So we headed to NYC early Thursday morning in search of the “Teenage Mutant Ninja Turtles.” After touching down at LaGuardia we climbed into a yellow taxi held together by duct tape, rode over potholed streets with our cell phone cutting in and out (gosh I love New York City), and arrived at Grand Central Terminal around 11:00 a.m.
“A long time ago in a galaxy far far away” I was running three separate departments at then Richmond-based Wheat, First Securities. Subsequently, Tom Dorsey and Watson Wright decided to leave Wheat, First and form the now legendary firm of Dorsey Wright. When they left, that department fell under my management.
In biblical tradition, the four horsemen of the apocalypse are a quartet of immensely powerful entities personifying the four prime concepts – war, famine, pestilence and death – that drive the apocalypse. For today’s investors, the equivalent is historically high equity valuations, historically low bond yields, increasing longevity and, as a result, the increasing need for what can be very expensive long-term care.
Americans have under-saved and will need more than withdrawals from savings to survive retirement. An optimal withdrawal strategy and asset allocation, delaying Social Security, annuitizing, tapping home equity and possibly working longer need to be evaluated. Let’s take a typical American couple and evaluate which options improve retirement consumption.
Most research on retirement strategies assumes that people have saved adequately. But data on household savings shows that many households fall short, and will need to call on relatives or other sources for support. This raises questions about the best withdrawal or annuity strategies when savings are insufficient. It turns out that which strategy works best is different than for adequately funded retirements.
Most retirees pay Medicare premiums as a direct deduction from their Social Security checks. For those retirees, there is a “hold harmless” provision in the law that prevents an increase in Medicare premiums. However, certain individuals are not covered by this provision – and here are some strategies to prevent a sudden increase.
Although the general concept of mortality credits is widely understood, the underlying math is not. Understanding the math can help with decisions such as the best age to purchase an annuity and which type of annuity to purchase. Such an understanding can debunk some popular beliefs about annuities.
Leveraged funds may seem like a good idea – if we expect the S&P 500 to be positive, for instance, then getting four times its return seems even better – but long-term investors (and there shouldn’t be any other kind) should be skeptical.
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.