Thought for the day:
Some of the world’s greatest feats were accomplished by people not smart enough to know they were impossible. Doug Larson
If you will read no further:
From Harvard Professor Dan Gilbert:
As Retirees age, those with annuitized income are more satisfied then others living exclusively off Social Security and their financial portfolio. Retirees who rely solely on a defined contribution plan to fund retirement are significantly less satisfied with retirement. The importance of automatic retirement income is consistent with my own studies on declining cognitive abilities in advanced age as well as the simple intuition that managing an investment portfolio and deriving an appropriate income takes work that might be better delegated to a pension manager or automated through the purchase of an annuity.
Read his entire paper, “What Makes A Successful Retirement” here.
Important Trivia:
Bernie Madoff’s victims are beginning to receive reimbursements for their losses from the Madoff Victim Fund which, in addition to liability settlements from major investment banks, includes funds from auctioning off Madoff belongings such as luxury homes, boats and 14 pairs of boxer shorts. Madoff’s underwear fetched $200.
Thought for the week:
For the past week now I have been participating in a discussion on a LinkedIn interest group on the legitimacy of suggesting that a client purchase life insurance on his/her parents so that when they die, the client will receive a huge lump sum that can go far in enhancing their own retirement. Many of the participants expressed disapproval of someone actively attempting to benefit from their parents demise. I have my thoughts on that, but am not interested in discussing the morality of it.
What does interest me however, is the planning sense that is made out of insuring ones parents. Look at any insurance illustration and you can see the predictable rate of return generated by “investing” in premiums for a policy on a healthy senior’s life. The only unknown is when the person will die so that the actual ROR can be calculated. Click here to see illustration. No one objects to receiving an inheritance. No one objects to parents investing money to grow that inheritance. Investing in insurance that grows the inheritance definitely has merit. And for sure, it is a good idea to protect the inheritance by using life insurance to pay for long-term care costs or for estate transfer costs.
I have had a large insurance policy on my mother for many years. It can be tapped to pay long-term care cost if she needs it, or it will pay a respectable return to me if she doesn’t. The bottom line, my sister and I have not had to worry about paying to take care of Mom should the worst happen. Mom is 91 now and each year she lives is a joy. The fact that my rate of return on her policy is going down is a small price to pay for having her with us that much longer. Another example of how life insurance is a win-win.
And finally:
The “January Predictor” says, how stocks finish in January determines how the market will finish the year. Well, the Dow ended 5.3% lower than it was at year-end and the other major indices were also down, so 2014 will end on a down note…or will it? In the last 115 years the Dow finished up 74% of the time when January was up, but it also finished up 52% of the time when January finished down. It appears the January Predictor is no better than a coin flip, so we need to use science.
The “Super Bowl Indicator” says when the NFC team wins, the market will be up and if the AFC team wins the market will be down. Football science says since Seattle won the market will go up. However, this indicator has more loopholes than a Congressional budget bill. Indeed, when the Rams beat the Titans in 2000 the Dow lost 6%; even though the Giants won in 2008 the Dow dropped 34%.
Maybe you should buy an index annuity and wait for baseball?