BUZ LIVINGSTON: The Grinch

Published: Saturday, December 21, 2013 at 05:29 PM.

By failing to renew long term unemployment insurance Congress earned their Grinch status by making sure over a million Americans lose benefits three days after Christmas. Ho, ho, ho. 

For the world’s wealthiest nation to cast a blind eye with unemployment levels never seen in my lifetime I find disappointing. In my misspent youth I thought unemployment payments were a slacker scam but unemployment benefits efficiently stimulate the economy. 

Plus it is the humanitarian thing to do; read what the fellow whose birthday we celebrate in a couple of days has to say. I rarely work with unemployed people but when I have they eagerly wanted to work.

Dr. Wade Pfau is no Grinch but some may think so because he spoke an unfortunate truth, sorry to mention it during the holiday season. Pfau, Michael Finke and David Blanchett looked at current stock market valuations and current fixed income yields.

The data, “Asset Valuations and Safe Portfolio Withdrawal Rates” showed a 4 percent inflation-adjusted withdrawal rate for 30 years has less than a 50 percent survivability rate rather than the 90 percent plus planners generally use. 2013 is a stark anomaly; rarely have stock valuations been so high paired with fixed income yields so low.

Dr. Pfau and gang ran the numbers assuming more normal valuations for stocks and fixed income (mean reversion for statistics geeks).  Pfau, et al, also included a one-half percent portfolio fee in their study.  Don’t ignore fees like most people do.

Pay too much and you might run out of money before you run out of breath. The 4 percent initial withdrawal rate is still a good rule of thumb but you need to make sure you have a sustainable retirement spending strategy.



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