NewRetirement Blog

I grew up in the Great Depression and witnessed my parents’ penchant for avoiding risk. I learned my own lessons as well after I started earning my own money and tried to save it. Someone advised me of a “good” stock broker. He wasn’t good to me. I lost money on every stock he sold to me. I think that his firm directed him to sell the stocks in their own inventory that they considered bad investments.Midway through my working career at Boeing, I became head of corporate planning—a job that required parceling out research and new business budgets to the operating divisions and justifying the investments on the the sales prospects to the company’s board of directors. The total of the budget requests were always higher than we could afford to support while the sales projections from the operating divisions were, when totaled, higher than the customers could afford to spend. They reminded me of the always optimistic projections of my first stock broker.Years later, in retirement, I learned a lot about the various retirement planning methods. Almost all of them used optimistic portfolio returns from history and left out many things that influenced retirement spending and income, and no two gave similar answers. Inserting my standard test values for investment returns, pension, Social Security, tax rates, etc., I found they all gave different results. In fact, some said that no additional savings were required while others would impose staggeringly high monthly savings. These results were published in two, full page, articles in The Wall Street Journal.These programs came from well-known financial firms which seemed reluctant to improve their programs. I still find significant shortcomings after all of these years. The majority do not account for the appreciable costs that bring actual returns to values lower than the indexes for returns, nor do the simpler programs account for reverse dollar-cost-averaging shown by my research and described in J. K. Lasser’s Your Winning Retirement Plan.There are more complex statistical programs that purport to predict the future. They don’t. They should really say they are poor representations of what might have happened in the past. Most are based on fake return statistics and don’t correlate with actual historical inflation at the time of the returns.Together with my wife, we offer modest assistance to some people relying only on Social Security. They consumed their savings too early for various reasons, and now are sorry that they weren’t more conservative in their planning, budgeting, investing and spending. Over the years inflation destroyed the value of the pensions some have. Even then, they didn’t realize that they can’t spend all of their fixed pensions in retirement. It’s necessary to save part of each pension payment so they’ll be able to supplement their income later as inflation destroys fixed pensions income.Then there are Unk-Unks, a term for unknown-unknowns, that is, things you are unlikely to think about in advance, such as household emergencies and events in the lives of your adult children or elderly parents. Retirees have told me their biggest Unk-Unks were the divorce of a daughter with children followed by the need to support elderly parents after the parents exhausted their own savings.There are the things that you could have planned using some very detailed planning. Such planning is used by estimators in the construction industry. When an item was forgotten, we called these OSIFs, short for “Oh, shoot, I forgot,” except we had a stronger word than “shoot.” Forgotten items result in a dollar-for-dollar loss. On www.analyzenow.com I include a special event worksheet in the comprehensive programs that encourages people to include the cost of high value items such as to replace a roof, automobiles, etc. Retirees (and older working people) can gain much by first saving for a future purchase rather than paying for it over time.During my working years, I was very successful managing projects and organizations ultimately becoming president of The Boeing Aerospace Company (1980-1985). I attribute much of my success to being conservative both in work and retirement. Being conservative in retirement planning means using inputs that are low for returns, high for taxes, long life spans, etc. It also means having a significant portion of your assets in conservative securities. You can’t afford to retire on lottery tickets in a retirement portfolio.Bud Hebeler, www.analyzenow.com