Many Baby Boomers may be falling into the Equity Indexed Annuity Web and may well live to regret it. They are being heavily promoted to Baby Boomers and Seniors often due to the very high commissions being paid to the sellers.

It has taken some time but now it seems the problem with Index Annuities are getting the attention of the SEC. In an article on MarketWatch SEC Weighs Overhaul of ‘Index’ Annuities, it states equity indexed annuities are sold on the idea that;

“Investors benefit from gains in the stock market without any direct risk of losing money when stocks fall.

Last year, investors put $25 billion into indexed annuities. And during the bear market in stocks, it’s been an especially seductive notion.”

The SEC is getting involved because all is not what it seems with these annuities. High fees and commissions, complex ways of calculating returns, and pre-set caps to limit returns are some of the concerns. Read the rest of this entry »

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It’s that time when all the big fund managers roll out the long term stock market charts showing a trending stock market over the last 100 years. It’s a good ploy because over the long term the stock market goes up and “lo and behold” the advice given to you is to buy and hold for the long term. QED.

Well not so fast because you need to ask yourself:

• Are you accumulating your nest egg and so will not need it to live?
• Or are you relying on it to provide some or all of tour retirement income?

These are two totally different strategies. (larger image of DOW below)

What is also important is to distinguish between: Read the rest of this entry »

Occasionally I stumble on someone who is not tarred with the same “Buy and Hold” brush as most Wealth Mangers are today, sucked in by the believe that a short 25 year bull market is a guarantee the good times will continue.

They tell you past performance is no guarantee of future returns but that you should buy and hold for the long term as markets always go up.

If you are in retirement you cannot afford to chance it. It’s not the up side you should be concerned about, its the down side and the potential for a serious loss to your nest egg. Rule #1 is you need to protect yourself against large losses in retirement.

The other day I came across a site W.E Donoghue & Co Inc who’s slogan is “Managing the Investment Opportunities of your Lifetime.” Unfortunately the site is not Baby Boomer friendly in my view because it doesn’t explain in simple terms what the philosophy is. It is all in financial-speak to me and may be dismissed by Baby Boomers before they take a serious look. It seems to be aimed at financial planners more than investors. But Baby Boomers should definitely take a close look at this site. Read the rest of this entry »

I just read a column in the Australian newspaper where it says the Government is considering increasing the compulsory superannuation contribution to 12% or even 15%.

Nick Sherry Minister the “Super Minister” is not sold on the idea fully yet but I think he has it under consideration.

There are major problems with the current compulsory super system not least of which is the stated annual $860 Million paid to the wealth industry in fees just for taking 9% of our money by government decree. This in itself is criminal and makes a large dent in the end retirement amount over 40 or so years.

If the wealth managers lobbying hard in the corridors of Parliament House Canberra get their way and the compulsory contribution is increased to 15% that will increase their “take” of our kids annual contribution to $1.433 Billion. That is effectively a 40% pay rise for doing no more work. Does that seem fair to you?

Read the rest of this entry »

Dynamic Asset Allocation means moving in and out of Assets or Sectors as each becomes stronger or weaker. In order to do that you need a long term market timing strategy.

One Web site I have found that uses this strategy is Confident Investment Strategies

The aim is to avoid large losses but at the same time go for high returns when market conditions are bullish and stand aside when the market is bearish.

The primary benefit is that your capital is virtually still intact at the end of a bear market and is ready to capitalise on the next bull run. Thus the compounding effect of returns is maximised because you have retained most of your capital and do not have to use the bull market just to recover your losses.

I am a great believer in using technical analysis and charts to help determine long term market timing. I have used it myself for several years and profited from it. Read the rest of this entry »

I thought it might be a good idea to summarize where I believe I am at with my own strategy for managing my nest egg in retirement. To me the hardest thing to do is to get your head around what you can do to take control and protect your nest egg in retirement. Unless you are very lucky it is just foolish to believe that a financial planner or adviser will take care of your money as well as you will.

You are the President of your nest egg fund and as such you are responsible for making the final decisions on what you will invest in and how you will manage it. Your financial planner is just one of a number of trusted advisers, and that is all.

As with most things in life you need to use your own common sense and employ people with specialist skills for the investment knowledge you don’t possess yourself. By this I mean if you have a framework for investing your nest egg and managing risk then you can employ people to advise you on what you should invest your nest egg funds in.

As with almost any business technical information is often cheap to buy, but management skills and good judgement are hard to find. So you need to find good sources of technical advise and learn to evaluate it yourself and input it into your overall strategy. Any investment has to meet your investment rules.

I am gradually formulating the rules and strategies I hope to use for managing my nest Egg in retirement.

Rules for Managing Your Nest Egg

• Avoid Large Losses to my Nest Egg
• Minimize Fees and Charges
• Minimize Taxes
• Control the effects of Inflation (this one I still need to research on)
• Separate Risk-Based Assets from Safe Assets and set a balance.
• Risk no more that 10% on any risk-based asset.
• Be prepared to be in Cash for periods at a time.
• Use the Teeter Totter principle to balance Risk-Based Assets with Safe Assets.
• Set up an Income Ladder with at least 5-7 years worth of cash for a pension.
• Use the Otar Retirement Optimizer to monitor my nest egg over time.

Strategy for Managing Your Nest Egg

I have already revised my strategic model on how I think I can manage my retirement nest egg. It is based on using three buckets, the teeter totter and Jim Otar’s Retirement optimizer. That will become my framework for investing. The buckets are empty right now because I am in cash. But over the next few months I will begin to fill the buckets according to my rules.

Tactics for Managing Your Nest Egg

Risk-Based Investments

The tactics are really the investments I will use to fill the buckets. Do I invest in ETFs, Stock Indexes, or other risk-based investments and add them to the risk-based bucket? I don’t have all the answers yet so I have to do more research on what types of investments I can make.

Safe Investments

What sort of income ladder do I want to create for the safe investment bucket and how can I maximise the return from this bucket over the long term? Do I need to consider an annuity for a time?

These are the tactical decisions and once the strategy is in place you can concentrate on them properly.

Summary

The strategy should be a framework to allow you to change tactics as new investment products become available or market or investment conditions change which you may want to take advantage of. The point is if you can create a system that can be used to manage any type of investment and can be adjusted for risk without having to reinvent it, then you can concentrate on the important thing of managing your nest egg in retirement.

What’s more if the model is clear and concise you can define your rules such that your trusted financial planner can help manage it in your absence. Isn’t that the essence of what we want to do? It then frees you to enjoy your retirement but still have your finger on the pulse as it were.

Here is my latest bates retirement income strategy model #2. You can check out retirement income strategy model #1 and compare them.

As I learn more from my research I find the picture of what I need to do becomes clearer. So I have decided to revise my model and it is shown below.

This is what I think will work for me. It may not suit all Baby Boomers but I find simple diagrams and pictures give me a better understanding of what I need to achieve.

(A large diagram is displayed later in the Post)

Read the rest of this entry »

From some of the emails and comments I have been getting it is plain to me I need to redefine what my blog is about.

This blog is all about how to protect your retirement nest egg if you have one when you are close to or actually in retirement. Rule #1 is avoid large losses in retirement. If you have many years to go then you should consider putting a bigger percentage of your nest egg into risk-based investments like equity funds or stocks once the market settles down again. This blog may not be of use to people far from retirement right now. Read the rest of this entry »