All good comments. On a somewhat different tack, however, we may also want to think about how long we should remain in our owned homes. I am in my 70's, living in California, in a neighborhood just outside of one of the recent major fire zones. Our home is safe, but homes only a few blocks away have been razed by the fires. As with most homeowners, our house is our single most valuable asset. If our house had burned, insurance would likely have paid for most, but likely not all of the cost of replacing it. There is also the issue of the time required to rebuild after a major fire, which from observing past fires, can take years. The question then is, as much as I like living in my current home, is there an argument for selling our homes as we age in order to reduce our financial risk, as well as the time and burden of having to rebuild?
I have also set aside a multi-year RMD reserve to avoid having to sell into a falling market. I first did this a year ago and then again just before the recent market high. Better lucky than good, I suppose, but your suggestion is sound, nonetheless.
Likely, but at least Pokeman cards, vintage autos and Faberge eggs are tangible objects with actual intrinsic value. Crypto, on the other hand, resides in the category of vapoware or the "concept of an asset," which exists more in the imagination than in actual fact. Crypto is often compared to the Dutch tulip craze, but unlike crypto, tulips were real objects, but like tulips, crypto's value could quickly disappear. The idea of a strategic bitcoin reserve is foolish on many levels, but the desire for such a reserve is understandable as it would allow many bitcoin owners to convert their bitcoins into real dollars that could be spent, transferred or invested in meaningful ways. A strategic bitcoin reserve is only likely to have value until it doesn't, whereupon, like so many governmental economic efforts, it would be just another transfer of wealth represented by an addition to our national debt.
Both my wife and I have executed living wills that gives the other the ability to decide when its time for pallative care only. In California, it is also possible to lodge a copy of your living will with the state that will allow health care providers to access a copy of this document if needed. What we have specifically rejected executing is a DNR (Do Not Resuscitate), which potentially gives a health care provider the authority to end care in the absence of an authorized power holder. It was our feeling that it should be a family member, or other designate, who would make this decision and not our doctor.
I am 76 and, like many of the comments you have received, am cogniscent of the toll of aging. I gave up running at 40. Stopped playing tennis at 70. And, a serious crash ended my cycling at 72. However, I am in the gym or pool 7 days a week, plus walking and a Tai Chi class. My body hurts and I don't have the stamina that I once had but I console myself with the reminders that: 1) I have outlived many of my peers, and 2) I am in far better condition and more mobile than many of my peers. Small consolation perhaps, but it beats the alternative.
These are absolutely the right questions to ask: Where will he live when you are no longer able or living? Who will have legal authority to make decisions on his behalf? How will his long term care be paid? In my working career, I ran into this issue numerous times and I was often disappointed by the lack of planning (or outright denial) on the part of parents with disabled children. Answering these questions can be expensive and frequently require the help of a lawyer, but the lack of such planning can be devastating to a disabled child when their parent guardian is no longer able to provide the care and support they need.
All good points. What I would add is that we also need to prepare for the psychological impact of a potential losing streak. We've enjoyed a long run up in markets with only "transitory" declines (sorry, I couldn't resist), and a period of serious decline will be more painful than the pleasure we've experienced on the ride up. It's also important that we practice the same advice we often give others: don't panic and make ill-timed sale decisions. As always, we also need to remember that most of us are long term investors, with time horizons greater than 10 years. And, if the past 50-60 years of investing experience can provide any guidance, a well structured, low cost, risk-adjusted portfolio will remain our best option.
Everyone wants downside protection to limit potential loses, but this solution also limits upside gains. Add on high fees and this just smacks of being another engineered investment solution that benefits the provider more than it does the investor. Simple asset allocation, using low cost funds, can provide a similar risk profile for more cautious investors.
As usual, the answer to your question depends on a lot unknowns: How long will you both live? What will you future health care needs be? Do you have children that you would like to leave money to? And so on. The simplest answer I can offer is this: If you are just entering retirement, there is a high probability that one of you may live to age 90 or more. And, if you have an IRA, or other similar retirement vehicle, it is possible that upon the death of the last of you, there could be money left that would be distributed over an additional 10 year period. In other words, you have a potential 20-30 year investment time horizon to plan for, which will be affected both by how much you spend and the effects of inflation. Spending you have some control over, but not inflation which on average runs 2-3% per year. As a result, in order to fund your spending and overcome the effects of inflation, your investment portfolio should include some exposure to equities. How much depends on your risk tolerance, but a lot of other comments in response to your question will give you some idea in this regard.
Good article! I am 10 years into retirement and am increasingly aware that the go-go phase is rapidly coming to an end. The pandemic ended many of our travel dreams and we instead spent this money on a new kitchen. Not exactly the tradeoff I would have wanted, but it was worth it in retrospect. What comes next is uncertain. Long range travel is less attractive, so we have spent more on travel within the US borders. The next phase is what worries me now. We have the means, but making a timely decision about how and where to downsize is complicated. Our parents wanted to "age in place," but caring for aging parents in their homes proved to be both expensive and complicated. We'd like to simplify our lives in this next phase so as not to burden our son with we faced with our aging parents. A lot of other Boomers are facing the same dilemma.
Comments:
All good comments. On a somewhat different tack, however, we may also want to think about how long we should remain in our owned homes. I am in my 70's, living in California, in a neighborhood just outside of one of the recent major fire zones. Our home is safe, but homes only a few blocks away have been razed by the fires. As with most homeowners, our house is our single most valuable asset. If our house had burned, insurance would likely have paid for most, but likely not all of the cost of replacing it. There is also the issue of the time required to rebuild after a major fire, which from observing past fires, can take years. The question then is, as much as I like living in my current home, is there an argument for selling our homes as we age in order to reduce our financial risk, as well as the time and burden of having to rebuild?
Post: Rent Forever?
Link to comment from January 11, 2025
I have also set aside a multi-year RMD reserve to avoid having to sell into a falling market. I first did this a year ago and then again just before the recent market high. Better lucky than good, I suppose, but your suggestion is sound, nonetheless.
Post: Spending It
Link to comment from January 11, 2025
Likely, but at least Pokeman cards, vintage autos and Faberge eggs are tangible objects with actual intrinsic value. Crypto, on the other hand, resides in the category of vapoware or the "concept of an asset," which exists more in the imagination than in actual fact. Crypto is often compared to the Dutch tulip craze, but unlike crypto, tulips were real objects, but like tulips, crypto's value could quickly disappear. The idea of a strategic bitcoin reserve is foolish on many levels, but the desire for such a reserve is understandable as it would allow many bitcoin owners to convert their bitcoins into real dollars that could be spent, transferred or invested in meaningful ways. A strategic bitcoin reserve is only likely to have value until it doesn't, whereupon, like so many governmental economic efforts, it would be just another transfer of wealth represented by an addition to our national debt.
Post: Worth Repeating
Link to comment from January 6, 2025
Both my wife and I have executed living wills that gives the other the ability to decide when its time for pallative care only. In California, it is also possible to lodge a copy of your living will with the state that will allow health care providers to access a copy of this document if needed. What we have specifically rejected executing is a DNR (Do Not Resuscitate), which potentially gives a health care provider the authority to end care in the absence of an authorized power holder. It was our feeling that it should be a family member, or other designate, who would make this decision and not our doctor.
Post: Share the Power
Link to comment from January 6, 2025
I am 76 and, like many of the comments you have received, am cogniscent of the toll of aging. I gave up running at 40. Stopped playing tennis at 70. And, a serious crash ended my cycling at 72. However, I am in the gym or pool 7 days a week, plus walking and a Tai Chi class. My body hurts and I don't have the stamina that I once had but I console myself with the reminders that: 1) I have outlived many of my peers, and 2) I am in far better condition and more mobile than many of my peers. Small consolation perhaps, but it beats the alternative.
Post: A Lifetime of Loss
Link to comment from December 28, 2024
These are absolutely the right questions to ask: Where will he live when you are no longer able or living? Who will have legal authority to make decisions on his behalf? How will his long term care be paid? In my working career, I ran into this issue numerous times and I was often disappointed by the lack of planning (or outright denial) on the part of parents with disabled children. Answering these questions can be expensive and frequently require the help of a lawyer, but the lack of such planning can be devastating to a disabled child when their parent guardian is no longer able to provide the care and support they need.
Post: Three’s Company
Link to comment from December 28, 2024
All good points. What I would add is that we also need to prepare for the psychological impact of a potential losing streak. We've enjoyed a long run up in markets with only "transitory" declines (sorry, I couldn't resist), and a period of serious decline will be more painful than the pleasure we've experienced on the ride up. It's also important that we practice the same advice we often give others: don't panic and make ill-timed sale decisions. As always, we also need to remember that most of us are long term investors, with time horizons greater than 10 years. And, if the past 50-60 years of investing experience can provide any guidance, a well structured, low cost, risk-adjusted portfolio will remain our best option.
Post: Time to Check
Link to comment from December 21, 2024
Everyone wants downside protection to limit potential loses, but this solution also limits upside gains. Add on high fees and this just smacks of being another engineered investment solution that benefits the provider more than it does the investor. Simple asset allocation, using low cost funds, can provide a similar risk profile for more cautious investors.
Post: Don’t Place That Call
Link to comment from November 9, 2024
As usual, the answer to your question depends on a lot unknowns: How long will you both live? What will you future health care needs be? Do you have children that you would like to leave money to? And so on. The simplest answer I can offer is this: If you are just entering retirement, there is a high probability that one of you may live to age 90 or more. And, if you have an IRA, or other similar retirement vehicle, it is possible that upon the death of the last of you, there could be money left that would be distributed over an additional 10 year period. In other words, you have a potential 20-30 year investment time horizon to plan for, which will be affected both by how much you spend and the effects of inflation. Spending you have some control over, but not inflation which on average runs 2-3% per year. As a result, in order to fund your spending and overcome the effects of inflation, your investment portfolio should include some exposure to equities. How much depends on your risk tolerance, but a lot of other comments in response to your question will give you some idea in this regard.
Post: Growth Investing or Dividend Investing in Retirement?
Link to comment from October 26, 2024
Good article! I am 10 years into retirement and am increasingly aware that the go-go phase is rapidly coming to an end. The pandemic ended many of our travel dreams and we instead spent this money on a new kitchen. Not exactly the tradeoff I would have wanted, but it was worth it in retrospect. What comes next is uncertain. Long range travel is less attractive, so we have spent more on travel within the US borders. The next phase is what worries me now. We have the means, but making a timely decision about how and where to downsize is complicated. Our parents wanted to "age in place," but caring for aging parents in their homes proved to be both expensive and complicated. We'd like to simplify our lives in this next phase so as not to burden our son with we faced with our aging parents. A lot of other Boomers are facing the same dilemma.
Post: Before You Quit
Link to comment from October 26, 2024