Dude2 wrote:
I don't see why it is so difficult to envision what one is currently making in salary and use that as a basis for what one will need in retirement. You were able to live most of your life on that amount and manage, so hopefully that will continue going forward. One can subtract some from that amount in anticipation of social security benefits. That number can then be what you are shooting toward in retirement for a ballpark number of 30 years.
Why the negative TIPS comments? In the past bonds have been known to be killed by inflation, so somebody thought inventing an inflation adjusted bond was a good idea. The way I see it, TIPS become the reference frame. $10 in TIPS bought today will be a real $10 whenever we withdraw it. This is what makes it easier to compute what you need for retirement. Your needs of tomorrow can be directly determined by your needs of today. If that isn't a good technique, then what is? You seem to suggest the answer is nothing because nothing is known going forward. I think we can do better than that.
One can
envision Zeus throwing thunderbolts. One can envision many things, and people do all the time. That is not the issue though. TIPS are wonderful. I invest in TIPS.
What the myth is, is that one can use TIPS as the safe basis for what you need to save, and that this number is EQUIVALENT to what someone needs to save using a traditional stock bond approach.
This is a myth. At least for the average american I posit.
If its not a practical myth, then someone needs to spit out the number, envision it, then spit it out with some math behind it, of what the AVERAGE american safe saving number is.
http://financemymoney.com/average-ameri ... dian-wage/
The average american household income is 63K.
So, what is the number that the average american making 63K needs to save via this approach?
If you cannot come up with a number, then how in the world, can you postulate this number is EQUAL to the minimum that one should save via a traditional approach?
Thats just the first step too...........
But when one just barely scratches the logical surface with these approaches, one starts talking reality, (construct a tips ladder), what does the average person need to save, etc.......
Silence.
I do not think anyone will post what the number is.
I really doubt it is
doable for the average statistical person/household (a blur of all households,who lives the average life expectancy, a household who owns 1.9 cars,). If it is doable, then please tell us what Mr. Average has to save via TIPS, whats the number a 63K household needs to save?
This is why its a myth. Nobody has put up the number yet. And if you cannot put up a number, then getting upset that people do not use that approach in the real world, is silly, if it cannot even be applied to a very simplistic average example.
If someone puts up a number, then you go, okay, what TIPS investment scheme do they use, to do the savings with, the current returns blow?
More silence. Probably just a continuation of silence, since nobody will post a number of savings to begin with.
then if by some absolute miracle, someone actually
1)posts the number with some good backing
2)posts how this investor is gonna save it via TIPS today to end up with enough to retire on
You are still left with the fact that
a single person is NOT AVERAGE. He is a single person, a very statistically difficult/impossible concept to match........ They die, they get depressed quit jobs, they get addicted to crack, they become alcoholics, they get divorced lose half, they go to jail, they get sick cannot work.......Heck, they may even capitulate out of TIPS! TImes get going great again, they go into stocks out of thier 100 percent tips. Or they think, hmm, htis doesnt feel right anymore, I am getting out of TIPS. A single person is unpredictable.... Then, TIPS in Weimar republic, how would they have done, great depression, reality can be unpredictable. The whole "risk free" issue, it goes on and on... but start simple:
how much does the household with 63K income, age 49, need to save via TIPS per year to be "safe" in retirement at current returns?
LH