I worked in the investment biz and one year was a part of the employee benefits communications team for our company's 401K plan. While I generally knew that too many employees were too conservative in their investment choices, I was appalled when I spoke to individual employees about their plan choices. The number who were entirely invested in the cash option and their reasons why (safety) was revealing. Not only did many employees not understand the basic concept of the time value of money, our company had utterly failed to help its employees understand this concept in order to make better long term investment choices. Save early and save often are just the starting steps to successful investing. People also need to understand that a reasonable exposure is their only sure way of growing their savings on an inflation adjusted basis.
We miss you, and especially your thoughtful comments on investing. I hope your family is doing well as this form of cancer is both awful to have and awful to watch. Best regards, and thanks.
The investment biz is constantly in search of new "sizzle" to part dollars from unwary investors. I have come to the conclusion that much of the investment process is not all that hard. What is hard is not panicking when markets turn and having the discipline to start early and save often. There is nothing magical about this and most people can be taught the basics of how to manage their money. The investment business, on the other hand, makes the process look overly complicated, which requires the aid of an investment professional to navigate - even though the long term results of most such professionals isn't all that special.
Disagree. SS is basically an annuity that is funded by worker contributions. It is not a business that is failing because of changing consumer trends. At the time that SS was created, the average life span was low and there were far more workers contributing to the system than retirees receiving benefits. Today, we have the largest post WWII generation rapidly moving into retirement which has resulted in more retirees receiving benefits than workers paying into the system. As a result, the SS fund reserves that were accumulated in years past are being spent down. Complicating this even further is the fact that Americans are living much longer than when SS was established. That said, as the Boomer generation dies out, the imbalance in the worker/retiree ratio should come back into balance. Congress is responsible for determining the funding of the SS system and it is fair to say that they have failed in this regard for a variety of reasons, both political and economic. Converting SS from a guaranteed benefit to a 401K-like retirement vehicle might benefit some, but it could as easily be a disaster for retirees who make poor investment decisions. And, the option to end SS and shift the entire burden of saving for retirement to workers would be even worse. Millions of retired Americans depend on their SS benefits and to allow the system to fail for lack of "investment" would have profound political and economic consequences.
LOL! I feel your pain. My wife and I have been savers all our lives and managed to retire debt free. However, once the paychecks stopped, we had to start spending our own money which was a difficult transition. Even though I had used a Monte Carlo simulation tool to test whether our savings was likely to last (it was), it was still a difficult transition. 15 years post retirement we have more than we started with and have been able to spend what we wanted along the way. A lifetime savings habit is not easy to shed and you'll probably start conservatively as you begin retirement, but hopefully will gain confidence as time goes by.
Opinions will vary, but for me its always been a function of : 1) how much do I have, 2) How much do I need every year 3) how much time do I have left to recover from a downturn, and 4) how much of a downturn can I stomach? I use bond funds primarily to reduce risk and volatility. I am obviously giving up something in terms of return, but as I rapidly approach age 80, I don't think have enough time to recover from a major downturn. Had I chosen a 100% equity allocation 50 years ago, I no doubt would have much more than I do now. However, living with a 100% equity allocation is easier said than done.
As with so many things in the investment world, timing is everything. Or, as we used to say when I worked in this business: better lucky than good. Firms spend a lot of money developing investment strategies that they hope will produce marginal returns, and sometimes it even works, but seldomly for very long. As you correctly note in your article, few investors have either the expertise or resources to compete with the likes of Klarman or Lynch, and frankly shouldn't even try. As a retiree, I am quite happy to use a few low cost funds and keep my trading activity to a minimum. After 10+ years of retirement, our retirement savings have grown comfortably without making any significant changes in our spending.
First: the fact that you have discussed your estate plan with your children already places you in a minority. In my experience in the wealth management biz, I met far more clients who did not want to discuss their estate plans with their children for reasons that included: fear, being pestered for money or it was none of their business. Beyond that, the decision of whether or not to have a trust depends on a number of factors: the ages of your children, their ability to handle money, addictions, disabilities, and/or protecting a child from a spendthrift spouse. For most of us, the age at which they might inherit is the most common reason for a trust. In my own case, our son is now 40 and financially responsible, so whatever share he gets will be outright or via an inherited IRA. However, if he were not to survive us, our trust contains alternate distribution provisions.
I would venture that we've all had the worry of whether we might run out of money in retirement. When I retired at 66, this was a central concern in figuring out how to invest our retirement funds. I don't know that I will ever stop worrying, but 11 years later, we have more than we started with and have not lacked for anything. Part of this may be attributable to how our moneys were invested, but perhaps the most important factor has to be that we aggressively saved while we worked and started retirement with a nest egg that was more than likely to last. We consider ourselves lucky as not everyone can do this. So, now that we are on the short end of life, do we feel free to spend more? Probably not, but we do spend more freely on travel and entertainment than we did when we were younger.
For people can't or don't want to self-manage, hiring a manager may be their only option. However, producing returns that will pay for these fees and produce reasonable net rates of return is very difficult. Active v. passive investing has been extensively studied and the consensus appears to be that, over time, passive management w/low fees will outperform active managers. Suzie may be more comfortable with her manager, but must also accept that there is seldom a free lunch in investing and that her returns may lag yours due to the 2.0% fee hurdle she must overcome before generating any net returns.
Comments
I worked in the investment biz and one year was a part of the employee benefits communications team for our company's 401K plan. While I generally knew that too many employees were too conservative in their investment choices, I was appalled when I spoke to individual employees about their plan choices. The number who were entirely invested in the cash option and their reasons why (safety) was revealing. Not only did many employees not understand the basic concept of the time value of money, our company had utterly failed to help its employees understand this concept in order to make better long term investment choices. Save early and save often are just the starting steps to successful investing. People also need to understand that a reasonable exposure is their only sure way of growing their savings on an inflation adjusted basis.
Post: This post contains a secret and words I used in a few forum posts ago. Why is it not encouraging.
Link to comment from September 6, 2025
We miss you, and especially your thoughtful comments on investing. I hope your family is doing well as this form of cancer is both awful to have and awful to watch. Best regards, and thanks.
Post: Health Update
Link to comment from September 6, 2025
The investment biz is constantly in search of new "sizzle" to part dollars from unwary investors. I have come to the conclusion that much of the investment process is not all that hard. What is hard is not panicking when markets turn and having the discipline to start early and save often. There is nothing magical about this and most people can be taught the basics of how to manage their money. The investment business, on the other hand, makes the process look overly complicated, which requires the aid of an investment professional to navigate - even though the long term results of most such professionals isn't all that special.
Post: Inventing Problems
Link to comment from September 6, 2025
Disagree. SS is basically an annuity that is funded by worker contributions. It is not a business that is failing because of changing consumer trends. At the time that SS was created, the average life span was low and there were far more workers contributing to the system than retirees receiving benefits. Today, we have the largest post WWII generation rapidly moving into retirement which has resulted in more retirees receiving benefits than workers paying into the system. As a result, the SS fund reserves that were accumulated in years past are being spent down. Complicating this even further is the fact that Americans are living much longer than when SS was established. That said, as the Boomer generation dies out, the imbalance in the worker/retiree ratio should come back into balance. Congress is responsible for determining the funding of the SS system and it is fair to say that they have failed in this regard for a variety of reasons, both political and economic. Converting SS from a guaranteed benefit to a 401K-like retirement vehicle might benefit some, but it could as easily be a disaster for retirees who make poor investment decisions. And, the option to end SS and shift the entire burden of saving for retirement to workers would be even worse. Millions of retired Americans depend on their SS benefits and to allow the system to fail for lack of "investment" would have profound political and economic consequences.
Post: Does Social Security work?
Link to comment from August 31, 2025
LOL! I feel your pain. My wife and I have been savers all our lives and managed to retire debt free. However, once the paychecks stopped, we had to start spending our own money which was a difficult transition. Even though I had used a Monte Carlo simulation tool to test whether our savings was likely to last (it was), it was still a difficult transition. 15 years post retirement we have more than we started with and have been able to spend what we wanted along the way. A lifetime savings habit is not easy to shed and you'll probably start conservatively as you begin retirement, but hopefully will gain confidence as time goes by.
Post: On the Downslope of Life?
Link to comment from August 31, 2025
Opinions will vary, but for me its always been a function of : 1) how much do I have, 2) How much do I need every year 3) how much time do I have left to recover from a downturn, and 4) how much of a downturn can I stomach? I use bond funds primarily to reduce risk and volatility. I am obviously giving up something in terms of return, but as I rapidly approach age 80, I don't think have enough time to recover from a major downturn. Had I chosen a 100% equity allocation 50 years ago, I no doubt would have much more than I do now. However, living with a 100% equity allocation is easier said than done.
Post: Risky Business
Link to comment from August 31, 2025
As with so many things in the investment world, timing is everything. Or, as we used to say when I worked in this business: better lucky than good. Firms spend a lot of money developing investment strategies that they hope will produce marginal returns, and sometimes it even works, but seldomly for very long. As you correctly note in your article, few investors have either the expertise or resources to compete with the likes of Klarman or Lynch, and frankly shouldn't even try. As a retiree, I am quite happy to use a few low cost funds and keep my trading activity to a minimum. After 10+ years of retirement, our retirement savings have grown comfortably without making any significant changes in our spending.
Post: How to Beat the Market
Link to comment from August 25, 2025
First: the fact that you have discussed your estate plan with your children already places you in a minority. In my experience in the wealth management biz, I met far more clients who did not want to discuss their estate plans with their children for reasons that included: fear, being pestered for money or it was none of their business. Beyond that, the decision of whether or not to have a trust depends on a number of factors: the ages of your children, their ability to handle money, addictions, disabilities, and/or protecting a child from a spendthrift spouse. For most of us, the age at which they might inherit is the most common reason for a trust. In my own case, our son is now 40 and financially responsible, so whatever share he gets will be outright or via an inherited IRA. However, if he were not to survive us, our trust contains alternate distribution provisions.
Post: Letting Go
Link to comment from July 26, 2025
I would venture that we've all had the worry of whether we might run out of money in retirement. When I retired at 66, this was a central concern in figuring out how to invest our retirement funds. I don't know that I will ever stop worrying, but 11 years later, we have more than we started with and have not lacked for anything. Part of this may be attributable to how our moneys were invested, but perhaps the most important factor has to be that we aggressively saved while we worked and started retirement with a nest egg that was more than likely to last. We consider ourselves lucky as not everyone can do this. So, now that we are on the short end of life, do we feel free to spend more? Probably not, but we do spend more freely on travel and entertainment than we did when we were younger.
Post: Flexing the Retirement Spending Muscle
Link to comment from July 19, 2025
For people can't or don't want to self-manage, hiring a manager may be their only option. However, producing returns that will pay for these fees and produce reasonable net rates of return is very difficult. Active v. passive investing has been extensively studied and the consensus appears to be that, over time, passive management w/low fees will outperform active managers. Suzie may be more comfortable with her manager, but must also accept that there is seldom a free lunch in investing and that her returns may lag yours due to the 2.0% fee hurdle she must overcome before generating any net returns.
Post: The High Cost of Financial Advice: A Tale of Two Portfolios
Link to comment from July 14, 2025