- The financial planning implication considers that a simpler lifestyle will in most instances be a less expensive lifestyle.
- Financial simplicity is also included on the list.
- A simple ETF portfolio diversified across the major asset classes can get the job done in terms of sustaining a long retirement.
by Roger Nusbaum AdvisorShares ETF Strategist
For many years on the Random Roger blog we have talked about simplifying all facets of life including of course financial simplicity. "Financial simplicity" has implications both in financial planning as well as portfolio construction.
The financial planning implication considers that a simpler lifestyle will in most instances be a less expensive lifestyle, and of course a less expensive lifestyle becomes much easier to plan for. For purposes of this post we'll assume Social Security will be able to pay out as people hope for; how much needs to be saved for a $3000/month lifestyle (including Social Security) compared to a $10,000/monthly lifestyle? Instead of worrying about a 4% withdrawal rate, it can be possible to combine Social Security with a 2% withdrawal rate.
One way to simplify is with a smaller house or more specifically a Tiny House. Tiny Houses are essentially little houses on wheels (along the lines of an Airstream) that are very cheap due not only to their size but also because they are not covered by building codes. Being trailer-sized they tend to be 100-200 square feet but many of them can accommodate an upstairs sleeping loft which obviously increases the square footage a little.
By some estimates, Tiny Houses cost 1/10th of what an average regular sized house costs. The economics of this combined with the Great Recession's impact on the social fabric has created a Tiny House movement that also includes life simplicity, self-sufficiency (growing some or all of your own food) and social consciousness.
Also included on the list is financial simplicity. This of course includes living below one's means, not incurring excessive debt and simplified investing (for people who choose not to make a full time vocation out of their portfolio).
While the idea of living in a 200 square foot house, growing your own kale, may not resonate as a desired lifestyle, most people can find ways to cut back and many legendary investors extoll the virtues of keeping investments simple. Obviously ETFs play a huge role in a simplified investment portfolio.
I recently had very similar conversations with two friends, both in their early 50s, who are starting to think about what their retirements might be, and while both know they need to have their savings last, they do not want to spend a lot of time on their investments.
A simple ETF portfolio diversified across the major asset classes can get the job done in terms of sustaining a long retirement, all the easier when the retiree has simplified their financial life and financial needs.
Additional disclosure: To the extent that this content includes references to securities, those references do not constitute an offer or solicitation to buy, sell or hold such security. AdvisorShares is a sponsor of actively managed exchange-traded funds (ETFs) and holds positions in all of its ETFs. This document should not be considered investment advice and the information contain within should not be relied upon in assessing whether or not to invest in any products mentioned. Investment in securities carries a high degree of risk which may result in investors losing all of their invested capital. Please keep in mind that a company’s past financial performance, including the performance of its share price, does not guarantee future results. To learn more about the risks with actively managed ETFs visit our website AdvisorShares.com.AdvisorShares is an SEC registered RIA, which advises to actively managed exchange traded funds (Active ETFs). The article has been written by Roger Nusbaum, AdvisorShares ETF Strategist. We are not receiving compensation for this article, and have no business relationship with any company whose stock is mentioned in this article.