% of bankroll to put in the stock market

[Fire Walker]

IMO one of the most underrated and unheralded investment opportunities are high yield bond funds. The bonds they buy are also called junk bonds which turns a lot of people off. It might seem very risky and it would be if you bought 2 or 3 bonds yourself instead of a fund. But the fund manager buys hundreds of bonds at better prices than an individual could get. If he has a few that flame out and default he generally also has a few that soar in value. The risk is considerably less than in most equity funds. My brokerage characterizes several of these funds as low risk. Of course, if there is panic in the bond market which happens from time to time they won't be unaffected. These funds are composed mainly of short term bonds which means they are less sensitive to interest rate fluctuations than long term government bonds. You could easily find a few that average about 6% over time. One of the funds I have has made money every year in the last 10 years except for 2008. And in 2008 it only lost 6.72% when the S&P 500 index dropped 37% after considering dividends.

When asked what [Buffet] thought of junk bonds he replied, "I think they'll live up to their name." (Sorry, couldn't resist).

[Jabberwocky]

You'd trust a stranger with your finances? That's funny!

[Joe Mama]

The younger you are, the more (% of portfolio) you should have in stocks--diversified stocks, spread your bets around. The best time to get in is after a correction. I held my stocks and continued to buy more in 2008-2009 -- it felt like splitting 8's versus a ten, however both are the right thing to do. My portfolio has quadrupled + since then. One of my best investments now is deferring social security (8% per year guaranteed plus inflation adjustment for 4 years).

[Morphy]

and make sure that your advisor is a "fiduciary"

[Freightman]

Interesting point, and I think you are correct. The S.S. Administration says this:

According to data compiled by the Social Security Administration:

• A man reaching age 65 today can expect to live, on average, until age 84.3.

So, as a rough calculation ignoring the increased payments from inflation which would make the puzzle too complicated but would benefit an older person because the increases based on % would be greater:

If a man would get $2,000 per month at age 65 and he defers his payments until age 70 he will have forfeited $120,000 of income that he would have drawn between ages 65 and 70.

At age 70 he would draw $2,800 per month which is $9600 per year more than if he had taken the payouts at age 65.

The forfeited income of $120,000 if divided by $9,600 equals 12.5 Which means it would take him another 12.5 years to make up the income he forfeited by not taking the payouts at age 65.

Which would put him at age 77.5 And the S.S. data says that on average a many will who has reached age 65 will live to be 84.3 years old.

But if he dies sooner than average he just busted by hitting a 16 against a dealer Ace. And if he lives to an age greater than 84.3 then he drew a 10 on his double on 11 against a 10.

This is a rough calculation. It would be possible to make a much more complex reckoning but that is not for me. I'll leave that for the Mathletes here.

An excellent non blackjack post that everyone should pay attention to. Though the numbers are different for Canadians, the concept is exactly the same. It's mostly about when you're going to croak, and where the breakeven point is.

Not sure Wp when you can start taking social security in the US. In Canada, we can take Canada pension, at a discount, at age 60.if you live a long time, you're selling yourself short. If you're going to croak soon, take what you can get. There are obviously other factors in the equation, but this is the king and short of it.

[Gronbog]

But if you die early, then you didn't need the money anyway. I see deferred guaranteed benefits as a way to strengthen the safety net should you have the (mis) fortune to live longer than expected.

[Freightman]

The fact that the S.S. Administration will add 8% for each year that you defer seems generous and suggests to me that they are gaming the system; trying to influence you to defer. I suspect that they may have much more detailed data that indicates that those who claim early in general receive more net dollars. I'm not sure about this, but it seems logical.

That is very very interesting, and I would relook at the numbers. Payments need to be supported by growth in funds created fir this purpose. The nature of these funds is such that speculative investments with higher potential returns, and greater risk of loss, are avoided for lower return funds with more stability. Accordingly, to pay 8% bonus per year on funds earning, for the sake if argument, 5%, seems more than a bit silly.

Remember one thing. The formula listed above us, if accurate, is a recipe for disaster. The smaller you are, the quicker it us to the day if reckoning. The bigger you are, the longer it is to that day, but it does come.

I don't know if the US has a seoerate fund designated fir Social Security, or if payments come from general revenues. Regardless, an imbalance, wherever, has to be addressed.

[ZeeBabar]

Ok, so you get $120k less if you take SS at age 65 as opposed to 70. Now, as I am doing, if I play BK with my SS and make $120k in 5 years, I come out ahead!

[Freightman]

3
Nice post. You've done a favour for most on the forum.
Further, individual tax rates should be taken into consideration.

[DSchles]

Wondering why all the discussion revolves around age 65 when, in fact, everyone faces the decision at age 62 as to whether or not to defer, and you receive the 100% value of your payout at age 66. Then, you earn the bonus to age 70.

There are many more complications with husband and wife. And, of course, the discussion did not assume any return on the funds taken early, which is also a consideration.

Don

[Bigdaddy]

Wondering why all the discussion revolves around age 65 when, in fact, everyone faces the decision at age 62 as to whether or not to defer, and you receive the 100% value of your payout at age 66. Then, you earn the bonus to age 70.

There are many more complications with husband and wife. And, of course, the discussion did not assume any return on the funds taken early, which is also a consideration.

Since we're on the subject, I did an Excel calculation a little while back to estimate which is best. It depends on the interest rate you expect to earn on your investments and your life expectancy. It all comes down to taking the highest NPV of the three options. My conclusion is (contrary to popular opinion) that it is probably best in most cases to take at age 66. You can decide for yourself. The formulas for the Excel spreadsheet are reproduced below:

Interest rate	(input C6)
Number of years of life expectancy after age 70	(input C7)
Monthly benefit at age 66	(input C8)
PV of lifeteme benefits if taken at 62	=-PV(C6/12,(C7+8)*12,C8*0.75)*((1+C6)^4)
PV of lifeteme benefits if taken at 66	=-PV(C6/12,(C7+4)*12,C8)
PV of lifeteime benefits if delayed until 70	=NPV(C6,0,0,0,(-PV(C6/12,C7*12,C8*1.32)))

[Freightman]

I helped my uncle with this decision a while back and came to the same conclusion. When I pointed out he could park the money he would defer and earn a return on it he saw the decision wasn't even close. In the very unlikely event that he lived long enough to start accruing a tiny bit extra he would likely not be able to do anything with it anyway.

The other issue that no one seems to have touched on;

The need for money, on a present value basis, decreases as we get older.

[Freightman]

Soo. You wait to get it until the time you got it you may not know (or care) if you ever got it? Get it? Good!

Pretty much sums it up.