Comments on: The Five Biggest Myths of Retirement Planning http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/?utm_source=rss&utm_medium=rss&utm_campaign=the-five-biggest-myths-of-retirement-planning The AllianceBernstein Blog on Investing Wed, 22 May 2013 07:20:14 +0000 hourly 1 http://wordpress.org/?v=3.4.1 By: Financial Planning http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/#comment-50440 Financial Planning Mon, 28 Jan 2013 11:24:11 +0000 http://blog.alliancebernstein.com/?p=2594#comment-50440 One more myth "My retirement years won''t last all that long" :) One more myth “My retirement years won”t last all that long” :)

]]> By: robert http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/#comment-16569 robert Sun, 09 Sep 2012 08:47:06 +0000 http://blog.alliancebernstein.com/?p=2594#comment-16569 Hi Daniel B. Eagan It''s true fact you have written and great idea.I appreciate your thoughts.I just want to put another point here. Many banks and building societies take every possible opportunity to promote their financial products, such as pensions. It all sounds very good and many people choose their bank to provide their pension as they trust them, but it should be realized that they are usually tied in to promote only one pension provider and this will rarely offer the best opportunity out there. Hi Daniel B. Eagan
It”s true fact you have written and great idea.I appreciate your thoughts.I just want to put another point here.
Many banks and building societies take every possible opportunity to promote their financial products, such as pensions. It all sounds very good and many people choose their bank to provide their pension as they trust them, but it should be realized that they are usually tied in to promote only one pension provider and this will rarely offer the best opportunity out there.

]]> By: David Forman http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/#comment-15918 David Forman Thu, 30 Aug 2012 18:37:24 +0000 http://blog.alliancebernstein.com/?p=2594#comment-15918 I believe that if one wishes to maintain his or her standard of living and a portfolio that does not lose any capital, one must consider taxes and inflation. Assuming your 3% to live on, you must add say 2.5% for today''s inflation and divide by a tax rate say of 0.7%. This would require a return of nearly 8%. This would allow you to 1) increase your annual expenses to stay even with inflation, pay your taxes and keep your portfolio growing at the rate of inflation. I know, I for one, feel very uncomfortable in running down my portfolio to zero on the day I die (guarantee to cause death on that day)! Also, I would like to have some Estate to pass on to charity and my children. To get a return of 3% today would be very unsatisfactory. I believe that if one wishes to maintain his or her standard of living and a portfolio that does not lose any capital, one must consider taxes and inflation. Assuming your 3% to live on, you must add say 2.5% for today”s inflation and divide by a tax rate say of 0.7%. This would require a return of nearly 8%. This would allow you to 1) increase your annual expenses to stay even with inflation, pay your taxes and keep your portfolio growing at the rate of inflation. I know, I for one, feel very uncomfortable in running down my portfolio to zero on the day I die (guarantee to cause death on that day)! Also, I would like to have some Estate to pass on to charity and my children. To get a return of 3% today would be very unsatisfactory.

]]> By: Tara Thompson Popernik http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/#comment-15831 Tara Thompson Popernik Wed, 29 Aug 2012 08:17:11 +0000 http://blog.alliancebernstein.com/?p=2594#comment-15831 We''''d agree that today''''s high equity risk premium means that equities are well-positioned for positive returns. But, because bond yields are so low, we expect total equity returns to be muted compared to what history would suggest about a post-crisis period. In other words, we believe equities will deliver returns near their long term normal returns while bonds will deliver returns far below long term averages. For a retired investor in a balanced portfolio, this means returns will be lower than normal. It''''s also important to note that the initial sustainable spending rate of 3% for a 65 year old couple is designed to give retirees a high degree of confidence that they will be able to spend an inflation-adjusted after-tax amount from a balanced portfolio for the rest of their lives. We define a high degree of confidence as a 90% likelihood of not running out of money during your lifetime. A less conservative planning standard would result in a higher sustainable spending rate. We””d agree that today””s high equity risk premium means that equities are well-positioned for positive returns. But, because bond yields are so low, we expect total equity returns to be muted compared to what history would suggest about a post-crisis period. In other words, we believe equities will deliver returns near their long term normal returns while bonds will deliver returns far below long term averages. For a retired investor in a balanced portfolio, this means returns will be lower than normal.

It””s also important to note that the initial sustainable spending rate of 3% for a 65 year old couple is designed to give retirees a high degree of confidence that they will be able to spend an inflation-adjusted after-tax amount from a balanced portfolio for the rest of their lives. We define a high degree of confidence as a 90% likelihood of not running out of money during your lifetime. A less conservative planning standard would result in a higher sustainable spending rate.

]]> By: Russell D. Ragland http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/#comment-15784 Russell D. Ragland Tue, 28 Aug 2012 15:32:25 +0000 http://blog.alliancebernstein.com/?p=2594#comment-15784 Generally good advice and much appreciated. Obliviously, as one ages their life expectancy declines so the total portfolio requirements should decline as well. I am wondering how much where one is in the market cycle (peak or trough) and having a personal goal of leaving as little as possible would influence the 3% or 4% rule? The real point is everyone''s needs are different and one has to constantly adjust to the short-term and long-term circumstances in making this important decision. Generally good advice and much appreciated.

Obliviously, as one ages their life expectancy declines so the total portfolio requirements should decline as well.

I am wondering how much where one is in the market cycle (peak or trough) and having a personal goal of leaving as little as possible would influence the 3% or 4% rule?

The real point is everyone”s needs are different and one has to constantly adjust to the short-term and long-term circumstances in making this important decision.

]]> By: Jeff McClure http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/#comment-15479 Jeff McClure Thu, 23 Aug 2012 21:30:40 +0000 http://blog.alliancebernstein.com/?p=2594#comment-15479 The concept that a person should only take 3% from a retirement portfolio appears to me as silly as the idea that one should take 8% that was in vogue back in the late 1990s. All we have to use to judge the likely future is the past. In the past when stock market returns were effectively zero for a decade or more, as they are today, reversion to the mean created an outsized gain in the following decade. I can find no point in history where that does not apply. Even if we compare 2007-2009 to the market decline of 1929-34, five years after the high point, just when the gloom and doom was the worst, was a point from which equity gains were astonishingly high for the next two decades. To tell people who have had little or no real gain in their portfolios that they must learn to live on 3% of what they have saved is to drive them into the arms of the shysters who will take all of their money. A well allocated portfolio right now has a good potential of achieving a healthy 8% (+) expected return for the next several decades. The concept that a person should only take 3% from a retirement portfolio appears to me as silly as the idea that one should take 8% that was in vogue back in the late 1990s.

All we have to use to judge the likely future is the past. In the past when stock market returns were effectively zero for a decade or more, as they are today, reversion to the mean created an outsized gain in the following decade. I can find no point in history where that does not apply.

Even if we compare 2007-2009 to the market decline of 1929-34, five years after the high point, just when the gloom and doom was the worst, was a point from which equity gains were astonishingly high for the next two decades.

To tell people who have had little or no real gain in their portfolios that they must learn to live on 3% of what they have saved is to drive them into the arms of the shysters who will take all of their money. A well allocated portfolio right now has a good potential of achieving a healthy 8% (+) expected return for the next several decades.

]]> By: Kevin Sullivan http://blog.alliancebernstein.com/index.php/2012/08/23/the-five-biggest-myths-of-retirement-planning/#comment-15478 Kevin Sullivan Thu, 23 Aug 2012 21:09:51 +0000 http://blog.alliancebernstein.com/?p=2594#comment-15478 You are spot on. Great points. You are spot on. Great points.

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