On Retirement Investing in an Unsure Market

by: Roger Nusbaum

Thursday was the second day that the S&P 500 again closed below its 200 DMA so I put on an across the board position in the ProShares Ultrashort S&P 500 (NYSEARCA:SDS). Given the nature of the dance that the S&P 500 has been doing around the 200 DMA, more so than any other time since I've been using this strategy, I am exploring some alternatives to getting back out so soon should the market lift a little in the next couple of days. While I have one idea that I favor for now I'm not going to front run it here on the blog.

I will say that given my skepticism about the worst financial crisis ending neatly after just a year or two I will lean toward being overly defensive as opposed to unhedged. The position size targeted is low single digits, percentage-wise, and if this turns out to be a meaningful decline then the SDS position will grow to hedge a larger portion of the portfolio.

Advisor Perspectives reran a five year old article written by Paul Merriman called Ten Retirement Lessons from the Smartest People I Know. "Lesson Eight: Active trumps lazy, every time" to which Merriman adds;

Smart people of all ages keep themselves active mentally as well as physically. People who regularly challenge their brains live longer than those who get intellectually lazy. Do you want to have a long, happy retirement? Then do stimulating things like reading, crossword puzzles, taking a class or teaching one. If you can, travel to unfamiliar places and try new things.

This can also include having some sort of income producing activity after "retirement." As I have said repeatedly, this should not mean staying in a job you hate until you die but rolling up your sleeves and figuring a way to make a little bit doing something you enjoy and would ideally otherwise do for nothing.

Most of the other "lessons" in the article are also quite useful.

The Business Insider ran an article by Megan McArdle called The End of Retirement As We Know It. While it was not that meaty the opening quote from Allison Schrager was pretty good; "I don't know if it's ever going to be realistic that everyone saves enough to spend the last third of their life on vacation." I don't think I ever thought of it that way.

The rest of the article seems to focus on the extent to which every sort of entitlement (social security and pensions) is over extended and cannot possibly meet their obligations. Do you believe the financial health of this country relies in some large measure on people being forced to give something up? I would urge anyone to "get right" with the idea of paying in and not being able to take out. It would be great if social security didn't become some sort of welfare-like program but I can't figure any other outcome.

Disclosure: None