Retirement Reading Roundup

Good advice from around the internet.

Many of these links came courtesy of Abnormal Returns.

Marketwatch has an article about the evolution of retirement housing. Not wanting to end up in a "retirement home" has long been a front burner issue for just about everyone (I have no data to cite, but have you ever known anyone who wanted to go to a retirement home?). Quite a few years ago I became aware of facilities that were a mix of apartments (condos) where people lived independently but could move to another part of the facility if their medical condition changed in such a way as to require a higher level of care. These sounded expensive, often having six-figure buy ins. The above link lays out some similar (but not the same) traits incorporated into different concepts including very affordable rents.

To the extent we can assume everyone wants freedom to choose their outcomes, preserving healthspan becomes very important. The best chance for people to do this is by making good decisions related to diet (cutting sugar) and exercise (including weight resistance training). There are no absolutes but where frailty often reduces the options we have, making the effort, a serious effort, to be healthier (less frail) is our best path to living the retirement lifestyle we want.

Another one from Marketwatch makes the case that if you're unsure about how much to save for retirement, just go for 10%. I won't say that's wrong but it may be incomplete. Living below your means is crucial for long term financial success. It is a buffer against being undersaved. I would also encourage that retirement not be viewed as an end but as the start of a new chapter. That is a cliche and is used frequently but if you're lucky, "retirement" will last for decades. Figuring a way to to create some sort of income stream from something you enjoy doing on top of Social Security and portfolio income will make life much easier. The easiest ideas I can come up with are monetizing a hobby and/or passive income from real estate but there are no doubt others.

The Get Rich Slowly blog had a post about obstacles people have getting started saving money and the 'come to Jesus' moment that people often have in their 40's. One quote about companies that offer seminars to teach employees about personal finance jumped off the page;

“Bob doesn't want to attend his 401(k) seminar because he's afraid he'll see his neighbor there…and that would be equivalent to admitting he didn't know about money for all those years.”

To the extent that actually happens, it is a comment on vanity. On some level, everyone knows they need to save money, they probably know they need to invest it and if they don't know a whole then they probably think it is complicated (it can be as complicated or simple as you want to make it). If they realize these things and vanity prevents them from learning then they are making their own problems worse.

It's kind of like going to the gym and not doing certain exercises because you don't think you use a lot of weight. If you do exercises with weight such that you are challenging yourself with slow movements and very little rest in between sets (I would add going to failure when safe to do so, but some folks think that is a bad idea) then you are making yourself physically healthier. If you take time to learn about how to save and invest, you are making yourself financially healthier.

The Wall Street Journal took a look at Roth 401ks. I've blogged previously that starting this year I opened a Solo 401k (I am self employed). I'd been contributing to SEP IRA for many years which is where most of our qualified money is. We've each have Roth IRAs too but by virtue of contribution limits, those balances are smaller. A Roth 401k (or in my case Solo Roth 401k) allows for much larger contributions. My hope is that I'll be able to get my new Roth 401k to be about the same size as my SEP (not sure there is enough time but there could be). As I've gotten closer to "retirement" age I've become more focused on trying to pay as little in taxes when I am retired. If that resonates with you then you would contribute to your Roth 401k first.

Here are two articles on longevity risk (one and two) which is the risk that you live longer than you thought or more precisely longer than you planned for. I've quipped before that being 85, fit and out of money is not a great situation. The combination of healthy lifestyle (proper diet and exercise and don't smoke) and medical innovation creates a path for a big jump in lifespans at some point (hopefully all of us reading this can benefit from that).

Thinking about this means confronting some difficult topics related to health and mortality. We all know what things contribute to shortening lifespan. Many of these things can be improved upon (my Twitter feed says reversed) and here I am talking chronic maladies and being overweight. If you confront these issues I would encourage you to consume less sugar and lift weights as ways to mitigate those risks.

If you're lucky enough to be healthier then you need to think about ways to mitigate longevity risks. Anything can happen to anyone but if you're 60, not overweight and fit you need to plan on being around a while, all the more so if either or both of your parents are still around. One way to mitigate longevity risk is an annuity. Don't "@ me" (a Twitter term), I am not an annuity salesman, I've never sold one and never will, they are insanely expensive (I am aware of one exception). But the concept of annuitizing something does address longevity.

Two years ago we bought the cabin next to ours and put it on Airbnb. It pays for itself and will be paid off by the time I am 66 (took a 15 year mortgage). It annuitizes in that it will continue to payout an income as long as we are willing to manage it or pay to have someone else manage it (we don't do this now but who knows when we're older). It also serves as a Plan B (selling that house if we ever need the money) or Plan C (selling the house we live in now to move into the Airbnb.

Finally Brinker Capital looks at the extent to which couples argue about, or otherwise have trouble talking about money. If you live below your means then you have fewer financial issues to worry about and so you have fewer financial issues to argue about.

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