Table Of ContentTable of Contents
Title Page
Copyright
Dedication
Preface
Note
Acknowledgments
Part I: The Retirement Income Target
Chapter 1: The Road to Retirement
Detours
Chapter 2: Doubts about the 70 Percent Retirement Income Target
Niggling Doubts
Saving for Retirement Is a Two-Dimensional Problem
The Macro Case Against 70 Percent
Low-Income Workers
Conclusions
Notes
Chapter 3: Homing in on the Real Target
Setting the Ground Rules
Howard and Barb
Steve and Ashley 1.0
Steve and Ashley 2.0
Expressing Consumption in Dollars
Conclusions
Chapter 4: A New Rule of Thumb
Guiding Principles
Retirement Income Targets under Different Scenarios
General Rule of Thumb
Conclusions
Note
Part II: The Wealth Target
Chapter 5: Quantifying Your Wealth Target
A Rough-and-Ready Estimate
A More Actuarial Approach
Note
Chapter 6: Why Interest Rates Will Stay Low (And Why You Should Care)
The Rise of the Savers
The Japan Experience
Applicability to the United States and Canada
Possible Remedies
Implications
Notes
Chapter 7: How Spending Decreases with Age
Doubts
Quantifying the Decline in Consumption
Why Does Consumption Decline?
Next Steps
Notes
Chapter 8: Death Takes a Holiday
Present-Day Life Expectancy
Dispersion of Deaths
Who Is Benefiting the Most?
Why Is Mortality Improving?
The Future
Conclusions
Notes
Chapter 9: Estimating Your Own Life Expectancy
Conclusions
Notes
Chapter 10: Is Long-Term Care in Your Future?
Long-Term Care (LTC)
What Does LTC Entail?
What Are the Chances You Will Need LTC?
How Long Is LTC Usually Required?
Conclusions
Note
Chapter 11: Paying for Long-Term Care
Typical LTC Insurance Contract
Does the Math Work?
The Verdict
The Consequences of Not Insuring LTC
Note
Chapter 12: Putting It All Together
New Wealth Targets
Buffers
Conclusion
Note
Part III: The Accumulation Phase
Chapter 13: Picking a Savings Rate
Historical Performance
Lessons Learned
What the Future Holds
Generalizing the Results
Note
Chapter 14: Optimizing Your Savings Strategy
The Goal
Strategy 1: Simple
Strategy 2: Simple Lifecycle Approach
Strategy 3: Modified Lifecycle
Strategy 4: Variable Contribution
Strategy 5: The SMART Approach
Conclusion
The Third Lever
Methodology
Chapter 15: A Gentler Approach to Saving
Path 1: Pain Now, Gain Later
Path 2: Smooth and Steady Improvement
A Comparison in Dollar Terms
Conclusions
Part IV: The Decumulation Phase
Chapter 16: Rational Roulette
Call to Action
Watch Out for Your Children
Note
Chapter 17: Revisiting the 4 Percent Rule
The 4 Percent Rule
Problems with the 4 Percent Rule
A More Rational Spending Rule
A Monte Carlo Simulation
Conclusions
Chapter 18: Why People Hate Annuities (But Should Still Buy One)
Why Annuities Should Be Popular
The Psychology Behind the Unpopularity
Tontines
The Insured Annuity Strategy
Indexed Annuities? Forget It
Conclusions
Note
Part V: Random Reflections
Chapter 19: How Workplace Pension Plans Fit In
Why Employers Offer Workplace Plans
Getting the Most out of Your Workplace Plan
How a Workplace Pension Plan Affects Your Dollar Target
Online Forecast Tools
Chapter 20: Bubble Trouble
Why Worry about Financial Bubbles?
Examples of Recent Financial Bubbles
Common Characteristics
The Everything Bubble
Notes
Chapter 21: Carpe Diem
The Numbers
Healthy Life Years
Trends
Personal Genome Testing
Notes
Chapter 22: A Life Well Lived
Retirement and Happiness
Final Thoughts
Note
Appendix A: Similarities between the United States and Canada
Social Security Programs
High-Level Comparison of Retirement Vehicles
A Tax Comparison
Appendix B: Social Security in the United States and Canada
Name of Social Security Pension Plan
Purpose of Social Security
Earnings Base for Pension Calculation
How Pension Is Calculated
How the Plans Are Funded
Normal Retirement Age
Early Retirement Age
Delayed Retirement
Indexation
Other Government-Sponsored Pension Plans
Taxability
Appendix C: Retirement Income Targets under Other Scenarios
Appendix D: About the Assumptions Used in the Book
Thoughts on Conservatism
Assumptions Used to Estimate Personal Consumption
Assumptions Used to Calculate Future Retirement Savings
Assumptions Used to Estimate the Historical Accumulation of Savings
Couple Contemplating Long-Term Care Insurance
Assets Needed to Cover Long-Term Care (LTC)
About the Author
Index
End User License Agreement
List of Illustrations
Chapter 1: The Road to Retirement
Figure 1.1 The Fragility of Life
Chapter 2: Doubts about the 70 Percent Retirement Income Target
Figure 2.1 Breakdown of Expenditures in a Steady Saving Scenario
Chapter 3: Homing in on the Real Target
Figure 3.1 Expenses at Age 42
Figure 3.2 “Investments” Keep Personal Consumption Low
Figure 3.3 Save Early and Party at 60?
Figure 3.4 Steve and Ashley 2.0
Figure 3.5 Real Personal Consumption Doubles Between 34 and 60
Chapter 6: Why Interest Rates Will Stay Low (And Why You Should Care)
Figure 6.1 Saver Ratio
Figure 6.2 Saver Ratio
Figure 6.3 China is Next
Figure 6.4 Worker to Retiree Ratios Plummet
Chapter 7: How Spending Decreases with Age
Figure 7.1 Consumption Change for US Married Couples
Figure 7.2 Consumption Pattern of Canadians
Figure 7.3 German Household Spending (2014)
Chapter 8: Death Takes a Holiday
Figure 8.1 When Death Occurs for 60-Year-Old Men in 1950
Figure 8.2 When Death Occurs for 60-Year-Old Men in 2015
Figure 8.3 Death in 1950 Rates vs. 2015
Figure 8.4 Future Drivers of Mortality Improvement (male 80)
Chapter 9: Estimating Your Own Life Expectancy
Figure 9.1 Gain or Loss in Life Expectancy
Figure 9.2 Distribution of Future Deaths for Women Age 50
Chapter 13: Picking a Savings Rate
Figure 13.1 Retirement Income if 8% is Saved for 30 Years
Chapter 15: A Gentler Approach to Saving
Figure 15.1 Personal Consumption Under Path 1 (Steve and Ashley)
Figure 15.2 Smoothing Personal Consumption (Path 2)
Figure 15.3 Personal Consumption (Constant Dollars)
Chapter 17: Revisiting the 4 Percent Rule
Figure 17.1 Historical Income from 4 Percent Rule
Figure 17.2 Average Real Return on a Balanced Portfolio
Chapter 18: Why People Hate Annuities (But Should Still Buy One)
Figure 18.1 Summary of Retirement Income Enhancer
Chapter 21: Carpe Diem
Figure 21.1 Risk Between Ages 50 and 80—Male
Chapter 22: A Life Well Lived
Figure 22.1 Maslow's Hierarchy of Needs
List of Tables
Chapter 3: Homing in on the Real Target
Table 3.1 Defining Personal Consumption
Chapter 4: A New Rule of Thumb
Table 4.1 Retirement Income Targets under Scenario 1: Homeowners
Table 4.2 Retirement Income Targets under Scenario 1: Renters
Table 4.3 Retirement Income Targets under Scenario 2: Homeowners
Table 4.4 Difference in Targets, Scenario 2 vs. Scenario 1
Table 4.5 Size of “Investments” Made
Table 4.6 New Rule of Thumb for Retirement Income Target*
Chapter 5: Quantifying Your Wealth Target
Table 5.1 How Wealth Target Varies by Income Level
Table 5.2 How Income Needs Change after Divorce
Table 5.3 How the Wealth Target Depends on Age (Target at age 64 = $400,000)
Chapter 6: Why Interest Rates Will Stay Low (And Why You Should Care)
Table 6.1 Saver Ratios in 1990
Chapter 7: How Spending Decreases with Age
Table 7.1 Spending Drops More than 50% on These Items
Table 7.2 Spending Increases More than 50% on These Items
Table 7.3 The Rate of Decline in Consumption (US and Canada)
Chapter 8: Death Takes a Holiday
Table 8.1 Modern Death Probabilities (for a 60-year-old)
Chapter 9: Estimating Your Own Life Expectancy
Table 9.1 Estimating Life Expectancy
Table 9.2 Life Expectancy Zones
Chapter 10: Is Long-Term Care in Your Future?
Table 10.1 Probability of Needing LTC for First Time
Table 10.2 Cumulative Probability that a 55-Year-Old Will Need LTC
Table 10.3 Likelihood that LTC Will Persist for 5 Years
Chapter 11: Paying for Long-Term Care
Table 11.1 LTC Insurance Premiums versus Payouts
Table 11.2 Couple's Financial Situation
Table 11.3 Claim Occurs at Age 71
Table 11.4 Claim Occurs at Age 86
Table 11.5 Provision for Long-Term Care
Chapter 12: Putting It All Together
Table 12.1 Process for Finding the Wealth Target—an Example
Table 12.2 Neutralizing Risk of Premature Retirement
Table 12.3 Level of Confidence that Inflation Risk Is Covered
Table 12.4 Wealth Targets if the Intent Is to Retire at Age 65
Table 12.5 Wealth Targets if Intent Is to Retire at 60
Chapter 13: Picking a Savings Rate
Table 13.1 Assumptions for the Historical Estimates
Table 13.2 Savings Rate Needed to Hit the 50% Target
Table 13.3 Assumptions for Projecting Pensions 30 Years
Table 13.4 Savings Target* for Homeowners with Children
Chapter 14: Optimizing Your Savings Strategy
Table 14.1 Constant Asset Mix, Constant Contribution Rate Approach
Table 14.2 Asset Mix in Target Date Funds (in 2015)
Table 14.3 Strategy 2 (Simple Lifecycle)
Table 14.4 Strategy 3 (Modified Lifecycle)
Table 14.5 Strategy 4 (Variable Contribution)
Table 14.6 Strategy 5 (SMART Approach)
Table 14.7 Summary of Results
Chapter 17: Revisiting the 4 Percent Rule
Table 17.1 How the 4 Percent Rule Works
Table 17.2 High Returns on Equities
Table 17.3 Scenario B: Spending the Nominal Return
Table 17.4 Scenario C: Accelerated Withdrawals
Chapter 18: Why People Hate Annuities (But Should Still Buy One)
Table 18.1 Long-Term Economic Assumptions
Table 18.2 Annuity vs. Drawing Income from an Investment Portfolio
Table 18.3 Annuity vs. Drawing Income
Chapter 20: Bubble Trouble
Table 20.1 Other Financial Bubbles
Chapter 21: Carpe Diem
Table 21.1 Percentage of Healthy People Who Develop a Critical Illness or Die
Table 21.2 Prevalence of Critical Illness versus Death (Male)
Table 21.3 Number of Disease-Free Years Americans Can Expect
Table 21.4 Changes in Health—1998 to 2006
Table 21.5 Changes in Health—1998 to 2006
Appendix A: Similarities between the United States and Canada
Table A.1 Single Person, 5-Year Average Earnings of $60,000*
Table A.2 Single Person, 5-Year Average Earnings of $100,000
Table A.3 Married Couple, 5-Year Average Earnings of $60,000 and $30,000
Table A.4 Married Couple, 5-Year Average Earnings of $100,000 and $60,000
