News, Analysis, and Research for the Retirement Planning Industry

But it Must Be True; it’s in The Wall Street Journal

In Uncategorized on 6 December 2011 at 1:16 am

An article with the hopeful title: “How to Catch With Your Savings” appeared in yesterday’s WSJ.   The article’s takeaway – save a lot more, wait as long as possible to take income – is certainly true enough.  However one of the article’s three primary financial illustrations was way, way off.

The illustration in question is as follows:

“Financial Engines looked at scenarios for a 50-year old earning $65,000.  Putting 6% of that salary per year in a mix of stock and bond funds would likely lead to a portfolio at age 65 that should generate $31,700 of income annually for life.”

As several commenters on the article noted, an annual lifetime income of nearly $32k after only 15 years of savings seemed too good to be true.  So I ran the numbers using these assumptions:

  • Our 50-year, Bob, old gets 3% annual raises
  • The average annual return of his balanced portfolio is 5%*

The result of 15 years of savings was a portfolio worth $106,667.  To maximize his income, suppose Bob leverages mortality credits and purchases a life-contingent annuity.   According to, Bob would get a check for about $637 per month, or $7,644 annually – less than ¼ of the $31,700 in the illustration.

Earlier in the article, the author stats that “[t]here’s no disputing that the math isn’t pretty after getting a late start on retirement saving.”  How right he was.

Either Financial Engines miscalculated (less likely) or some key facts – perhaps that the


Great Day For Up! (with apologies to Dr. Seuss)

In Uncategorized on 30 November 2011 at 9:52 am

The markets are going up.

The Fed Reserve,
ECB too
Have made access to money easier for you!

Bank of Japan!
Swiss National Bank!
Print as fast as you can.

Swap arrangements!
I don’t quite understand
But 50 bps cheaper!
Say, that is grand!

S&P 500!
Nikkei too!
DAX! and FTSE…
up UP with YOU!

Up Liquidity!
Can’t have too much.
To spend, Spend, SPEND
on stimulus and such.

Up sentiment!
Rally! Higher!
Bunds and gilts
are better, STRONGER!

Treasuries too
could not be brighter
Down yields! Up prices!
Up Timothy Geithner!

Unsustainable you say?
Some problems, you wonder?
But our best and brightest will ponder…

Problems now have gone away!
We’ll pay for it some other day.

The Great Collapse of the 21st Century

In Uncategorized on 13 October 2011 at 10:29 pm

Editor’s Note:  One bright spot in the current economic malaise is the surprising availability of gently used time travel equipment at very reasonably prices (I practical stole my Wenger quad-lithium SRP-22 from Seth MacFarlane).  While flitting about space-time, openly mocking Hawking’s chronology protection conjecture, I brought back a chapter from a 22nd century textbook titled “American Economic History – The New England to the Martian Colonies, 500 Years that Changed Everything”.   Enjoy.

Chapter 13:  The Great Collapse of the 21st Century

The Great Collapse, was different than the other depressions and recessions that preceded it.  It was not simply market speculation, shenanigans, and bad fiscal policy (though those undoubtedly played a part), nor was it just a particularly nasty downward slope in the business cycle.  Rather, it was the build-up of decades of pressure from unsustainable societal choices with respect to spending, taxation, domestic policy, and labor, combined with stunning political cowardice, that resulted in a