William Bernstein on How Much You Should Have Saved for Retirement

Interesting interview with William Berstein in MONEY.

Tell me what you think of this piece from the article:

So how should I be investing near and after retirement?

You want to end up with a portfolio that matches your liabilities, meaning the amount you’ll need to spend in retirement. The rule of thumb I came up with, based on annuity payouts and spending patterns late in life, is that you should save 20 to 25 times your residual living expenses — that is, the yearly shortfall you have to make up after Social Security and any pension.

This portfolio should be in safe assets: Treasury Inflation-Protected Securities, annuities, or even short-term bonds.

Anything above that, you can invest in risky assets. That’s your risk portfolio. If you dream about taking an around-the-world trip, and the risk portfolio does well, you can use it for that. If the risk portfolio doesn’t do well, at least you’re not pushing a shopping cart under an overpass.

That’s a pretty sizable chunk of change. Based on that number and NOT including social security, my wife and I are about 10% to 20% of the way there. OUCH! Granted, my goal is lofty. We’ll do what we can and not worry about it.

I also think Bernstein is pretty conservative. I don’t see a lot of people having that much money by the time they retire.


Comparing the Monthly Performance of Three S&P 500 ETFs

I thought it might be interesting to look at the monthly performance of three different exchange-traded funds that track the S&P 500 Index (iShares S&P 500 Index ETF (IVV), SPDR S&P 500 Index ETF (SPY), and Vanguard S&P 500 Index ETF (VOO)). The newest ETF of the bunch is Vanguard’s VOO, which has monthly return data going back to October 2010. I used that month as the basis for the comparison.

Of the three ETFs, VOO has the lowest expense ratio of .05% compared to .09% for IVV and SPY.

To calculate the returns, I downloaded the data from Yahoo! Finance and used the Adjusted Closing Price, which adjusts the price for dividends and splits.

Here’s what I found:

Comparing the Monthly Performance of IVV, SPY, and VOO

The performance differences were very close between the three. The best performing ETF of the three was iShares. Keep in mind that these numbers do not reflect transaction charges (brokerage fees and such).

Interesting Look at Last Night’s Game from a Gambling Point of View

I wondered how last night’s improbable outcome of the game between the Packers and Seahawks affected gambling.

Seahawks – Packers Game Tilts Gamblers’ Fortunes

I did think this was pretty cool:

…Sportsbook.com decided to refund those who had bet on the Packers, saying it was the right thing to do.

Did any of you watch the game? What were your thoughts? I thought it seemed pretty well called until the fourth quarter. I couldn’t believe that defensive pass interference call against Green Bay and the very last call. Hard to blame that on bad refereeing. It appeared criminal.

Ten for Tuesday, September 25, 2012

Happy Tuesday to you all. This is day two of my daughter being home sick with something like the flu. She’s better today but I kept her home just in case. Stay healthy, people.

Here’s this morning’s Ten for Tuesday. Enjoy!

1. Foolish interview with Michael Mauboussin.

2. David Bach’s 3 basket approach to financial security.

3. How to retire rich – 3 smart setps at ages 30 – 45.

4. How to buy a car with poor credit. My advice: Think cheap car.

5. Funding a SEP IRA.

6. Consumer confidence is up this September. How can this be? Are consumers more confident about the job market since so many people have quit looking for jobs?

7. Forbes list of America’s richest people. Spoiler alert: Bill Gates is number 1

8. And, here’s a list of the 11 wealthiest people in China.

9. The importance of CPI as an investment benchmark.


10. Goodbye, Smith Barney.

Quote of the Day: Speculation vs. Gambling

Today’s quote of the day comes from Chapter 12 – Investment and Speculation in Thomas Sowell’s Basic Economics: A Common Sense Guide to the Economy*, one of my favorite books:

Speculation is often misunderstood as being the same as gambling, when in fact it is the opposite of gambling. What gambling involves, whether in games of chance or in actions like playing Russian roulette, is creating a risk that would otherwise not exist, in order either to profit or to exhibit one’s skill or lack of fear. What economic speculation involves is coping with an inherent risk in such a way as to minimize it and to leave it to be borne by whoever is best equipped to bear it.

He uses the example of a wheat farmer and futures contracts to illustrate his point:

A futures contract guarantees the seller a specified price in advance, regardless of what the market price may turn out to be at the time of delivery. This separates farming from economic speculation, allowing each to be done by different people, who specialize in different economic activities. The speculator uses his knowledge of the market, and of economic and statistical analysis, to try to arrive at a better guess than the farmer may be able to make, and thus is able to offer a price that the farmer will consider an attractive alternative to waiting to sell at whatever price happens to prevail in the market at harvest time.

Speculation serves a purpose in that it reduces risk in the economy as a whole.

*Affiliate link

WSJ: “Free” Checking Costs More


From today’s WSJ:

To avoid a monthly fee, bank customers in the U.S. must keep an average minimum balance of $723 in checking accounts that pay no interest—up 23% over last year, according to a new survey from data provider Bankrate Inc., which analyzed 477 checking accounts at 247 banks and thrifts. The average monthly fee on noninterest checking accounts rose 25% to $5.48, also a record.

Further down in the article, the author mentions that it costs most banks $250 to $300 a year to maintain checking accounts. Amazing that it costs that much especially with all the electronic transactions that go on daily. I also wonder if that figure is net after retail fees.

All these new fees are a direct result of dubious Frank-Dodd act. Thanks Frank and Dodd.