Junkster recently mused in a post about striking a balance between reaping now and sowing for the future as we manage our individual portfolios during our "retirement" years. The article in this link suggests it may be appropriate to plan on living to 100 as we consider this question. It also suggests we manage our individual portfolios like endowments, seeking to balance annual withdrawals and portfolio growth to avoid eroding the principal.
The idea of looking at our individual situations and then deciding on an amount to set aside for the future -- be it the nominal or inflation adjusted principal or some other amount -- makes sense to me. (It is the basic approach I use to manage my portfolio.) The decided upon amount can be set aside for use if a dramatic future increase in medical and related care expenses requires it. And, it can include additional funds to be left to our heirs and/or to do good things in the world after we are gone. The remainder of the ongoing total returns in our individual portfolios can be reaped now.
The success of this approach assumes we will avoid doing too much reaping after one or two good years. So, "Reaping Now" needs to be averaged over some number of years. But, the idea that we each need to have a conversation with ourselves and make peace with much we want to be setting aside "indefinitely" for the future makes sense to me.
http://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/03/12/the-100-year-old-portfolio-investments-for-a-long-life
Comments
After 30years...no (real) money worries.......surprise yourself
Don't know if it makes sense or not. But, I do tend to view our investments (mostly IRAs) as an endowment. Viewing them that way makes investing a lot less stressful, allows me to take more risks than I might otherwise, and encourages a more patient long term approach. But I think the trick here is to need to withdraw only smaller quantities in any given year.
In '08 we dropped 21%. In '09 we gained a bit over 28%. The first experience did not depress us or shake our confidence. The second did not elate us. We consider these types of fluxuations part of the normal flow of investing.
We get along pretty well on pensions and SS. Our needs are few. Our situation may not be typical and so this approach may not work for everyone. Has nothing to do with leaving something to heirs. Just a way of investing I've gotten used to. It's nice to grow your nest egg. But, I also think investing should be enjoyable. Take the joy out of it and what's left?
http://gosset.wharton.upenn.edu/mortality/perl/CalcForm.html
Edit: I am as guilty as anyone, but I think most of us overestimate our longevity.
Exactamente!
Is any of your portfolio or at least enough to generate some cash flow when you would have to have RMD (required minimum distribution)? Would this amount combined with SS be enough? 'Course, I am sure you could always draw as needed from the taxable accounts, eh?
Take care of yourself, and hoping no flooding in your area.
Catch
There you go then.........all set, not unlike at this house.
I've always been intrigued how much annually we spend in retirement. Obviously where we live and if married or single among other factors has an impact. The above link has some interesting retirements facts. For instance, $44897 is the average household spending for those 65-74. I would assume that is a married household. In my local community and surrounding areas I know more than a few single retirees who are doing just fine on $35,000 to $40,000 a year. That includes discretionary expenses ala trips and cruises. Then again, I live in Mayberry and about 30 years behind the times where expenses are very low.