Comments on: Is Inflation Really a Big Retirement Threat? http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/ Wed, 08 Feb 2012 17:31:40 +0000 hourly 1 http://wordpress.org/?v=3.1 By: A Week in Review: Edition #1 | My Findependence Day http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20504 A Week in Review: Edition #1 | My Findependence Day Tue, 24 Feb 2009 15:25:27 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20504 [...] - Canadian Dream looks at whether inflation is worth the added risk of an aggressive portfolio in [...] [...] – Canadian Dream looks at whether inflation is worth the added risk of an aggressive portfolio in [...]

]]> By: Weekly review February 14th- 20th | Financial Highway http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20372 Weekly review February 14th- 20th | Financial Highway Fri, 20 Feb 2009 20:41:26 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20372 [...] Canadian Dream is wondering if inflation is a big retirement treat [...] [...] Canadian Dream is wondering if inflation is a big retirement treat [...]

]]> By: Tim Landry http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20364 Tim Landry Fri, 20 Feb 2009 16:24:42 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20364 One point to consider is that one inflation rate that we MUST consider as "seniors to be" is (I am not exactly sure of the term they use) the rate of "health cost" inflation. We also have to consider that certain parts of this "inflation" may not yet lend themselves to numbers. Remember that we are going to lose about 40% of our Doctors and 40% of our nurses to retirement over the next 20-odd years + we will be losing full-time tax payors at just about the same rate. Also remember the "hit" on our economy already caused - and to RAPIDLY GROW - by the demand for elder care. Women ALREADY spend more time caring for parents and spouses than they do for kids - and that is going to grow. The biggest threat to everything women have accomplished in the last 60 years is the coming elder boom One point to consider is that one inflation rate that we MUST consider as “seniors to be” is (I am not exactly sure of the term they use) the rate of “health cost” inflation. We also have to consider that certain parts of this “inflation” may not yet lend themselves to numbers. Remember that we are going to lose about 40% of our Doctors and 40% of our nurses to retirement over the next 20-odd years + we will be losing full-time tax payors at just about the same rate. Also remember the “hit” on our economy already caused – and to RAPIDLY GROW – by the demand for elder care. Women ALREADY spend more time caring for parents and spouses than they do for kids – and that is going to grow. The biggest threat to everything women have accomplished in the last 60 years is the coming elder boom

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20313 Canadian Dream Thu, 19 Feb 2009 04:03:32 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20313 Julie, Ah yes, inflation linked bonds. The trick is to make sure you are getting a good rate. Sometimes the return on the non CPI linked part can suck so bad you are better off with normal long term bonds. Otherwise it is worth considering. Tim Julie,

Ah yes, inflation linked bonds. The trick is to make sure you are getting a good rate. Sometimes the return on the non CPI linked part can suck so bad you are better off with normal long term bonds.

Otherwise it is worth considering.

Tim

]]> By: Julie http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20309 Julie Thu, 19 Feb 2009 01:28:11 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20309 I'm going through the same consideration re my retirement nest egg. I think I've decided to work one more year and stick with a more conservative portfolio. I think that when you don't consume a ton, a lower rate of inflation applies. Have you ever considered inflation-linked bonds? I found this article interesting http://network.nationalpost.com/np/blogs/wealthyboomer/archive/2007/11/24/worry-free-investing.aspx I’m going through the same consideration re my retirement nest egg. I think I’ve decided to work one more year and stick with a more conservative portfolio. I think that when you don’t consume a ton, a lower rate of inflation applies. Have you ever considered inflation-linked bonds? I found this article interesting http://network.nationalpost.com/np/blogs/wealthyboomer/archive/2007/11/24/worry-free-investing.aspx

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20277 Canadian Dream Wed, 18 Feb 2009 12:00:10 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20277 FT, Yep I read the book. I'm not saying her math is wrong, I'm just saying I don't believe the CPI is my personal inflation rate. So hence the calculation is wrong for my application and hence my point I don't think taking on extra risk is really that useful. In addition, I can't believe anything an economist says regarding future market performance. 2008 managed to prove just about everyone of them wrong. Kevin, Excellent point. A larger pool of cash can afford a lower rate of return and use a lower draw down rate. Both of which help a lot to avoid risk. Thanks for the mention of a few funds with a similar breakdown. My pension plan has a similar breakdown as well which I'll likely use when I pull the plug. Thanks for the debate guys! Tim FT,

Yep I read the book. I’m not saying her math is wrong, I’m just saying I don’t believe the CPI is my personal inflation rate. So hence the calculation is wrong for my application and hence my point I don’t think taking on extra risk is really that useful.

In addition, I can’t believe anything an economist says regarding future market performance. 2008 managed to prove just about everyone of them wrong.

Kevin,

Excellent point. A larger pool of cash can afford a lower rate of return and use a lower draw down rate. Both of which help a lot to avoid risk.

Thanks for the mention of a few funds with a similar breakdown. My pension plan has a similar breakdown as well which I’ll likely use when I pull the plug.

Thanks for the debate guys!

Tim

]]> By: Kevin W http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20231 Kevin W Tue, 17 Feb 2009 18:44:03 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20231 One other point, 'old fashioned' income funds such as Vanguard's Wellesley Income, LifesStrategy Income, and Target Retirement Income have stock allocations in the 20%-33% range. So you are in good company. One other point, ‘old fashioned’ income funds such as Vanguard’s Wellesley Income, LifesStrategy Income, and Target Retirement Income have stock allocations in the 20%-33% range. So you are in good company.

]]> By: Kevin W http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20230 Kevin W Tue, 17 Feb 2009 18:41:04 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20230 I think a 1/3 stock, 2/3 bond allocation is reasonable for retirement income. You can work it out as follows: say you reinvest bond principal and live on bond interest, inflation is 3%, and stocks grow 10%. Then if 33% of your portfolio grows 10%, the whole thing has grown 3.3%, which lets you buy more bonds and grow the interest payments at pace with inflation. So this all works provided you can live on the interest payments from the 2/3 of your portfolio that's bonds. That probably supports a draw rate lower than 4%, maybe more like 3-3.5%. @Million Dollar is probably right that an indefinite 4% draw probably calls for something more like 50/50. Your draw rate is an important consideration that should be factored in. If your portfolio is large enough you can afford the luxury of investing conservatively. Billionaires can live fine on the interest from a 100% muni bond portfolio. I think a 1/3 stock, 2/3 bond allocation is reasonable for retirement income. You can work it out as follows: say you reinvest bond principal and live on bond interest, inflation is 3%, and stocks grow 10%. Then if 33% of your portfolio grows 10%, the whole thing has grown 3.3%, which lets you buy more bonds and grow the interest payments at pace with inflation.

So this all works provided you can live on the interest payments from the 2/3 of your portfolio that’s bonds. That probably supports a draw rate lower than 4%, maybe more like 3-3.5%. @Million Dollar is probably right that an indefinite 4% draw probably calls for something more like 50/50.

Your draw rate is an important consideration that should be factored in. If your portfolio is large enough you can afford the luxury of investing conservatively. Billionaires can live fine on the interest from a 100% muni bond portfolio.

]]> By: Million Dollar Journey http://blog.canadian-dream-free-at-45.com/2009/02/17/is-inflation-really-a-big-retirement-threat/comment-page-1/#comment-20219 Million Dollar Journey Tue, 17 Feb 2009 13:46:32 +0000 http://blog.canadian-dream-free-at-45.com/?p=629#comment-20219 Tim, I have a book review of "The New Retirement" by Sherry Cooper (BMO chief econommist) coming up that mentions if you want your retirement dollars to last in the long run (30 years), you should have a 50/50 stock/bond allocation. That is, based on her equity growth assumptions. I believe her equity growth assumption is conservative ~4-5% after inflation and following the 4% withdrawal rule. Tim, I have a book review of “The New Retirement” by Sherry Cooper (BMO chief econommist) coming up that mentions if you want your retirement dollars to last in the long run (30 years), you should have a 50/50 stock/bond allocation. That is, based on her equity growth assumptions. I believe her equity growth assumption is conservative ~4-5% after inflation and following the 4% withdrawal rule.

]]>