As Baby Boomers heading into retirement pursue investment income, Leo Acheson of Morningstar says it’s important to have a good financial plan.
Given all the unusual factors attached to the current need to increase the debt ceiling, and the very unhealthy political climate, I could see a lot of turbulence in the markets just ahead. In a worst-case scenario, a debt ceiling crisis could even result in a new recession.
In today’s Morning Tack, however, we are referring to “Better Call Shad,” not Saul, meaning Frederick “Shad” Rowe, the founder of Dallas-based Greenbrier Partners and also a “fixer of sticky situations.” The current short-term “sticky situation” would be the stock market flat-lining for a few weeks and in the process frustrating both bulls and bears alike. After our talk, I went back and re-read Shad’s April letter to shareholders. There were a few lines that really resonated with me.
Is time segmentation a superior investment strategy for retirees relative to total-return investing?
For time segmentation to work, there must be a clear procedure for how to extend the bond ladder. Unfortunately, with its varied implementation, that procedure is often overlooked. I will examine the potential for time segmentation by considering three different ways to implement it.
Time segmentation is wildly popular in practice and it goes by many different names. But it is also the least studied retirement-income approach. Whether time segmentation is a superior investing approach for retirement income has led to many heated debates.
DALBAR’s method for calculating average investor returns unfairly understates these returns. DALBAR does not properly calculate an internal rate-of-return for an ongoing series of cash flows, which renders its results meaningless. DALBAR’s response to this article is also provided.
1. 3Q Gross Domestic Product Rises More Than Expected 2. Fed Seems to Admit That ZIRP Didn’t Work as Expected 3. President Trump Willing to Increase Domestic Spending 4. Time for the Fed to “Normalize” Monetary Policy 5. “Handing Down Your Legacy” Still Available For Free
When comparing strategies for coordinating home equity with portfolio distributions to generate retirement income, the tenure option fairs well. As a way to fund retirement efficiency improvements, using the tenure payment option from the line of credit as an alternative to purchasing a SPIA or DIA is worth exploring further.