FYI: Risk is a tricky concept to grasp because most people don’t really understand what their true risks are. We tend to worry about things that are readily available in our memories while spending little time worrying about problems that could be years or decades out into the future. For the majority of investors, their biggest risk is not meeting their goals, or worse, running out of money. This piece I wrote for Bloomberg looks at a study that sheds some light on another risk associated with longevity.
Regards,
Ted
http://awealthofcommonsense.com/2017/08/the-biggest-risk-for-most-retirees/
Comments
I know. Yes, I know I'm a broken record on a tool that is extremely useful when discussing long term planning and decision making. That's because I've been retired for almost two decades and have experienced many of its issues and problems.
A key worry and real problem is running out of money. Knowing that likelihood, and some discipline, are critical elements in this arena. To the surprise of no MFOers, the tool I constantly endorse is Monte Carlo,analyses. The primary outputs of that now user friendly tool are a portfolio survival odds estimate and a value range of those end-of-period probabilities.
Here is an MFO internal reference to a post that I submitted a few days ago on this very topic:
http://www.mutualfundobserver.com/discuss/discussion/34976/monte-carlo-investing#latest
It provides Links to 2 very good, free Monte Carlo simulators that are easy to use. Please give them a test.
Doing just a few what-if scenarios will give you a feeling for many potential retirement shortfalls. These tools also are easily exercised to explore how rather small changes can have a dramatic impact on portfolio survival odds. That's where the do-it discipline enters the equation. Good luck to everyone.
Best Wishes