In the ever-evolving field of retirement planning, the quest for knowledge is a journey without end.

That’s why I like this Lee Ainslee quote. The philosophy of continuous learning resonates deeply with my approach as a retirement coach and advisor.

Continuous learning has been a hallmark of my 30+ years in the investment business and one of the reasons I love researching capital markets and how best to help better navigate through the noise and focus only on what truly matters.

In this note, I aim to share the latest insights and strategies I am currently exploring to help you navigate the complexities of retirement with confidence and clarity.

From the emerging world of cryptocurrency investing to the age-old debate between income annuities and bond ladders, there’s a wealth of knowledge to uncover.

We’ll touch upon the nuances of Medicare options, the delicate balance of investment risk in retirement, and the often-overlooked question of when more money might actually become a hurdle to happiness.

Moreover, we’ll explore the necessity (or not) of optimization in financial matters, the intricacies of Roth conversions, and the shifting spending patterns in retirement's various stages.

Additionally, we’ll discuss how to choose the best place to retire and understand different money scripts within couples.

As I dig into these topics, I won't be providing definitive answers just yet. Instead, I'll share the main issues and questions that have arisen during my research.

Your feedback will be invaluable in shaping my ongoing exploration of these critical areas. Please send me an email at [email protected] with your thoughts and preferences.

Let’s embark on this journey of continuous learning together, ensuring that we make the most of our time, energy, and money to create a fulfilling and happy retirement.

1. Exploring Cryptocurrency Investing

The rise of cryptocurrency has introduced a new dimension to investing, particularly with Bitcoin and Ethereum leading the charge.

These digital assets promise high returns but come with significant volatility and regulatory uncertainties.

As I investigate further, the key issue is understanding how to integrate these volatile assets into a retirement portfolio without jeopardizing financial stability.

I’m trying to distinguish between investing in crypto as a purely speculative undertaking versus as a way to participate in the shaping of the new economy.

2. Income Annuities vs. Bond Ladders

Income annuities and bond ladders both offer strategies for generating stable income in retirement.

However, choosing between them involves understanding the nuances of each approach.

The primary question here is which option provides the most reliable income stream while aligning with an individual's risk tolerance and financial goals.

One of the issues that bothers me about annuities is their complexity and opaque pricing. I must admit some bias here. I am especially troubled by the loss of financial flexibility when buying an annuity, but also recognize the peace of mind that comes from knowing with certainty that a part of my lifestyle expenses will be covered.

3. Navigating Medicare Options

Medicare is a complex system with multiple options, each with its trade-offs.

The challenge lies in selecting the right plan that balances cost, coverage, and convenience.

My current research is focused on identifying the most critical factors to consider and common pitfalls to avoid when making this decision. I am one year away from having to make this decision.

In many ways, I can’t believe how complicated this issue is. My goal is to arrive at some simple decision rules to make maybe not the best decision but at least something that I can live with.

4. Managing Investment Risk in Retirement

Stocks generally outperform bonds over the long term but come with higher volatility.

As retirees seek to preserve their wealth, the dilemma is determining the right time to scale back on equities without sacrificing too much potential growth.

This balancing act is central to my ongoing analysis of retirement investment strategies.

As a long-time equity investor, I find it hard to significantly scale back risk and accept that most of my portfolio will barely beat inflation (as is the current situation with bonds).

However, I also know that playing the same game I have been at for the last 30+ years is not right at this stage of my life. How much do I scale back? When? Those are some of my pressing questions.

5. When More Money Means More Problems

While having more money can provide security, it can also become a source of stress if not managed properly.

The key issue I'm exploring is identifying when additional wealth transitions from being beneficial to becoming a burden and how to ensure that spending aligns with personal values and happiness.

This question is similar to #4 in that taking more risk is usually tied with greater financial rewards.

The real issue is at what point does more financial wealth become an unhealthy obsession? When is enough, enough? What kind of margin of error in my finances do I really need?

6. The Necessity of Optimization in Financial Matters

Financial optimization can be a double-edged sword. Striving for perfect efficiency in areas like portfolio management, withdrawal strategies, and tax planning can be time-consuming and exhausting. Moreover, things are always changing so what is best today may not be best tomorrow.

My research is focused on determining when it is sufficient to be "close enough" rather than perfect, and the implications this has for overall financial well-being.

I think that perfection is unattainable. I recently read that through his career Roger Federer won 54% of all points he played yet won 80% of his matches. Not quite perfect but pretty close. And that was enough for many tennis fans to call him the GOAT!

7. Roth Conversions: Timing and Benefits

Roth conversions can be advantageous under certain conditions, but timing is crucial.

The main question here is identifying the scenarios in which a Roth conversion makes the most sense and the steps required to implement it effectively.

How much of a bet on future taxes do I want to take? If you had looked at this question in the past you might be surprised to find out that there is no slam dunk here. Taxes do not always go up as most people believe.

For example, the Tax Cuts and Jobs Act (TCJA) of 2017 nearly doubled the standard deduction, which significantly reduced taxable income for many retirees. For many retirees, the increased standard deduction provided substantial tax relief.

Lots of financial planners swear by Roth conversions, but are they always worth the bother of implementation?

8. Spending Patterns in Retirement

Retirement spending is not static; it varies across different phases such as the go-go years, go-slow years, and slow-go years.

Understanding these patterns is key to effective financial planning.

My research aims to uncover typical spending trends and how to budget for each stage. I will rely heavily on recent research in the field by experts such as David Blanchett at Prudential and aim to arrive at some “rules of thumb” to guide your planning assumptions.

I am personally very interested in this topic as I am totally onboard to experiencing as much of life as possible while can. I might be wrong but it seems to me that spending in retirement is very much constrained by our physical and mental health.

9. Choosing Your Retirement Location

While tax rates are a significant factor in deciding where to retire, they are not the only consideration.

The broader question is how to weigh tax benefits against other factors like quality of life, proximity to family, and healthcare availability when choosing a retirement location.

Many people choose weather and cost of living as their primary inputs, but the decision is for most people much more complex. Do you buy a second home and split your time between two places? Do you become a traveling nomad? Do you seek variety in the places where you live, or do you prefer certainty of location?

The recent spike in home values globally has shifted the conversation. Places that used to be inexpensive are now expensive. Other new locations are rising in the ranks. The world is your oyster, but, boy, this can get complicated.

10. Understanding and Resolving Money Scripts in Couples

Money scripts are deeply ingrained beliefs about money that influence financial behavior.

In couples, conflicting money scripts can lead to disagreements and stress. These flash points can become worse in retirement when you no longer have the luxury of “mine and yours” paychecks and 401K’s.

I have seen couples in great relationships bicker over small financial issues. Retirement is, believe it or not, the 10th most stressful life event according to the Holmes-Rahe assessment. Money issues are usually at the forefront.

My exploration here focuses on identifying these scripts and developing strategies for couples to harmonize their financial approaches and better understand how to read each other’s hidden beliefs and concerns.

Your input on these subjects will be instrumental in guiding my ongoing research and ensuring that I address the areas that matter most to you.

Share your thoughts and preferences by emailing me at [email protected].

The Big Picture:

• US Large Cap Equity investors experienced an up week while interest-sensitive sectors were slightly down.

• International Equities were down as political uncertainty in Europe has made investors nervous.

• Year to date US Large Cap Equities and Commodities are the best performing asset classes.

• The investment environment remains risk-on. Aggressive asset allocation strategies continue their outperformance.

Economy:

• The US economy continues to be whipsawed by changing growth and inflationary expectations.

• A couple of data reports last week pointed to slowing growth and a more cautious US consumer.

• Meanwhile, the fight against inflation continues. Friday’s PCE inflation release will be pivotal in shaping expectations. The strength of the US dollar has kept import prices within check for now.

• Among the G7 countries, the US is growing the most at the moment with only slightly higher rates of inflation. That’s a good thing!

Equities:

• US Large Cap equities were up 0.6% over the last 5 trading days while the Russell 2000, our preferred Small Cap Index, was down 0.8%.

• International stocks also had a down week with Developed Markets losing 1.1% while Emerging Markets went up 1.1%.

• In terms of style, value outperformed growth.

  

  Source: iShares, 6/21/2024

• On the international front, the US was in the middle of the pack with no major market experiencing severe losses last week.

• The resurgence of Chinese stocks was put on hold as investors grew more concerned about the path of interest rates in the US and remained skeptical of policy measures designed to revive the moribund Chinese housing market.

Bonds:

• The Federal Reserve does not seem to be in a hurry to lower rates anytime soon.

• My guess is that we get max one rate cut this year but market participants seem to want more. As long as this stand-off continues don’t expect bond prices to change much.

• Investors should be focused on yield as the primary source of return.

• As such the short-end of the yield curve looks more attractive than buying into long-maturity bonds.

• Credit is also more attractive than Treasuries in light of solid economic growth.

• Last week we saw credit spreads relative to Treasuries go up a bit. Most likely this was due to expectations for a slowing US economy.

Signal Versus Noise

What’s Coming on Premium Wednesday😀 

• Asset Allocation Performance - Portfolio Implications

Disclaimer: This newsletter is not trading or investment advice but for general informational purposes only. This newsletter represents my personal opinions which I am sharing publicly as my blog. Futures, stocks, and bonds trading of any kind involve a lot of risk. No guarantee of any profit whatsoever is made. You may lose everything you have. We guarantee no profit whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission, CFTC, or with any other securities/regulatory authority. Consult with a registered investment advisor, broker-dealer, and/or financial advisor. By reading and using this newsletter or any of my publications, you are agreeing to these terms. Any screenshots used here are the courtesy of Global Focus Capital and Retirement With Possibilities. The data, quotes, and information used in this newsletter are from publicly available sources and could be outdated or outright wrong - I do not guarantee the accuracy of this information.