Thursday, July 23, 2009

Work Long, Die Early, The Road to Successful Retirement

I read a funny piece by Gordon Powers on MSN Finance. It was entitled: How not to ruin your retirement. As I'm retired, forced out of the workforce last December by a layoff, I was interested.

I learned: "the biggest payoff comes from ensuring that you don't retire during a sharp downturn." That's right, during a downturn don't get a layoff notice; It's bad planning. Damn. I made my first mistake right there. Only accept a layoff notice during boom times. It's a good rule. No argument there.

Cutting back on your payout period will also up your chances of not running out of cash during retirement. Powers actually looked at doing this by working longer but since we are in a downturn that's difficult. Another approach to this, and easier to boot, is just don't live so long. Hey, 84 or 85 what's the diff. Try this with any financial calculator; It works! Need more security, cut your lifespan again. If I'm gone by 79, I'm in good shape financially. It's a plan!

Lastly, to kick your chances of success up another notch, Power suggests putting more of your money in stocks. The biggie here is do not put the money in bad stocks, don't be silly. Only invest in good stocks that are going up. Use your head. Invest wisely. If there was ever a time that you considered Northern Telecom, GM, or the big American banks as safe investments, maybe this ploy isn't for you. Hmmm...well, maybe stock market ETFs or a cheap index fund would be O.K. Rumour has it that even losers win with those. (I've done well.)

There may have been more insightful tips but I didn't have time to finish the piece, I was busy chopping more years off my expected time of departure. I can relax. I now have a goal that is more retirement appropriate. My retirement funds are safe, unless I am unlucky enough to live. Damn. Always a fly in the ointment.

Tuesday, July 21, 2009



Saturday, July 18, 2009

It's all a gamble!

The other day I blogged on investing for retirement and a reader questioned my ideas. The questions were very good and very pointed. My questioner made it clear I had not taken a very good in-depth look at where I was considering putting some of my precious retirement funds.

I don't want to appear too flippant but somehow, at some point, all is a gamble. No one steps up to this table and walks away a winner.

On the way to our eventual loss, and we all ultimately lose this game called life, we like to feel in control. Our investment strategy is no different; we want to believe if only we take control, do it well, take care to make no mistakes, we will succeed.

I hate to tell you, but this not necessarily true. In the end, it is out of our hands.

I like to dream that I am a movie writer working on a successful script. (I make a mint, it may star Tom Cruise.) In my movie, an inventor perfects a time machine and a criminal acquaintance, Tom Cruise who is facing certain imprisonment, kills him in order to travel back in time. He believes that he will avoid imprisonment plus benefit from knowing the outcome of everything.

He uses his new knowledge to quickly accumulate wealth, all is going as planned. He puts all his money in IBM. He knows it will beat Burroughs, drive them into the ground. He discovers that life, given a chance to be replayed is not at all like a stage performance with lines etched in stone. It is life, living, breathing life. This time the execs at IBM make some small mistakes and the ones at Burroughs don't. Burroughs buries IBM, leaving them making electric clocks and money-losing Selectric typewriters.

The man loses everything. He realizes life is not unfolding the second time as it did the first. Each day life moves farther and farther away from life's original path; the one with which he was familiar. Events are not repeated. He turns to crime as he is a criminal; he gets caught and is sent to prison.

Somethings don't change.

My point. Move carefully in the financial world, follow the rules. If you don't know the rules, visit the library and borrow a few books. A visit to Chapters might be in order as the library does not carry all the good books. Spend a little money on some books — think of it an investment.

Then, set your goals, buy a mix of stocks, bonds and GICs, spread the risks, and sit back and relax. Really, it is out of your hands.


p.s. In a future post I will look at Monte Carlo calculations as they apply to financial planning. I have an Excel spreadsheet tracking my portfolio. The true average annual return of my investments is plugged into a Monte Carlo calculator, as is the true value of my investments. The calculator factors in my wife and my old age pensions which will kick in in a few years. It looks at the dividends and the distributions that I am actually receiving as of today, and lastly, it factors in my true living expenses which it takes from my home budget page.

At the moment, I won't become a burden on the government until I hit 91 according to Mr. Monte Carlo. Cheers!