You’re probably still easing into the year, so this week I won’t post anything that’s meant to teach. Instead, permit me to look forward to the next few months.
I’m trying to guess what are the characteristics of my readers, so that I can post stuff that’s useful to you. And while I’m pretty sure you share some characteristics, I also guess that in another respect you fall into two broad types.
I think the shared characteristics are a desire to be proactive, curiosity, and not being scared by numbers.
Proactive? I’m guessing that you’d love to have the time and money to indulge yourself. You may enjoy many aspects of your life today, but if you could be self-indulgent, you’d change at least some of it. Well, that’s what the ideal way to spend this phase of life is all about! It’s about personal freedom. It’s a wonderful goal. And you’d enjoy getting closer to it. I hope my blog posts will enable you to be proactive about this phase of life.
Curious? You know there are things that are outside your everyday life, but you want to learn about them, partly for the pleasure of learning, and partly because some of these things might turn out to be important to you. And when you learn, sometimes the new knowledge changes the way you think about the world, and you grow as a person. You’re not only open-minded, you’re eagerly open-minded.
And third, you’re not scared of numbers. You may even love numbers, but that’s not what I’m saying. When you see a bunch of numbers, it’s instinctive to you that some are bigger than others, that some are close together and others far apart. Numbers are a way to describe some things. They’re a language, just like words. Big, small, close, far — that’s all the number sense you need, for the most part.
Then the separation starts. Of course there are all kinds of characteristics on which you differ. But the one I’m focused on now is your degree of technical knowledge. Some of you are non-technical, as far as investment and finance go. And others are techies, and some of the language of finance and investing is an everyday part of your lives. So as an overall group, you come at these posts with different backgrounds and different levels of initial knowledge, and different levels of expectation about what you want from them. Some of you techies have contacted me in private and said, in essence: “Get on with it! Give me something that will help me with the numbers, as I prepare for retirement.” I hear you.
So I’ll continue with some posts on Topic 1 (relating to happiness and the psychology of retiring – that’s something that’s relevant for all of us), while also giving you more meaty, numerical stuff. The techies should understand this numerical stuff right away. The non-techies should understand the purpose and the approach; if the calculations seem a bit abstract, check with your favorite techie expert.
In particular, I’ll have a major focus on your personal funded ratio, in this coming quarter. This is a measure that compares the amount you’ll have, taking into account your existing and future savings, and compares that with the amount you’ll need to support your planned lifestyle for the rest of your life. Of course this isn’t a prediction, it’s an early estimate. But I’ll show you four ways to compare the two amounts, so that you’ll get a lot of insight into where you already are and what kinds of things you may need to do to get you to your goal.
Ideally, what I have in mind is to create a sort of app on the website, where you create inputs and the app will give you outputs that you can print out. Once you erase your inputs, the record will be gone; the website will keep nothing. That’ll ensure your privacy. I think that’s how the website http://www.longevityillustrator.org operates (the one I used to find life expectancy numbers in Post #12). Anyway, that’s my goal. I’m not there yet. Give me a little time to get there.
Other than that, there’s nothing fixed about the contents of the posts in the next few months. Of course I have a number of ideas, but I’d prefer to have your input, and so I’m setting out some possible topics below. I’d really like you to tell me which ones are most appealing or important to you. Or add topics that aren’t listed, if that’s what you’d prefer. Send them to me via the Comments section — I won’t post them (nobody else will know what you’ve asked for), I’ll just add them up and use them to determine what exactly the content will be. You can do this at any time — your input is always important to me.
OK, then, here are some ideas:
- Pacing our lives as a five-act play
- How best to spend time and money
- Retire to a lifestyle, not just from one
- What are your goals for the future?
- What if you don’t have a financial professional?
- Using a “life coach”
- How healthy is your romantic Venn diagram? (OK, that tells you nothing! — but those who have heard me on the subject tell me it’s surprisingly memorable, about being a couple as well as two individual people)
- Historical investment return patterns
- Your fundamental investment choices are to eat well or sleep well, and they depend on psychological as well as financial factors
- Your home as part of your retirement portfolio
- Invest actively or passively? They’re really three separate issues
- More detail about how to use different longevity tables
- Glide paths and how to improve them
- Risk: what happens when the rubber hits the road
- Three broad phases of life after work
- Three retirement goals ideally need three separate instruments
- Three things that could derail your plan
- Four ways to convert assets into a sustainable income stream
- The role of an annuity in a sensible retirement portfolio
- Good advisers will speak our language
That’s more than enough! Over to you …
A list of possible ideas to discuss in the future
I have written about retirement planning before and some of that material also relates to topics or issues that are being discussed here. Where relevant I draw on material from three sources: The Retirement Plan Solution (co-authored with Bob Collie and Matt Smith, published by John Wiley & Sons, Inc., 2009), my foreword to Someday Rich (by Timothy Noonan and Matt Smith, also published by Wiley, 2012), and my occasional column The Art of Investment in the FT Money supplement of The Financial Times, published in the UK. I am grateful to the other authors and to The Financial Times for permission to use the material here.