Comments on: The steady-savings retirement plan http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: miniclip tanki http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-54190 Sat, 04 Oct 2014 01:51:43 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-54190 Hands down, Apple’s app store wins by a mile. It’s a huge selection of all sorts of apps vs a rather sad selection of a handful for Zune. Microsoft has plans, especially in the realm of games, but I’m not sure I’d want to bet on the future if this aspect is important to you. The iPod is a much better choice in that case.

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By: a10 game http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-54074 Thu, 02 Oct 2014 11:25:04 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-54074 This is getting a bit more subjective, but I much prefer the Zune Marketplace. The interface is colorful, has more flair, and some cool features like ‘Mixview’ that let you quickly see related albums, songs, or other users related to what you’re listening to. Clicking on one of those will center on that item, and another set of “neighbors” will come into view, allowing you to navigate around exploring by similar artists, songs, or users. Speaking of users, the Zune “Social” is also great fun, letting you find others with shared tastes and becoming friends with them. You then can listen to a playlist created based on an amalgamation of what all your friends are listening to, which is also enjoyable. Those concerned with privacy will be relieved to know you can prevent the public from seeing your personal listening habits if you so choose.

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By: unity 3d http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-54072 Thu, 02 Oct 2014 10:43:04 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-54072 I’ll gear this review to 2 types of people: current Zune owners who are considering an upgrade, and people trying to decide between a Zune and an iPod. (There are other players worth considering out there, like the Sony Walkman X, but I hope this gives you enough info to make an informed decision of the Zune vs players other than the iPod line as well.)

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By: miniclip.com http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-54064 Thu, 02 Oct 2014 06:48:22 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-54064 This is getting a bit more subjective, but I much prefer the Zune Marketplace. The interface is colorful, has more flair, and some cool features like ‘Mixview’ that let you quickly see related albums, songs, or other users related to what you’re listening to. Clicking on one of those will center on that item, and another set of “neighbors” will come into view, allowing you to navigate around exploring by similar artists, songs, or users. Speaking of users, the Zune “Social” is also great fun, letting you find others with shared tastes and becoming friends with them. You then can listen to a playlist created based on an amalgamation of what all your friends are listening to, which is also enjoyable. Those concerned with privacy will be relieved to know you can prevent the public from seeing your personal listening habits if you so choose.

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By: didi games love tester http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-54059 Thu, 02 Oct 2014 00:52:52 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-54059 Hands down, Apple’s app store wins by a mile. It’s a huge selection of all sorts of apps vs a rather sad selection of a handful for Zune. Microsoft has plans, especially in the realm of games, but I’m not sure I’d want to bet on the future if this aspect is important to you. The iPod is a much better choice in that case.

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By: wpfau http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-25373 Sat, 26 Mar 2011 13:45:01 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-25373 Galician:

There is a subtle difference, though it has a big implication. The difference is that you don’t independently choose a withdrawal rate and a wealth accumulation goal, but just directly save enough to finance your desired retirement expenses. It leads to the differences between the black curve and the blue curve in Figure 5.

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By: Galician http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-25304 Wed, 23 Mar 2011 03:10:13 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-25304 In the paper “Safe Savings Rates: A New Approach to Retirement Planning over the Lifecycle” the author, Wade Donald, seeks to critique his interpretation of current financial planning practice with respect to retirement planning only to replace it with, in effect, the same process.

From page 3:

“I am suggesting that the following retirement planning process, which is one which isolates the accumulation and decumulation phases, is not appropriate.”

The author goes on to summarise current financial planning practice to be (the steps listed below have been reworded so as to read from the third person);

Step 1: Estimate the withdrawals needed from financial assets to pay for planned retirement expenses after accounting for Social Security, defined-pension benefits, and other income sources. Planned retirement expenses are defined as a replacement rate (RR) from pre-retirement salary.

Step 2: Decide on a comfortable withdrawal rate (WR) shown to be sufficiently capable in the historical data.

Step 3: Determine the wealth accumulation (W) retirement goal, defined as W = RR / WR.

Step 4: Determine the savings rate (SR) needed during working years to achieve this wealth accumulation goal.

Donald suggests replacing Steps 2 to 4 of the above process with the following:

Step 2: Decide on a comfortable savings rate (SR) based on what has been shown to be sufficiently capable of financing desired retirement expenditures in the historical data.

On page 4, Donald then goes on to define what a sufficiently cable savings rate should be.

“A particular savings rate was successful if it provided enough wealth at retirement to sustain 30 years of withdrawals without having the account balance fall below zero. Actual wealth accumulations and withdrawal rates may vary substantially for different retirees.”

This statement is simply a restatement of Steps 2 to 4. Put another way, this is what Steps 2 to 4 do leading the reader to wonder what, exactly, is new with this approach.

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By: TFF http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-24282 Thu, 24 Feb 2011 01:11:34 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-24282 Good insight, Amicus, and another reason why simplistic income-replacement guidelines don’t hold water. Every individual situation is different.

Note that investment income used to pay rent is taxed (and may trigger taxation of Social Security benefits). Yet if you “invest” in your home, the “income” of low-cost housing is entirely tax-free and does not count towards your AGI.

Yet another example of how income taxes create truly perverse incentives. The homeowner is likely already wealthier than the renter, so the renter is rewarded by paying higher taxes in retirement?!?

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By: AmicusAlso http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-24276 Wed, 23 Feb 2011 23:27:44 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-24276 “…on 50% of their final salary”
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Q: Felix, if one is a renter, not a homeowner, …

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By: jmh530 http://blogs.reuters.com/felix-salmon/2011/02/21/the-steady-savings-retirement-plan/comment-page-1/#comment-24264 Wed, 23 Feb 2011 19:01:48 +0000 http://blogs.reuters.com/felix-salmon/?p=7390#comment-24264 Assume you begin investing at 25 and at 45 you would hold a balanced portfolio with some risk aversion coefficient, lambda, and the investor is passive. Back out the expected returns of the balanced portfolio with reverse optimization (u=lambda*S*w where S is the covariance matrix and w is your balanced portfolio). However, they dynamically adjust their risk aversion coefficient by lambda*2^((age-45)/20). Then, using the expected returns found above, optimize the portfolio given the lambda here. When they are 25 their risk aversion coefficient is half that at 45 and when they are 65, their risk aversion coefficient is twice when they are 45. If the optimizations are unconstrained, this would mean the 25-year old (65-year old) portfolio is exactly twice (half) as risky as the 45-year old portfolio.

Any views on the investment outlook should be relative to the balanced portfolio and considered a separate problem (though not a separate optimization). Further, the investor could also dynamically adjust the risk aversion coefficient of the balanced portfolio (though not in the reverse optimization process) based on market conditions.

To the extent that he would prefer a constant savings contribution to take advantage of mean-reversion, then he is not necessarily passive. He does have an opinion on the return generating process. I would prefer to keep active and passive decisions separate. For instance, you could assume that the returns over your original optimization time horizon will be distributed as your inputs into the optimization (which could be influenced by views) and then normally distributed according to the original covariance and reverse optimized mean until say 30 years after death. You could then set your savings rate such that the probability that your wealth 30 years after your death is less than 50% of your final salary is less than 5%.

This is obviously more than any individual investor could do, but it wouldn’t be so hard to program into something a financial planner could use.

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