What do “the utilities of retirement” refer to? Buy gas and electric stocks and live off the dividends? No. Not in this article. We’re talking about utility as an economic term of art, meaning reward, pleasure, and satisfaction.
IRMAA (Income Related Monthly Adjustment Amounts) acts as a penalty on prosperity, lightly touching the truly wealthy and passing over the poor and those doing okay. It is a dagger aimed at the heart of affluent professionals who diligently saved for retirement and are now drawing down their ample 401(k) funds.
No matter how long you delay taking Social Security, it likely won’t cover all your living expenses. But that doesn't mean you should take it early.
More than a generation ago, financial historian Peter Bernstein wrote about investors’ 'memory banks,' the market experience that accumulates in their hippocampi over their investing lives and molds their investment strategy. As he put it, looking back on the 1990s: 'Most of the new participants in the market had no memory of what a bear market was like.'
Financial planners perform a valuable service by discussing with married clients what will happen if the income of one of them disappears upon death. But the focus should be on the adequacy of the remaining income to the spending needs of the survivor — not the change in tax rate from married to single.
At the risk of assaulting an already deceased equine, happy talk about decreased spending in retirement strikes us as the whistling-past-the-graveyard rationalization of those who fear they haven’t saved enough. In plain English, the average retiree spends less than while working because they have to, not because they want to. Advisors and prospective retirees should take care not to confuse the two.
We love Roth accounts - really, we do. As long as we don't have to pay too high an entrance fee. Which would be dumb.
Don’t allow your middle-aged clients depending on their 401(k) plan to fool themselves. Markets can’t rescue a failure to save until it hurts. And don’t let them kid themselves that a smoother ride with bonds won’t come at the cost of increased shortfall risk.
