Seeking Alpha

Want A 50% Increase In Your Retirement Income? Financial Advisors' Daily Digest

by: SA For FAs

Prof. Laurence Kotlikoff helps seekers find a lot more alpha.

Jim Sloan discusses strategies for managing cash at this market juncture.

Mohamed El-Erian offers guidance on getting through the volatility.

A Boston University professor once shared with me that one of the cool fringe benefits his employer offered its employees was access to retirement software developed by BU professor Laurence Kotlikoff. (My informant was not Kotlikoff himself but one of his colleagues.)

Economics professors are really into “consumption smoothing” – finding ways of keeping one’s level of income even before and after retirement, which the Kotlikoff software surely does. But the profession isn’t opposed to increased consumption either, and the good professor’s nifty tool has allowed BU employees to alter assumptions about their length of employment and savings to see with just a few clicks how they might increase their standard of living while maintaining a floor for safety (another predilection of the profession).

Well, I am pleased to report that, in a virtual sense, at least, Seeking Alpha can make that benefit available to its readers, as we welcome Professor Kotlikoff to our webpages as a regular new contributor. His mission is to help investors find meaningful alpha through the everyday aspects of their lives that they directly control, without undertaking taking market risk. As Larry puts it in his debut article:

Wall Street is yielding only 1 percent real. Hence, seeking alpha in the financial market is a lost cause. Instead…all of us need to look in our backyards, where all our personal financial decisions are waiting to be optimized.”

He shows us how we can obtain this internal alpha via eight “tricks” that raise the retirement spending allowance of a fictional couple by just under 50%. The first trick – and the one that delivers the greatest bang for a hypothetical 50-year-old Pennsylvania couple – is deciding to delay taking retirement and Social Security benefits for four years. That alone adds over $21,000 a year to their currently projected $108,000 annual income.

The last trick – and second most impactful – is to downsize their home in retirement, which yields another $12,000 or so a year. A few thousand here and a few thousand there, and through sensible life decisions planned well in advance, this couple has added $2 million to their retirement nest egg.

Investing in financial markets is a sensible part of any family’s financial planning, but it involves risk of loss and too often is relied upon, naively, as a substitute for disciplined personal behavior. I have a feeling he’s got more than few more “tricks” up his sleeves, so I suggest you follow Kotlikoff’s feed and post your questions or ideas for future articles. He’s generally quite accessible and responsive, and I am excited by the opportunity for Seeking Alpha readers to seek and find more alpha.


Please share your thoughts in our comments section. Meanwhile, below please find links to other advisor-related content on today's Seeking Alpha. Also, Seeking Alpha has added podcasts to its repertoire –from me and others; for a weekly “best of” digest, follow SA Multimedia; you can also follow my feed on iTunes.

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