YDNAL wrote:richk2 wrote:But you don't get my point which is why write all these books about investment theory and allocation and then bury somewhere a brief, by the way, that only about 1 per cent of the population can ever use the theories cause for everyone else it is too risky.
It appears obvious to me that you conflating issues.
- 1. Books about investment theory and [asset] allocation differentiate riskless and riskier investments.
2. Everyone is entitled to allocate savings to match their Ability & Need for risk.
3. What Bernstein says - as YOU quoted in your original post - is that "IF you saved 20x to cover your needs" you can't really afford "riskier" investments in #1.richk2 [OP] » Mon Mar 24, 2014 1:47 am wrote:
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"Now, let's say that instead of a $5 million portfolio, you have $1 million portfolio. Now you cover your needs by a factor of 20. Really, in that situation, if you want to retire at that point, there's only one thing you should be doing, and that's to take that money and probably either buy a Treasury Inflation-Protected Securities ladder and some longevity insurance on top of it, or you could just throw it all into three or four immediate fixed annuities and pretty much cover almost all of your living expenses on that. You can't take any risk."
4. Everyone is also responsible for their savings and consumption rates. What does 1% of the population have to do with any of this?
All that said, dang it, to cover 30 (or more) years in retirement save more than $1M (20x) or consume less than $50K - it ain't rocket science nor is it cause to ramble on and on as you have done since the OP on Monday.
Put another way:
If you need 50k, and by need, I mean
need, not want, not live on currently, not "like numbers starting with 5", then you cannot afford risk. Imagine if the loan sharks were going to start breaking things off unless you gave them 4k a month, plus you want $100/month for ramen. In that case, if you had 1M, you would want to be very, very careful. You do not want pieces removed.
If you do not have $1M, then you are very likely to make the loan sharks mad. There are no good answers - reaching for yield has high risk. For example, if you have only $200k, and you want $50k/year, you need a return of 25% a year, and there are no safe 25% returns.
On the other hand, if you
prefer living on 50k, but can get by on 10k, then you only need 200k to survive. You must keep that safe, but you can afford risk with the rest. That might indicate, for example, downsizing your home, or sharing an apartment so you have more options.
For many people, Social Security can cover their rent, heat, lights, and food. It would be unpleasant to not have more, but not fatal. They might, for example, have to prepare food on a hot plate when it is difficult to stand up, or not be able to afford pre-prepared food, but they would not be putting their life at risk.