"Funding retirement begins with the simple observation that after one retires, the bills keep coming but the paychecks stop."
So says retirement planning expert Dirk Cotton, and it is this common sense approach that is characteristic of the quite constructive model he presents on Seeking Alpha. The simplicity of his presentation nevertheless does not mask the inherent complexity of the problem since, as he discusses, creating a plan that matches uncertain income to uncertain expenses is not easy. Here is Part 1 of his model.
And in the great minds think alike department, new SA contributor Michael Lonier presents a differently described but not dissimilar retirement planning model. Both contributors stress that one has to plan retirement in a manner starkly different than that of saving for retirement. As Lonier puts it:
"It's no longer Charles Ellis's simple question if you've won the game, why do you keep playing, but a realization that if you are going to have a successful outcome in retirement, the investment game is essentially over and now you are in a new game with new rules. Even the very successful with many millions in savings can lose the new game if they play by the old rules."
Wrong, says Eric Nelson, Servo Wealth Management's feisty principal, who essentially argues that it is precisely the old rules that investors need, a proposition he supports with some dramatic looking data.
"In trying to avoid short-term losses for fear of running out of money… you experienced the very result you sought to avoid! It was only the investor who focused on the long term and the need for growth, white-knuckling their way through the harrowing (and temporary) market declines but stayed the course through it all who came out way ahead," Nelson sums the matter.
So whose approach makes the most sense? Please let us know in the comments section.
And here are other items of interest to advisors today:
- An RIA explains why smaller investment managers may be better choices than advisors at large firms.
- How to defensively allocate a portfolio if you think the market's comeuppance is coming.
- Michael Kitces on who should file and suspend for Social Security benefits by the April 29 deadline.
- DoubleLine's Jeffrey Gundlach says Brexit's not happening.