 17, 2014 2:51 pm
 
Forum: Personal Finance (Not Investing)
Topic: Reverse mortgage as retirement emergency funding?
Replies: 15
Views: 921

Re: Wade Pfau: Lifecycle Finance

Bobcat2--- What is the theory behind using an Indexed Global fund in Life Cycle Funding as opposed to two equity index funds such as VTI and VXUS? Thanks. I may be wrong but I think he was just using it as an illustration of how one might create a "three fund portfolio" with global equiti...
by bobcat2
Mon Mar 17, 2014 9:22 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

In one of the referenced forum threads, there was a link to this blog article by Wade Pfau: Two Schools of Thought on Retirement Income The article contains a table describing the differences between "mean / variance" and life-cycle approaches. From my very limited background, I think it'...
by bobcat2
Sun Mar 16, 2014 5:31 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Has anyone purchased an inflation adjusted SPIA?

I believe one of the members of DC Bogleheads has purchased several real life annuities in chunks over time. I know her, but I don't know her Bogleheads user name.

BobK
by bobcat2
Sun Mar 16, 2014 10:57 am
 
Forum: Personal Finance (Not Investing)
Topic: Has anyone purchased an inflation adjusted SPIA?
Replies: 24
Views: 2267

Re: Wade Pfau: Lifecycle Finance

BobK, From a Lifecycle Finance approach, how would one handle planning for the possibility of needing long-term care? That has been a contentious issue in several discussions on the board, and there doesn't seem to be any consensus. It's a huge potential uncertainty in one's future liability--how d...
by bobcat2
Sun Mar 16, 2014 10:49 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

Liability matching is the idea that you should determine your minimum required income ("floor"), and assure that income by conservative investments like bills, bonds or annuities. Asset Dedication is a particular way to construct a bond ladder that does exactly that on a individual basis....
by bobcat2
Sat Mar 15, 2014 7:42 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

Re: Wade Pfau: Lifecycle Finance

The bottom of every wiki page has a feedback form for anonyous comments, no login required. We just received some suggestions, which have been posted to the Discussion tab. Please explain "dynamic programming" in more detail. This is the toughest one to answer, as the only explanation I c...
by bobcat2
Sat Mar 15, 2014 4:39 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824

The Three Fund Portfolio and Llife-Cycle Finance

The Three Fund Portfolio and Life-Cycle Finance Constructing a simple three fund portfolio is one way to see key differences between conventional investing advice and the investing advice recommended by life-cycle finance (LCF). An investor can take a three fund approach for investing for retiremen...
by bobcat2
Sat Mar 15, 2014 4:10 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 11824
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