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ZIRP And World War Z

Friday, September 13, 2013 - 9:27 PM
From The Asset Builder's Scott Burns comes a nice example of the arithmetic
of portfolio extinction:

     "Is your portfolio heading for extinction?
      The answer to this depends on your age and whether you are still
      employed. If you are young and working, portfolio extinction isn’t
      one of your problems.   . . .
      It’s a different story for retirees.   . . .

Read more:
4
cumuluscumulus297 posts since
Jan 16, 2010
Rep Points: 1,370
1. Saturday, September 14, 2013 - 6:17 AM
"Basically, this is a war on personal saving and investment. And it’s a war of extinction."

Not going into detailed elaboration on the subject, I happen to agree with Mr. Burns.
6
ShorebreakShorebreak2,371 posts since
Apr 6, 2010
Rep Points: 12,629
2. Saturday, September 14, 2013 - 8:08 AM
Well, I think Mr. Burns is just one big black cloud and he has no idea how seniors really can survive with even ZIRP!  He makes it all sound so hopeless.  Why am I not shocked that you, Shorebreak, agree with him?  I, proudly, am a senior and that could make me be anything from 45 to 125 and, and I WILL survive because not surviving is not a part of my plan.  My family depends upon me and I don't let family down no matter how ZIRPY they make our economy.  Have a great day all!
2
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
3. Saturday, September 14, 2013 - 1:56 PM
"...he has no idea how seniors really can survive with even ZIRP!"

OH REALLY, Paoli2?

That must be why Scott Burns manages a successful portfolio management company.

"Who is AssetBuilder for? Distribution portfolios: Retirees and early retirees who need to draw on their nest eggs will enjoy better odds of long-term portfolio survival."
5
ShorebreakShorebreak2,371 posts since
Apr 6, 2010
Rep Points: 12,629
4. Saturday, September 14, 2013 - 2:56 PM
The first thing is who would take 10% out their portfolio each year. Second thing is you never put in the market what you are going to use in 5 to 10 years. If you are going to take 4% out a year you would have 40% or so of you portfolio in laddered CD's or bonds. The other 60% would be in the market and each year when you rebalance you would take another 4% out if the market is up if it is down wait another year or so. You are in no hurry to take another 4% out to put in Cd's. You have another 9 years in Cd's to live on. 
1
AllyAlly778 posts since
Jan 16, 2010
Rep Points: 2,266
5. Saturday, September 14, 2013 - 3:04 PM
OH REALLY, SHORE!  Your friend can't speak for all seniors.  I am a senior and have had to go back to apartment living and I am surviving just great.  I would hate to see him cope with another Great Depression.  He can't eat his portfolio.  It all depends what's in it and I probably would not buy any thing he would recommend anyway.  Many seniors are and will survive with ZIRP or whatever they throw at us  because we learned how from our parents who survived the Depression and worse.  This is not a rude post.   I am only giving my opinion to a fellow poster who reacted to me, "first".

Ally:  How do we know we will have another  9 years to live?  Just kidding. :)  Many of the best managers agree with you and it is the way they think.  Just make sure you are in good health if you use your system.

 
2
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
6. Saturday, September 14, 2013 - 3:52 PM
Cumulus:  Thank you for taking the time to share Mr. Burns interesting articles with us.  I was in a state of "sleep talking" when I wrote to Shorebreak so I hope he didn't, as usual, take me seriously.  Now that I am fully awake, I hope to read more of Mr. Burns articles.  I may not agree with everything he writes but I am always willing to learn what others think.  I found his article about the RMDs very interesting except I don't use his method.  I use my own method of making sure we don't run out of money now that we are forced to withdraw.  If one has saved enough money that's not in IRAs, you can just buy another CD with it or what is left after paying taxes etc.  Much appreciation for sharing the article.
2
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
7. Saturday, September 14, 2013 - 4:13 PM
 paoli2: "I am a senior and have had to go back to apartment living..."

That's a shame. Bernanke's ZIRP affected you pretty bad.
4
ShorebreakShorebreak2,371 posts since
Apr 6, 2010
Rep Points: 12,629
8. Saturday, September 14, 2013 - 4:33 PM
Home is what you make it no matter where you live. It is a place for you and your family. What you make of it is your choice. People make the home. 
2
AllyAlly778 posts since
Jan 16, 2010
Rep Points: 2,266
9. Saturday, September 14, 2013 - 5:24 PM
Shorebreak:  My loosing my paid up home had nothing to do with Bernanke's ZIRP.  It was fully paid up but a miserable hurricane called Katrina decided it wanted my home and 30 years of paying for homeowners and Flood insurance refused to pay for another.  Sooo as I wrote, I am a survivor.  We are in a new city and state and starting all over paying for apartment rent.  That is the worse part at our ages having to pay rent all over again.  But ZIRP only messed us up because if I had higher interest rates I could have more income coming in.  Buying another home is out of the question not due to finances but DP doesn't want the care that goes with another home and all the extras that goes with it. 

Ally:  You are right that "home" is any place you are with the people you love however.......that love does not pay the rent!  When my DD got sicker and lost her job, we ended up paying for two apartments!  But as you wrote, it's "home" because we have managed to stay together even if she is a few doors away.  I am not kidding when I stress to everyone to "oversave".  We are doing fine because I live by that motto. No one expects, as a senior, to have to use your income and/or savings for rent again.  ZIRP is not going to ZAP me!
2
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
10. Saturday, September 14, 2013 - 9:33 PM
 "I am a senior and have had to go back to apartment living..."
Oops, no mention of Katrina. Implied due to ZIRP misfortune within topic. Sorry.
4
ShorebreakShorebreak2,371 posts since
Apr 6, 2010
Rep Points: 12,629
11. Sunday, September 15, 2013 - 8:10 AM
Shorebreak:  Did some of your last post from last night get chopped off?.  It makes no sense to me.  Just curious.
2
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
12. Sunday, September 15, 2013 - 10:57 PM
Re: #6 Paoli2
> Thank you for taking the time to share Mr. Burns interesting articles...
>
You're very welcome. Good to see someone take issue with him once and
awhile.  Although I find his articles worthwhile seems he can go
overboard.  Ally #4 notes the absurdity of his sample portfolio
withdrawals here; occasionally you have to throw him some slack as
I'm thinking he's really just highlighting the downside with an
(exaggerated) example.  So even though you're not in lockstep with
him, in pursuing common sense, self-directed finances there's lots
in common.
2
cumuluscumulus297 posts since
Jan 16, 2010
Rep Points: 1,370
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