Search found 548 matches

by Independent
Wed Dec 30, 2009 2:56 pm
Forum: Investing - Theory, News & General
Topic: Cost of Living, geometic average,how to lie with statistics?
Replies: 22
Views: 3572

I think that LH's OP is related to the Bureau of Labor Statistic's use of geometric means in calculating the CPI. There's an example in this paper: http://www.bls.gov/cpi/cpigmrp.htm Yes, you need market shares (expressed in fractions of total dollars spent) to do the calculation. In their example, ...
by Independent
Mon Dec 28, 2009 11:52 am
Forum: Investing - Theory, News & General
Topic: Should anyone have an emergency fund?
Replies: 66
Views: 14122

Remember there could be overlap. A Harvard education could give you a higher income *at the expense of* someone who is not college educated. So, not because you are smarter having been educated, but because of the strength of the signalling effect. There is a study that says that top students who t...
by Independent
Sat Dec 26, 2009 9:56 am
Forum: Investing - Theory, News & General
Topic: Summary of basic econ
Replies: 4
Views: 818

That looks like an edited version of the first few pages of Makiw's introductory text. If the Amazon "Look Inside" works, you can read the full version here: http://www.amazon.com/Principles-Macroeconomics-N-Gregory-Mankiw/dp/0324589999/ref=sr_1_5?ie=UTF8&s=books&qid=1261838971&sr=1-5#noop One of hi...
by Independent
Fri Dec 25, 2009 2:45 pm
Forum: Investing - Theory, News & General
Topic: Should anyone have an emergency fund?
Replies: 66
Views: 14122

I know Spence is a Nobel Laureate but this does not entirely add to his credibility in this case. It's not a strong credential (other than proof that he is a very smart person). The work that won him the prize 'job market signalling' is a micro piece (about how higher education doesn't make you sma...
by Independent
Fri Dec 25, 2009 12:02 pm
Forum: Investing - Theory, News & General
Topic: NYT Editorial: Temptations of $126 Billion (NY Pension)
Replies: 14
Views: 2345

There are many public service jobs where long tenure and experience are valuable: schoolteacher, tax assessor, police officer, Treasury economist. And therefore also predictability for those pursuing those careers. The history of outsourcing government functions to the private sector has been unhap...
by Independent
Thu Dec 24, 2009 4:13 pm
Forum: Investing - Theory, News & General
Topic: NYT Editorial: Temptations of $126 Billion (NY Pension)
Replies: 14
Views: 2345

The first part of the solution is to fix public sector accounting, so that defined pension plan liabilities are valued on the same basis as for private corporations, and reported as part of the public debt. I'd like to believe that this would make steps two and three unnecessary. I'd guess that bet...
by Independent
Mon Dec 21, 2009 11:17 am
Forum: Investing - Theory, News & General
Topic: "Lost decade" of stocks in perspective
Replies: 25
Views: 3623

Re: "Lost decade" of stocks in perspective

There's been a lot of talk about the "lost decade" of stocks, but I wonder: -Suppose you had put $100/month in the market (Wilshire 5000 or equivalent), from January 2000 to December 2009. Wouldn't the end result be substantially positive as of today after having DCA-ed through the 2000-02 and 2007...
by Independent
Sat Dec 19, 2009 10:44 am
Forum: Investing - Theory, News & General
Topic: Milevsky on SWRs, a new index?
Replies: 11
Views: 2444

I certainly hope that any adviser using this index discusses it before the client makes decisions on how to invest/withdraw the retirement nest egg. (The alternative seems to be to pull it our after the fact only if it makes the adviser look good.) Used in advance, it does set up a useful benchmark....
by Independent
Mon Dec 14, 2009 11:30 am
Forum: Investing - Theory, News & General
Topic: "Guaranteed" Annuities - bad feeling about this...
Replies: 36
Views: 4803

The OP focused on the "guarantee" in annuities. To me, it's similar to the "guarantee" in corporate bonds. It's fine to say "Stock dividends and selling prices are not guaranteed, but bond interest and maturity values are." The "guarantee" in this case comes from the issuing company, and is only as ...
by Independent
Sun Dec 13, 2009 12:45 pm
Forum: Personal Finance (Not Investing)
Topic: Huge discrepancy in annuity payouts
Replies: 15
Views: 2867

When I retired, I had the option of a monthly income or a lump sum. The monthly income was clearly the better deal (when compared to using the lump sum to buy an immediate annuity). Checking with HR, the plan intentionally gives an "early retirement subsidy" to people who take the monthly income, bu...
by Independent
Thu Dec 10, 2009 4:42 pm
Forum: Investing - Theory, News & General
Topic: Missive from Singapore: Exposing Investment Fallacies
Replies: 29
Views: 5826

Bodie has some useful thougts, but I've got a lot of trouble with the "remedy" at the end. Consumers already have a "secure lifetime income that provides inflation protection". It's called Social Security. It provides an income floor for everyone. IMO, it's about as much gov't involvment as we shoul...
by Independent
Wed Dec 09, 2009 2:48 pm
Forum: Investing - Theory, News & General
Topic: Volcker: Financial innovation is worthless
Replies: 18
Views: 2651

Re: Financial Innovations - Useful and Otherwise

Actually ATM's go back about 35 years, not 25 years as Volcker suggested. I distinctly remember using ATM's in Columbus, Ohio for several years in the mid 70's and being disappointed when moving to Connecticut in 1979 and discovering that ATM's were extremely difficult to locate. During the roughly...
by Independent
Wed Dec 09, 2009 12:24 pm
Forum: Investing - Theory, News & General
Topic: Future suckers groomed by stock game
Replies: 7
Views: 1716

I have trouble with the whole idea of "investment education" for high school students. I'm sure that we all learn best when we can see the immediate need for some knowledge. Most HS kids are 15 years away from anything I'd call "investing". Their near-term financial needs are things like: making a b...
by Independent
Wed Dec 09, 2009 12:03 pm
Forum: Investing - Theory, News & General
Topic: Volcker: Financial innovation is worthless
Replies: 18
Views: 2651

I know much less about this than many people on this forum, but based on what I can see, I agree with Volcker. "Innovation" in financial products doesn't seem to have brought us much. I expect he was intending to "hit them up side of the face" to get their attention, not to say that we should never ...
by Independent
Wed Dec 09, 2009 10:13 am
Forum: Investing - Theory, News & General
Topic: 4% SWR + dynamic annuitization decisions
Replies: 17
Views: 2267

I may not understand it correctly. I did some numbers for an example... I assumed I start with $1 million portfolio, and it provides a -20% return in the first two years after retirement and +10% thereafter. ... my fund is below zero by the end of the 7th year. Basically, the annuity payouts aren't...
by Independent
Tue Dec 08, 2009 4:15 pm
Forum: Investing - Theory, News & General
Topic: 4% SWR + dynamic annuitization decisions
Replies: 17
Views: 2267

I think the idea of periodic annuitization is interesting, but I would have guessed the "<" in your formula would have been ">". I may not understand it correctly. I did some numbers for an example. I checked Vanguard's Lifetime Income page and got these annual payouts for a $100,000 annuity premium...
by Independent
Tue Dec 08, 2009 1:11 pm
Forum: Personal Finance (Not Investing)
Topic: Turn down a job, after accepting, for a "better' one?
Replies: 44
Views: 8255

When I started working, I would have said "A promise is a promise". I figured it was a two-way street, I expected to be more than a number to my employer and I figured I owned them the same courtesy I'd give an individual. Now, it's plain that the "standard US business practice" is that employees ar...
by Independent
Tue Dec 08, 2009 11:04 am
Forum: Investing - Theory, News & General
Topic: 4% SWR + dynamic annuitization decisions
Replies: 17
Views: 2267

I want to be clear on the rule.

If the market does well in the first year, then at the start of the second, P=120% of SPI, and A=0, so you do not buy an annuity.

But, if the market does badly, so P=80% of SPI, and A=0, you do buy an annuity.

Correct?
by Independent
Tue Dec 08, 2009 10:55 am
Forum: Investing - Theory, News & General
Topic: How much should a young man, or woman save for retirement?
Replies: 54
Views: 9411

Re: How much should a young man, or woman save for retiremen

How much should a young man, or woman save for retirement? I am thinking of making a spreadsheet to do the calculations. I have a initial ideal of using what ever annual salary the young person has and compounding it at the expected inflation rate each year until death. Then adding up all the years...
by Independent
Mon Dec 07, 2009 12:50 pm
Forum: Investing - Theory, News & General
Topic: 4 percent SWR rate dead?
Replies: 57
Views: 7978

I prefer a rule that goes like this: "I'll withdraw the greater of X% of my current portfolio or Y% of my initial (inflation-adjusted) portfolio." The 4% SWR effectively says that if you want to set Y=4, you have to set X=4. But, if you are willing to set Y=3, then X can go way up to 6. That's a 50...
by Independent
Sun Dec 06, 2009 6:06 pm
Forum: Investing - Theory, News & General
Topic: 4 percent SWR rate dead?
Replies: 57
Views: 7978

nisiprius - Excellent discussion. I'd like to add a couple thoughts without taking away from anything you said. The ability to cut spending is a pretty big deal. The 4% SWR posits that you can't reduce, or at least reducing below that level would be considered "failure" of your retirement plan. I th...
by Independent
Sun Dec 06, 2009 5:51 pm
Forum: Investing - Theory, News & General
Topic: 4 percent SWR rate dead?
Replies: 57
Views: 7978

LH - I believe I understand your point. You want a Monte Carlo analyzer that allows you to input a mean return of 3-4% for the first 20 years and 7% thereafter. That will certainly produce a lower SWR than one that has a mean of 7% for all years, even though the "7% mean for all years" includes some...
by Independent
Sat Dec 05, 2009 2:12 pm
Forum: Personal Finance (Not Investing)
Topic: Withdraw money from ROTH and pay off car loan?
Replies: 19
Views: 4153

At age 25, I'd have no trouble cashing in the Roth to get rid of an auto loan. BUT, that's becuase at age 25 I was able to say "I'll take the money that I was spending on the car loan and put it into a 'car replacement account', so that I will never have to borrow to buy a car again." In fact, I/we ...
by Independent
Sat Dec 05, 2009 12:42 pm
Forum: Personal Finance (Not Investing)
Topic: Is gross or net income used in the "percentages" r
Replies: 10
Views: 4421

I agree with EmergDoc. Rules like this are so rough that before or after tax is irrelevant.
That said, I'll bet that most people apply them to gross income since most people can quote that number a lot faster than after tax.
by Independent
Sat Dec 05, 2009 12:50 am
Forum: Personal Finance (Not Investing)
Topic: Fair setup/arrangement for paying for kids college?
Replies: 103
Views: 12727

I was making around $140k when my kids were in school, and I was married. We paid the full cost of private schools for all three. I can't imagine being single, making $140k, and telling my only daughter that I'll only pick up half the cost of a state school. What would I spend the rest of the money ...
by Independent
Sat Dec 05, 2009 12:23 am
Forum: Personal Finance (Not Investing)
Topic: Auto Insurance - Rental car reimbursement coverage
Replies: 17
Views: 4549

The general rule on insurance is that you insure a catastrophe, but not an inconvenience (because the insurer will always load expenses into the premium).

I'll bet that for most of us, picking up the cost of a rental for a few days is an inconvenience, not a catastrophe.
by Independent
Fri Nov 20, 2009 11:30 am
Forum: Personal Finance (Not Investing)
Topic: Immediate Income Annuity
Replies: 45
Views: 8091

dpbsmith - good, comprehensive post.
by Independent
Thu Nov 19, 2009 2:48 pm
Forum: Personal Finance (Not Investing)
Topic: how do these monthly expenses compare to yours?
Replies: 105
Views: 14368

Here are two couples. One seems to spend more than you, the other less. Food at Home .................... 296 ...356 ....8% .....6% Food Away from Home ....... 213 ...364 ....6% .....6% Personal Care ...................... 50 .....83 ....1% .....1% Housing .......................... 1,338 2,134 ..35...
by Independent
Wed Nov 18, 2009 10:46 am
Forum: Personal Finance (Not Investing)
Topic: Credit card switch strategy help
Replies: 12
Views: 2037

Re: Credit card switch strategy help

Unless there is an annual fee you may not want to close the third card. Clark Howard is recommending keeping at least 3 to 4 cards open. That way if one of the banks closes your account for you it doesn't create a hardship. BearWolf I'm not sure what "hardship" arises from only having 1 credit card...
by Independent
Tue Nov 17, 2009 9:49 am
Forum: Personal Finance (Not Investing)
Topic: Immediate Income Annuity
Replies: 45
Views: 8091

I consider an immediate annuity a type of insurance. I buy insurance only because I'm concerned about some unlikely worst-case scenario. With the annuity, the "bad" scenario is some combination of long life, low investment returns, and high inflation. (I wouldn't buy any annuity if I were sure that...
by Independent
Mon Nov 16, 2009 11:59 am
Forum: Personal Finance (Not Investing)
Topic: Immediate Income Annuity
Replies: 45
Views: 8091

I consider an immediate annuity a type of insurance. I buy insurance only because I'm concerned about some unlikely worst-case scenario. With the annuity, the "bad" scenario is some combination of long life, low investment returns, and high inflation. (I wouldn't buy any annuity if I were sure that ...
by Independent
Mon Nov 16, 2009 11:42 am
Forum: Personal Finance (Not Investing)
Topic: How to choose term for term life?
Replies: 27
Views: 3613

It's certainly true that everything else being equal, decreasing term should be cheaper than level term. I used to price both, and I'm sure this was true for our company. However, decreasing term isn't popular. Most people end up buying a level death benefit because A) inflation automatically conver...
by Independent
Mon Nov 16, 2009 11:13 am
Forum: Personal Finance (Not Investing)
Topic: Growing old without kids or younger caring relatives
Replies: 123
Views: 28089

Excellent ideas above. Sun City sounds great if I am physically ready to move 1,000 miles. More likely, I wouldn't be in this postition until I'm older, then I'd look for a local "elder community". My Mom lived in one that had "independent living", "assisted living", and "skilled nursing" in three c...
by Independent
Wed Nov 11, 2009 11:40 am
Forum: Personal Finance (Not Investing)
Topic: Why has the cost of term life gone down so much?
Replies: 12
Views: 2689

I'm not convinced that term insurance rates have gone down by much - look at the rates for "20 year Level Premium, Regular Non-Smokers". Preferred Plus rates may have gone down because companies got pickier about who they would insure at their best rates. They may have also developed better statisti...
by Independent
Wed Nov 04, 2009 10:59 am
Forum: Personal Finance (Not Investing)
Topic: Looking for Explanation--Alan Klein Social Security Strategy
Replies: 17
Views: 3143

Re: Looking for Explanation--Alan Klein Social Security Stra

Following is a statement made by Bill Bernstein during the Q&A session at BH8: "There is another approach described by Alan Klein. The higher earner in the family files for Social Security at the age of 62 and then immediately declines. The lower earner then receives a half of that amount. At the a...
by Independent
Sun Nov 01, 2009 10:11 pm
Forum: Personal Finance (Not Investing)
Topic: A Boot Camp to Prepare for Retirement
Replies: 10
Views: 2391

"Boot Camp" is a clever name and may provide a sense of adventure.

But, the things they actually do would be on any financial adviser's todo list (With the exception of #5, which seems flat wrong to me.)

If I thought I needed help, I'd look up a fee-only CFP.
by Independent
Sat Oct 31, 2009 10:32 am
Forum: Personal Finance (Not Investing)
Topic: Is there room for a Boglehead financial planner out there?
Replies: 27
Views: 6535

Thanks for the good information. The out-of-pocket cost is an issue, the time is a bigger issue. The biggest problem for me would be getting the experience if I wanted to use the CFP designation. Looking at topics and sample questions, I can see the breadth of the subject. My thought was that I'd wo...
by Independent
Wed Oct 28, 2009 4:26 pm
Forum: Personal Finance (Not Investing)
Topic: Is there room for a Boglehead financial planner out there?
Replies: 27
Views: 6535

ddb - nice analysis. I'll agree that getting that many clients would be difficult. I'm in the fortunate position that I don't have to make any money at all. I'm retired and financially independent. I worked as a financial analyst for a number of firms that sold financial products to consumers, alway...
by Independent
Thu Oct 22, 2009 9:49 am
Forum: Personal Finance (Not Investing)
Topic: Dropped my LTC Insurance
Replies: 97
Views: 13345

I am 31. I wouldn't have even thought of this but it turns out I can get a group LTC rate through my company benefit package, supposedly locked in for the rest of my life through MetLife. Thoughts? ..... I suspect by the time I am 70, $100 per day will buy me a lunch at McDonald's. But according to...
by Independent
Wed Oct 21, 2009 9:50 am
Forum: Personal Finance (Not Investing)
Topic: curious about using credit card to pay for a car
Replies: 17
Views: 3641

My guess is it's deal dependent . If the sales manager knows that he's got plenty of profit in the deal so far, he will be okay with a CC for some of the purchase price if you insist. Of course, he would have also reduced the cash price if you had insisted on that. If he's already at his bottom pric...
by Independent
Tue Oct 20, 2009 8:19 pm
Forum: Personal Finance (Not Investing)
Topic: Retirement Calculators
Replies: 3
Views: 1256

If you're a long way from retirement, I'd suggest a simple year-by-year spreadsheet that you can build yourself. The big issue is expenses that will drop off (hopefully) as you get older and retire - mortgage, kids, savings, payroll taxes, then add college, stop earnings in the right year, put in th...
by Independent
Thu Oct 15, 2009 9:56 am
Forum: Personal Finance (Not Investing)
Topic: Kotlikoff receives RIIA Achievement award
Replies: 19
Views: 3037

I read "Spend til the End", and agreed with a lot of it.

If I recall correctly, these things are all in the book:
- the 70-80% rule is far too simplistic,
- many working people don't need to "save" at all,
- the 4% rule is too low for people with flexibility.
by Independent
Sat Oct 03, 2009 11:32 am
Forum: Personal Finance (Not Investing)
Topic: Did college cost you full list price?
Replies: 105
Views: 16096

I'm surprised at the high number of people who said "paid full cost". Colleges typically advertise that "nearly everyone" qualifies for some sort of aid. My current guess is that many of the the full cost payors are people who went to in-state public universities. Maybe somebody else has another idea.
by Independent
Wed Sep 30, 2009 9:47 am
Forum: Personal Finance (Not Investing)
Topic: Where does your money go?
Replies: 72
Views: 13163

Re: Where does your money go?

I did a quick analysis and was pretty surprised. We are living on 36% of our gross income after paying taxes, savings and the mortgage payment. Taxes: 29% Mortgage payment: 20% (principal 17%, interest 3%) Savings: 15% (20.5% including employer matches in 401-K's) All other: 36% No individual categ...
by Independent
Tue Sep 29, 2009 11:06 am
Forum: Personal Finance (Not Investing)
Topic: Term life vs Return of Premium
Replies: 14
Views: 2379

Just to complicate your life -- the table at SSA.gov isn't the best estimate of your chances of dying. If it were, the company would be incurring average claims of .001376 x $800,000 = $1,101 in the first policy year for people like you, and .00917 x $800,000 = $7,336 in the 30th year. It's hard to ...
by Independent
Wed Sep 23, 2009 9:57 am
Forum: Personal Finance (Not Investing)
Topic: BofA will "allow" us to live within means
Replies: 33
Views: 5240

Beginning Oct. 19, Bank of America will stop charging any fees for customers who overdraw their accounts by less than $10 in a single day. It will also limit the number of overdraft fees it charges to four a day, although the bank will continue to charge a fee of $35 per overdraft. Let's see, 4 x $...
by Independent
Tue Sep 22, 2009 4:37 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security; spousal benefit @ age 62 & delay retire
Replies: 17
Views: 5649

But I'm still confused on the second section about "start wife benefits at 66 and delay ...". In a post yesterday, I thought the rule was that as soon as she files for one benefit, she is deemed to have filed for both (presumably, only if her husband's situation makes it possible for her to file fo...
by Independent
Tue Sep 22, 2009 1:24 pm
Forum: Personal Finance (Not Investing)
Topic: Social Security; spousal benefit @ age 62 & delay retire
Replies: 17
Views: 5649

Situation 2: your PIA is less than 1/2 of his PIA. You will get your own reduced benefit plus a reduced amount of the difference between yours and 1/2 of his. In the $900 and $2000 example, you will get your own $900 reduced to 90% of $900 = $810 for starting 18 months early plus the difference of ...