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What Are Annuities?
Annuities are like financial power tools. In the right hands, they can help manage and stabilize your reliable income in retirement, but it’s also really easy to cut your fingers off if you don’t know what you’re doing. Think of annuities as contracts, in which you give someone money now in exchange for an income…
Read MoreWhat Every Retiree Should Know About I Bonds
Any discussion of TIPS requires an additional mention of Series I Savings Bonds. I Bonds can be purchased in taxable accounts from Treasury Direct without paying any fees or commissions. They work like a CD as they are not tradable on secondary markets. I Bond yields are quoted in terms of a real interest rate,…
Read MoreReview: Why you should think like a team when saving for your retirement
For a lot of people, retirement planning is a team sport. Unfortunately, it’s incredibly common for folks in the same household to have very different ideas of both what they want out of retirement, and what their retirement will actually look like. It’s never intentional – they just never actually talk about it. Not to…
Read MoreReview: How to Use a Password Manager
Normally with these reviews, we look at something related to investing, or some direct financial planning issue. But we’re going to switch it up this week. More and more of our life, especially our financial life, is happening online now. This is massively more convenient for almost everyone, but there are real risks. There are…
Read MoreInvestment Expenses: You Don’t Always Get What You Pay For
To economists, especially finance folks, prices are near magical things. There’s a near infinite amount of information packed into that number. Prices make the economy work. And they work in the real world, too. Absent other information, prices are usually a decent proxy for value. It’s pretty safe to assume that a $100 steak will…
Read MoreWhich Is Better For Retirement Portfolios: TIPS Or Traditional Treasuries?
Traditional bonds are priced around the objective of getting a return that exceeds expected inflation. If inflation is unexpectedly high, then the real return on nominal bonds is less. TIPS, on the other hand, keep pace with higher inflation, because it triggers a higher nominal return above their underlying real interest rate. Essentially, TIPS provide…
Read MoreWhat Do TIPS Tell Us About Future Inflation Rates?
Today, I want to talk about what TIPS can tell us about inflation. Exhibit 1 shows the TIPS yield curve for January 3, 2017. Yields are negative for TIPS maturing prior to 2022, and positive beyond that, although the longest ones do not even reach 1%. The Treasury stopped issuing thirty-year TIPS in the early…
Read MoreHow Far Should You Trust Market Models?
We use models all the time. We are constantly making decisions based on them – everything from simple heuristics (nachos taste good) all the way up to (and including) quantum mechanics. They’re great tools for helping us understand and make sense of the world. But it’s important to understand their limitations and the dangers of…
Read MoreReview: How much do you need to fund retirement? More than you think
Retirement is expensive. We know this. Most people aren’t adequately prepared for retirement. We also know this. And the situation just keeps getting worse. Medical science just keeps getting better, which means we’re living longer than ever (feels strange to call this a bad thing, but from a financial perspective it makes retirement more expensive), and…
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