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MANAGING MONEY IS about managing risk. But which risks? We all have a different collection of financial worries, and that drives the investments we buy and the insurance we purchase.
Problem is, every choice we make comes with a tradeoff. If we seek to fend off one risk, we often open ourselves up to other dangers. Consider five such tradeoffs:
1. Dying young vs. living long. When should we claim Social Security? Should we use part of our retirement nest egg to purchase an immediate annuity that pays lifetime income? If we’re eligible for a pension, should we opt for a lump sum or regular monthly payments?
These three questions all deserve careful analysis. But often, we answer based on worry: Are we most fearful of dying young, or is our big concern that we’ll outlive our money?
2. Enjoying today vs. prepping for the future. HumbleDollar readers tend to be masters of delayed gratification. That’s how many of us managed to amass enough—and often far more than enough—for retirement.
Once retired, we then strive to make the transition from diligent savers to happy spenders, and so we should. After all, that’s why we saved all that money. But from perusing comments on HumbleDollar, I’ve noticed that some take this a step further: They aim to really ramp up spending in their 60s because they figure that, later in retirement, they’ll spend far less and they won’t enjoy their money nearly as much—assuming they even live that long.
As I’ve mentioned before, I’m not sure this excessive spending is wise, in part because folks could face hefty long-term-care costs down the road. What’s driving the “spend heavily in our 60s” mentality? We might view it as a variation on point No. 1. Is our big fear dying young, without fully enjoying our money, or is it being prepared for the future, when that money might come in handy?
3. Getting rich vs. avoiding poverty. We all have both desires, but in varying degrees. One way to straddle these two is with the classic balanced portfolio, with its mix of 60% stocks and 40% bonds. Those who care more about avoiding poverty will likely opt for more bonds, while those whose greatest concern is getting rich might tilt more heavily toward stocks.
For some folks, these dueling impulses can translate into an odd use of their discretionary dollars. Think of the unsophisticated investors who keep almost everything in savings bonds and FDIC-insured bank accounts, but also spend money on penny stocks, lottery tickets, meme stocks and an occasional visit to the casino. The cash investments help them feel safe, while the longshot bets allow them to dream of riches.
Wall Street, and especially insurance companies, cook up products that aim to appeal to these twin impulses with a single investment. That’s how we end up with things like equity-indexed annuities, where investors can capture part of the stock market’s upside while being protected against losses. It’s a bad product, but a great marketing gimmick.
4. Simplicity vs. diversification. It’s possible to build a globally diversified portfolio of stocks and bonds with just two or three mutual funds or exchange-traded funds, thus combining simplicity with the safety offered by broad diversification. But what if we’re talking about a different sort of simplicity—limiting ourselves to just one or two financial firms, so we keep our finances simple for our own sake and that of our heirs?
I’ve never worried about diversifying across financial firms. I have almost all my money at Vanguard Group, and I use just one bank. But is this wise? For instance, in an era when financial firms are constantly under cyberattack, could thieves drain a financial firm of billions of client dollars, bringing the firm to its knees and leaving customers penniless? I have no clue whether this is a real risk or not, but I know it’s a major worry for others.
Countless times, I’ve also heard folks say they’d never buy an immediate annuity because of the risk that the insurance company involved might fail. Over the years, some small insurers have indeed gone bust. But what about major life insurers like New York Life, Northwestern Mutual and Mass Mutual? I find it hard to imagine one of these firms could fail—but others clearly can.
The concern over betting too much on one institution even extends to the federal government. Today, there are plenty of folks who fear Social Security benefits will be cut, especially once the Social Security trust fund runs dry in a decade or so. Again, this isn’t a fear of mine, but it’s a concern of many, and it’s one reason they claim benefits at age 62, the earliest possible age.
5. Insuring this vs. protecting that. By my count, there are eight major types of insurance: health, life, disability, long-term care, auto, home, renter’s and umbrella liability. Buy blanket coverage, and we might find we have precious few dollars left over for retirement savings and other goals.
To a degree, logic and necessity will guide our choices. Parents with young families should likely have ample life insurance, car owners are typically required to have an auto policy, mortgage lenders insist borrowers have homeowner’s insurance, and arguably everybody should have health coverage.
Still, that leaves a fair amount of leeway—and worry will likely dictate the choices we make. Those who worry about their health will often favor policies with low copays, low out-of-pocket maximums and fewer restrictions on the medical providers they use. Meanwhile, those who are risk takers might favor coverage with high deductibles, while skipping some policies they deem unnecessary.
We all have an image of ourselves, and about how conservative or aggressive we are. But action speaks louder than words. Take a look at your mix of investments and your collection of insurance policies. What does your financial life say about your worries?
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles.
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When we sold our house, I put the proceeds in a different bank from the one we use for checking as well as two credit cards. It made me feel safer to have that money at a bank that wasn’t linked to any other activity or accounts.
Thanks, Jonathan. I was wondering if you or one of your followers might be willing to expand a bit on why an equity-indexed annuity is a ‘bad product’. A friend suggested I consider a RILA annuity, which sounds similar, for a small portion of my retirement portfolio. Admittedly it sounds to me like an appealing way to help try to balance out peril #3.
An equity-indexed annuity is the functional equivalent of owning a mix of stocks and bonds — with a huge expense ratio. I’ve seen EIAs that pay insurance salespeople as much as 17% of the sum invested, and that money is recouped by slapping buyers with huge back-end commissions if they sell before the product “matures.”
Even at the more typical 7% commission, good luck finding an insurance salesman that is putting your best interest in front of his own. Those surrender fees typically apply for between 5 and 8 years.
IMO, if one does not possess a severe fear of stock market volatility there are better options.
Jonathan,
Thank you for another great post!
And a big Thank You! to all the commenters. I really enjoy reading how other folks allocate their retirement funds. They sure do give me lots to think about.
Decision, decisions… I don’t have any trouble with number 1 – I am far more concerned about running out of money than dying young(ish). If I die tomorrow, at 77, I really won’t care that I haven’t spent down my portfolio, whereas, if I reach my late 90s, as two of my grandparents did, I will want to know there is still money available. I waited until 70 for Social Security, to get the biggest possible base for future COLAs.
WRT number 2, I took early retirement so I could travel, and did so for 15 years until my rheumatoid arthritis came out of remission. However, I did not blow a lot of money traveling. I didn’t take expensive cruises or tours, and I certainly didn’t stay in posh hotels. Much more fun, and much easier to meet interesting fellow-travelers, if you stay in small local hotels or B&Bs (not AirBnB).
For number 3 my portfolio is even more balanced than 60-40. Figuring I don’t need to take a lot of risk, mine is 50-45-5.
All my investments are at Vanguard.
Of course, I have medical insurance. At various times I have carried term life, disability, home and flood insurance. When I traveled I not only had medical insurance that covered me abroad, but evacuation/repatriation as well.These days I have renters, auto and umbrella.
I forgot to mention the travel policy. For the last couple of years I’ve bought us annual policies that cover all our trips, domestic or abroad, mainly because of the evacuation/repatriation piece, but the rental car coverage is good, too. Less than $500 for both of us and well worth it, in my opinion.
Numbers 1 and 2 hit home for me as we want quality of life if we are fortunate to live into our 90s. When we downsized our home, we included ‘aging in place’ features (one level, no steps from garage, walk-in shower, bars, higher vanity, and wider hallways). Waited until 70 to take social security and opted for monthly payments on a small pension.
We added a deferred annuity to cover home services as we age (lawn care, house cleaning, windows/gutters, HVAC maintenance, etc). We do have kids/grandkids close by who help us whenever we need them, but we want to be as self-sufficient as possible. We enjoy hiking and biking and live 1/2 mile from trails, so we stay active. Side note: My dentist told me, “Take care of your teeth and your feet!”
Based on my own experience, I would never consider holding my assets in a single financial institution, because I’ve personally experienced the consequences of large collapses. When Executive Life, the biggest California life insurer, went down in 1991, First Capital followed and took some of my money with it — which was a major problem because the rest of my then-miniscule nest egg was frozen in the failed Rhode Island savings and loan system. My mortgage holder wasn’t the least bit sympathetic. I missed two payments and almost lost the condo before I was able to sell it at a 15% discount.
And when Washington Mutual collapsed in 2008… guess where I was doing my banking.
We are products of our experiences, so today I hold little money in the bank and my quite modest retirement accounts are spread across Schwab, Vanguard, Betterment and Wealthfront. I know on an intellectual level that it’s an excessive precaution, but I gotta be able to sleep.
Like you, Mike, the failed Rhode Island savings and loan system froze my nascent nest egg, too. At the time (late 1980s), I couldn’t resist the lure of supposedly insured savings and all-too-high interest rates. I was eventually grateful to have been made whole by the state and to have learned lessons of diversification and due diligence. The experience also resulted in my excessive caution with respect to safety. To this day, the proportion of fixed income in my portfolio (50%) may be too high for most but it helps me sleep at night.
We did eventually get our money back, Jo, but I wouldn’t say I was made whole. I loved my little condo in Cumberland. Right on the river.
ironically, the experience had the opposite effect on me that it did on you. I disdained “safe” investments from that point on, focusing on risky tech stocks when I moved to California. And I still have less of my portfolio in fixed income instruments than most people my age.
Interesting that those that failed were insurance companies and banks. I think investors should not use these types of institutions for investments. Brokerage firms such as Fidelity and Vanguard don’t use your money the way banks and insurance companies do. The only uncertainty is the cyberattack mentioned
I wouldn’t call that an uncertainty. I would call it an absolute lock. Guaranteed to happen at some point. But you’re right, it is a very different kind of risk.
These are indeed the decisions we all debate, some of us more intentionally and extensively than others.
The keys may be to make no quick decisions, nothing spur of the moment, or reactionary to an event.
Be introspective, say the thoughts out loud to others to refine your decision making rationale and sleep on it before acting to ensure no change if heart.
Then remain flexible enough to change your mind again to change course if its still possible!
In the 9/27/2024 Bogleheads University 501 series the video, Asset Protection Strategies with (Emergency department Doctor) Jim Dahle, the good doctor opines regarding additional actions that we can take in our professional and personal lives that in addition to buying umbrella insurance helps to mitigate having an above policy limit judgement against us.
His advice, in addition to having appropriate liability insurance, in a nutshell – Be competent, be nice and avoid high risk activities when we can. I enjoyed and learned from the video.
https://boglecenter.net/bogleheads-university/
Thanks for that. Jim Dahle’s talk was outstanding. Plus his down to earth discussion about the lawsuits was actually very comforting that doing the basics significantly reduces your overall risk. Good stuff.
I forget my 2024 New Year’s resolution but whatever it was initially, it’s since morphed into “Recognize and address fears.” So here, financial worry. I fear both having too little and having too much, though at the end just one of these two states will exist, and the assessment may come too late for corrective action. As for addressing this, I can additionally bifurcate into exogenous worries (the world, economy, market, all do what they will) and self-recognizable and possibly manageable worries (“The fault, dear Brutus, is not in our stars/But in ourselves.”)
For exogenous concerns, I invoke Alfred E Neuman. “What, Me Worry?”
That’s where #4 (diversification) kicks in and I apologize now to my family/executor who will be tasked with cashing in and consolidation, but they will get those “pennies from heaven” so not totally troublesome.
The bulk of my worries therefore regard my own flaws and shortcomings, which increase the longer I live, and worsen with whatever bad luck or health troubles I encounter. (Some good luck comes my way, too, though can hardly bank on it.)
Just putting these questions up here, Jonathan, reminds me that I need to make a couple photocopies of my immobile home title/insurance, one copy to put in the Big Binder that the kids know to pull out of the closet. The other with my various papers here, with a note where the original is (should be in a fireproof box of Obviously Important Stuff or a safety deposit box, fewer and fewer of which exist). Of course if I forget to do that, then the kids can head over to the motor vehicle department to replace the “lost” title… But why make their lives any harder at that point?
I’ve avoided poverty my whole life by spending three years in the Peace Corps as a young adult, which reset my internal thermometer about what constitutes “enough”. I have a pretty clear idea how to live on a few thousand dollars a year, as a billion or two people around the world must live. Many impoverished people live rich, fun, lives, full of family and love. Many rich people are miserable and lonesome. Yes, better to have both love and some money, if a person can set themselves up for it.
The Norman Rockwell museum has a wonderful Mad Magazine exhibit. I bought a bumper sticker there that said “Alfred E Neuman for President. What, me worry?” along with that cartoonish gap toothed likeness. It’s still on my car even after the election. It still makes me smile every time I see it.
I have a couple comments that probably don’t apply to HumbleDollar folks.
Fixed Indexed Annuities have typically outperformed CDs, so I think they have a place for people who are too risk adverse to ever invest in mutual funds. The thing I have a problem with are the insurance agents that push them, who do not possess securities licenses and pass themselves off as financial planners.
Not having renters Insurance is a head shaker for me every time I see a go fund me request for the victim of an apartment fire that didn’t have a policy. The premium is so affordable. It’s not unusual for the multiple policy discount to be greater than the cost of the basic renter insurance policy, making the policy nearly or totally free.
Finally, how about those retail product protection plans? I was given the option to pay $65 to insure a $300 computer. Seriously? I wonder how many thousands of dollars I have saved by not buying this insurance.
We’re definitely in the “plan for longevity” camp, even though we’re well aware that no one gets any guarantees. (My father died at 61 and my grandfathers also both passed in their 60s.) We took (or will take in my case) pensions rather than lump sums and with survivor benefits. We’re postponing claiming Social Security, at least one of us until 70.
We’re also pretty committed to enjoying experiences we can afford while we’re still young, healthy, and energetic enough. We want to travel and have a list of places both domestic and abroad we want to experience in the next 5-10 years, which is probably our window. We also enjoy things like live theater, concerts, and sporting events. These are expensive, but we know that the time will come when we won’t physically want to make that much effort and will stop doing it. This calendar year we’ve been to Sphere in Las Vegas twice (U2 and Eagles), saw Bruce Springsteen at the Chase Center in San Francisco, and accompanied our daughter to see Taylor Swift in Amsterdam. (Part of this is feeling that if Bono, Don Henley, and Springsteen, all of whom are older than we are, can still do this, so can we!) We’re planning a trip to New York for my 65th birthday in August, which will involve seeing the Giants play the Mets, some Broadway shows, and hopefully a class at the Peloton studio. This is the kind of trip I don’t see us making at 75 or 80.
As I’ve written here before, I’m an insurance man’s daughter and have stayed well-covered. I only dropped my disability coverage last year, realizing that I’m close enough to retirement to not need it anymore. Our term life policies will expire in 2025 and 2029. But we do have long-term care and umbrella insurance, in addition to the requisite homeowners insurance and health (which we currently get through my husband’s state retirement system with Medicare kicking in next year).
Have fun in NYC, Dana!
I hope the new Studio system makes it easier for out-of-town visitors to book a bike. Last time we visited NYC I tried for weeks and failed. In the early days of Peloton it was way easier.
I assert Bruce still provides the fullest value per concert $ of any entertainer. At age 75. Where does he get the energy?
Of all the great concerts we went to this year, that was the absolute highlight for me, and he was amazing. I’ve loved him since the 70s but this was my first time ever seeing him live.
I got into the London Peloton studio for a class in June, and it was fantastic. I’ve heard that the NYC studio is harder, so 🤞. I’ve also heard that if you get on waitlists you have a pretty good shot of getting in eventually. It would be cool to take a class on my 65th birthday!
Dr. Lefty, You are well spoken in your approach to enjoying experiences now, while you are healthy enough and have the time (and money) to do these things. I love the comment that if Springsteen can still perform at his age, we should make it our business to go to his concerts now (I’ve seen him many times too, being from NJ). BTW, you should definitely go to Peloton Studios in NYC for live rides when you do visit here. I’ve done it several times and it’s a blast! Definitely an experience you will enjoy! What’s your screen name on Peloton…I’m Luvtoride40.
As I said above, I got to take a class at the London studio this summer and meet Sam Yo, my favorite instructor. My leaderboard name is DrLefty (shocker, I know!). I’ll follow you!
The Springsteen show was such a highlight. I still smile just thinking about it.
Your comment demonstrates how different people can be.
I’ve never been to a concert, I can be in Times Square in 30 minutes on a bus I get a block from our home, but haven’t been to NYC in nearly twenty years and no desire to go. I’ve never been to a ML baseball game – I just don’t like crowds.
I have been to a few Broadway plays, but half we saw in London, including Jersey Boys. During a couple we saw I fell asleep much to Connie’s displeasure.
I have kissed the Blarney Stone though and stood at the traditional site of the Nativity and visited 45 countries.
On one hand I’m pretty dull, but I’m up for travel anytime … or was until age limited us. GO FOR IT ALL WHILE YOU CAN. 😎
RQ, funny, we are from Jersey and saw Jersey Boys in London too. I think we were the only people in the audience who knew the opening line “…there we were, 4 guys under a street light in Belleville New Jersey” who knew where that was and had been there! lol.
The father in law of my golfing buddy was Tommy DeVito.
Thanks for that last sentence in particular!
We have two new-to-us destinations on the calendar for 2025: South America in February (I’ll be on sabbatical, so we can travel then) and French Polynesia at the end of August (that’s my “yay, I retired” celebration trip!). I saved a LOT of Marriott Bonvoy points for the St Regis in Bora Bora!
Even the most rational among of us have an emotional bent when it comes to money and aging. My mother divorced my alcoholic abusive father when she was 50 years old. At the age of 51, she had a brain-damaging aneurysm.
My brothers and I banded together (we were 26, 24 and 21 at the time) and took care of her physically and financially for the next 25 years until her death. It was catch-as-catch-can: living with each of us and/or in places arranged by us. Until she left cigarettes lit and burned down two homes in two years which led to 6 different mom and pop nursing homes we could afford.
More aware than most that life is short, I left my husband at the age of 52. And as soon as the math worked, I quit work to travel full-time with a new and non-alcoholic husband. Ironically, it was my brother’s death at the age of 63 which pushed the math into “quit work” territory.
I have absolutely NO trouble spending money after saving it for so long. And I viewed the money I inherited from my brother as a permissive gift. I want as happy and full a life as I can muster on this slow slide to the void. Money is a means to that end. And I plan to spend as much of it as I can.
All good questions, and most are capable of being revisited. If your investments are too complex or too conservative, sell ’em and start over. If life insurance is too expensive or becomes unnecessary, let a term policy lapse. Of course, some decisions (starting Social Security, claiming a pension) are irreversible. In that case, move on and stop second-guessing yourself unnecessarily.
Frankly, I wrestle with the choice between set-it-and-forget-it with investments v. constant tinkering with our financial plan. The accumulated HD wisdom helps keep me from making too many changes. . .
Great article Jonathan. Where someone falls on the “dying young vs. living long” tradeoff is always fascinating. I think it’s a great example of how two intelligent, competent, decent people can look at he same set of data and arrive at vey different conclusions. For example, I know many folks who have plated a significant role in caring for elderly parents. For some (me included) that leads them to a more conservative position of planning for a long life so they we aren’t a burden to our children. Others I’v e spoken to see the frailty of advancing age and plan to (or at least claim to) burn through retirement savings as quickly as possible. When asked about care if they outlive their money, I’ve heard variations of “throw me in any old closet, or dump me in the cheapest home because I won’t care”. One guy at work was famous for that, almost boastfully. One day I asked him if he had done that to his dad, and he quietly admitted he had taken good care of his parents. I then asked him if he had raised his kids the way his parents raised him and he acknowledged that he had. I’ve lost touch with him, but it would be interesting to see how his retirement plays out.
I’m also in the camp of planning for a long life so that we won’t be a financial burden to anyone, especially after observing my late mother-in-law’s decline from Alzheimer’s and how expensive her care over the last year was. Thankfully, she and her husband had plenty of resources to cover it.
However, my own mother, who’s 83, recently announced that her resources are limited and that if she needs care down the line (in home or facility-based), she expects my siblings and me to kick in to help her partner (a younger man who just turned 60) pay for it. She’s also proclaimed that she plans to spend all her own money (she has some but not that much) because the three of us have plenty of money (that is actually true only to a point, and we’re not all in the same financial condition) and don’t need an inheritance from her. That part is fine, but she’s overlooking that if we had to contribute thousands of dollars a month to pay her care bills, it would compromise our own financial security, and we’re all heading into retirement years ourselves. The entitlement she’s expressing is rather breathtaking, and as a parent myself, I don’t quite understand where she’s coming from.
Good luck with all this, it might be a good time to explain to her how you “do money” and that no matter what she perceives as your wealth level, there’s only so much non-essential spending available.
Wow. Is that entitlement, or something even stronger? You and your siblings need to discuss and decide what’s reasonable (and what’s not!) as a response to your Mom and her partner. Circle your wagons and consider what the future holds under this circumstance. I wonder if Kathy’s comment about dementia is at play here.
That’s breathtaking! Could she be suffering from early dementia?
Sounds like time for several family councils.
My siblings and I have of course had several follow-up discussions among ourselves. The correct answer, if it comes to that, is that she should qualify for MediCal coverage, which would pay either entirely or partially (beyond her Social Security check) for in-home or residential care. We’re trying to figure out when or how to have this discussion and with whom (both of them? Just her partner? Aargh.)
I don’t think she has dementia. She’s never been an easy person, and age has just made her, well, more that way.
“A younger man who just turned 60”
Perhaps he should get a job.
He has a job. She’s retired, of course. They live in a house that he inherited, and he gave her a life estate in the home. I think she feels bad about him exhausting his resources to care for her, and I get that—he’ll be retiring at some point and has no children. But she’s not being very realistic about what her options are.
My brother-in-law made a different, yet similar announcement when he told us he was moving across country to be near us for help in dealing with his illness. The illness was slowly progressive, and we had implored him to plan for his eventual need for an assistance close to home, near his friends. He didn’t, but waited until crisis time. The sale of a home and his pension financed his life here until his death, so we had no need to provide money, but the strain on our time and emotions was tremendous. We still feel the reverberations two years later.
The situation led to much soul-searching for us, trying to determine the appropriate limits of family caregiving. Up front, I insisted it couldn’t jeopardize our financial stability, even if it wrecked our schedule. Because of his contentious nature, he shifted from one facility to another, eventually winding up in an assisted-living facility owned by friends. They provided extraordinary care until his death.
I truly feel for you and your siblings. As we made decisions about how much care to give, we rested on the belief that siblings are different from parents, which is perhaps just a mental construct we created. You don’t have that thought to fall back on. I still think I would recognize that there are limits to how much any person deserves of another time and resources. That’s not advice–just speaking of my own guidelines.
Thanks for that, Ed. Yeah, it’s a sticky situation. There are answers (specifically from state-funded programs for low-income seniors, which she is), but explaining that we’re not in a position to decimate our own financial security to just pay for her care on demand is going to be fraught.
Is her husband a good person? Just wonder what his thoughts are about your mother’s expectations regarding you and your siblings. Hopefully he thought about this eventuality when they got married.
Your Saturday newsletter is always a treat. Your contention is we all have an emotional component to our money decisions, even if we don’t realize or admit it. It would be interesting to look under the financial hood of those folks who appear or claim to be coldly analytical in all their actions, to see if their image aligns with their actions, as you put it.
At 57 I just purchased my first bond fund VBTIX and I am struggling to accept it. 5 years ago, I was of the mindset I would never own bonds. Roughly about 10% of my portfolio I feel now is NOT part of what I have worked hard dollar cost averaging for the last 30 years. I know I shouldn’t feel this way but my comfort level in buying bonds is not there. Funny thing is, I have 3 years worth of income in money markets and have had this for the last 5 years and I am content with it. So my thought is I don’t see a 60/40 portfolio anytime in my future but with my track record 77 is just 20 years away which would mean every 5 years my comfort level to bonds would grow by 10%. Hmmm.
I still don’t get why people buy bond funds. Money funds or buying Treasuries or CDs seems to make more sense. Or just buy bonds yourself.
There’s a strong argument that other aspects of your financial life – Social Security, a future pension – are bond / income equivalents. I try to evaluate my portfolio with those income streams as x% (good luck with the math!) of my overall position.
There’s a saying that if you’re happy with everything in your portfolio then you’re not properly diversified.
I guess I’m to simple to understand your statement. Please explain it to me. We have two SS incomes and three pensions which meet 100% of our expenses. Our portfolio is
50% VT (Vanguard World ETF),
25% VTI (Vanguard All US),
25% VUG (Vanguard Growth)
We are totally diversified and happy with it
Pick your peril, indeed. Even deciding WHEN to retire (if and when you think you have enough resources to live) seems like the one that scares many folks the most!
Jonathan, this post reminds me of the themes of many of books I’ve read about financial planning and spending in retirement. Particularly, “Die With Zero” one of my favorites. To spend your money on experiences while you have the time and health to do them (the early years) and enjoy the fruits of your working years!
Yes, we all have different risk tolerance’s that will guide our financial decisions (my wife and I both have pensions that we’ve elected Joint and survivor payouts for) and spouses need to consider each others risk tolerance to make these choices.
All of these are important decisions that could overwhelm and freeze some folks from taking the actions that are best for them. Are there any wrong answers? We might never know if we made the right choices or not.
I really liked “Die with Zero,” which I learned about here on HD. Most of what I’d been exposed to was “die with a lot” so that you can leave it to family or charity. In particular, what I liked about the book is its argument that when it comes to giving to family/charity, why wait? Obviously retain enough resources for your own needs and be smart about it, but you can enjoy the fruits of your giving while you’re still alive, and the recipients need it now—not 20-30 years from now.
Interesting article. Maybe I land a bit to the risk taking side if the spectrum, though not on all counts, and I don’t really consider myself one.
1.Plan to take SS at 70, no plans to buy an annuity, took pension as lump sum.
2.Early 60s, retired three years ago, not especially trying to spend but not especially hesitant to either. We’re aware of our yearly spend and are comfortable with it.
3.Allocated 65/35 but headed toward 60/40.
4.As much as I’d like to consolidate at one financial firm, I’m very inclined to have money at two different ones. Cybersecurity is one reason, and fraud protection is another. These are potentially very costly dangers that cost us zero to protect against other than minor inconvenience.
5.We have health, auto, renters, personal property and umbrella. When we had a home, we had flood insurance as well as homeowners. We carry ample coverage but with high deductibles. Insurance is for things we can’t easily cover ourselves, not things that just suck. Personal property is an exception because while we could cover it, it’s at higher risk.