And, they’re off! Already.

We’re going to really be sick of the Presidential horse race well before it’s over. But, so far, I have to admit, it’s been somewhat amusing.

The Dems saw Clinton take the lead right out of the gate. But, then Obama moved up fast and, depending on the viewing angle, may have nosed ahead. But, Clinton then surged back into the lead, in spite of boos and catcalls from some in the far left end of the grandstand who were even louder than her usual right-side detractors.

Republicans have suffered even more bumping and grinding with Thompson and Guiliani now neck and neck up front while Romney and McCain are fighting it out side by side a few lengths back.

And, posturing to enter the race midway through is Bloomberg, who spent most of his life a distinctly blue shade, transformed himself to red a few years ago, and just this week shed all identifying colors.

(Go to http://www.rasmussenreports.com/public_content/politics for regular updates on the progress of each of the contenders.)

These recurring contests of strength, style and stamina have always caused concern if not consternation among those who follow the sport, especially those of us who see great significance in the outcome. After experiencing what the last two winners did, however, I’m not sure it’s worth the anguish. They did what Bloomberg has done, but covertly. They changed colors, or at least shades, as they served out their terms as champions.

I’m noticing one thing that’s different this time, though. Me. I’ll be retired for a good part of their term. My priorities are changing and I’ll be less able to change my lifestyle in response to new taxing and spending priorities. The wave of baby boomers on my heels will be having similar thoughts.

I wonder how this will change the political landscape. Will this largest of generations (so far) that benefited so much from the strong private sector they will soon be leaving now begin to look more to the public sector for its care and feeding, and vote accordingly? Or, will the typical age-related transition to more conservative views lead them to prefer even less government in their lives than they have had? Either way, most of us will root for whoever we see as most likely to provide the optimum social and financial environment nationwide, and geopolitical environment worldwide, that doesn’t leave us – the soon to be retired – any worse off.

But, who will do that? No way to know for sure. And, each of us wants something a little different. That’s what makes it a horse race.

Looking ahead

Awhile back, I wrote about my concerns regarding what I’ll do in retirement. I have lots of ideas, but that’s the essence of the problem. Which ones will I actually do? How will I choose? Should I focus on a few things or touch on many? No progress to report on this issue yet.

So, I’m thinking about another issue – aging. Or, maybe maturing is a better word. What’s that going to be like?

With both of my mid-80s parents in memory care assisted living, I’m not too optimistic about my later years. But, what about my 60s and 70s? Could they actually be “the best years of my life” as some have claimed?

Specifically, there are three aging/maturing-related things I found myself wondering about this past weekend.

1. Will the Sunday blahs ever stop?

Ever since grade school, Sundays have been downers. I can’t seem to shed the weight of Mondays and school/work. Even though I usually enjoyed both, I preferred days of freedom-to-choose-what-I-do. Except on Sundays. When I have more days off, will Sundays get better? And, will days off get worse?

2. Will I finally learn to recognize how complicated things are before I undertake them?

Whether it was at home or at work, with projects or relationships, I have always underestimated the complexity and the challenges involved. I usually see the desired destination in vivid detail, but the route from here to there is often nearly invisible to me . . . until I start the journey. Will more years and continued efforts to be more objective help me in this regard? And, if so, will I enter the fray more prepared, or will I simply undertake less?

3. When I look back even a few short years at some of the things I’ve said and done and not done, will I ever stop thinking how immature/naïve/short-sighted I was?

This is natural, I’m sure, and generally fully warranted through the teens, twenties, and maybe into the thirties. But, I didn’t expect it to continue full bore into the forties, the fifties, and now in the early 60s. Will I ever “get it right” the first time? Or, do I really want to? If I reach the point where my actions of the past few years look perfect, I guess I will have stopped growing, right?

So, I’m hoping to get over the first two, and I’ll try to learn to live with the third. But, I’m a little worried that some Sunday evening early in my retirement years, I’ll find myself feeling morose, realizing I’m only half way through what I thought was a simple weekend project, and thinking I would have done this much BETTER a few short years ago.

No where to run to; nowhere to hide?

A recent conversation:

Friend: Are you looking forward to being retired and moving out of the cold country?


Me: I’ve got lots of things I’m looking forward to doing when I have the time, but we aren’t planning to move.


Friend: What!? Why would you want to put up with Wisconsin winters when you could live almost anywhere?


Me: We actually like the winters. And, most of the usual retirement areas are ungodly hot in the summer.


Friend: And, the tornados! Wouldn’t you want to get out of the tornado belt?


Me: There are risks everywhere.


Friend: Meh.

Later that day, I did a little poking around and found an article from the August 5, 2005 issue of Forbes magazine that listed the safest and least safe cities in the U. S. in terms of extreme weather (based on data from Sperling’s Best Places).

Least safe:


1. Monroe, LA
2. Dallas, TX
3. Jackson, MS
4. Lakeland - Winter Haven, FL
5. West Palm Beach – Boca Raton, FL
6. Kansas City, MO
7. Elkhart – Goshen, IN
8. Tulsa, OK
9. Memphis, TN
10. Shreveport – Bossier City, LA

I particularly like the fact that a city named for being a haven from winter has riskier weather than any snow-belt city in the country, even though one of the risk factors measured in the study was the frequency of below-freezing temperatures.

Safest:


1. Honolulu, HI
2. Boise City, ID
3. Santa Fe, NM
4. Yakima, WA
5. Spokane, WA
6. Richland – Kennewick – Pasco, WA
7. Medford – Ashland, OR
8. Corvallis, OR
9. Salem, OR
10. Las Cruces, NM

Why all the WAs and ORs (and the ID?)? The study ignored volcanic eruptions. It also ignored tsunamis (although Hawaii hasn’t had a bad one for decades).

That leaves a couple of higher elevation cities in New Mexico.

We might take a look. Any other suggestions?

Lapse . . . of judgment?

Today’s interesting statistic: In 2005, 3.5 million life insurance policies paid death benefits.

Today’s amazing statistic: In 2005 18.5 million life insurance policies lapsed.

(These numbers were recently reported by the Insurance Information Institute.)

I’m no insurance expert, but this seems like a lot of lapses. I’m sure many of these policies were owned by retirees who simply quit paying premiums when their perceived need for insurance declined with their retirement (no more earning power to protect and fewer if any financial dependents). Or, maybe it was just that money got a little tight.

There may have been good reasons for the majority of these lapses, but I’m sure some were simply bad financial decisions. Before letting a policy lapse, the policy owner really should give strong consideration to the following:

What benefits does the policy still provide (tax advantages, estate planning, etc.)?

What is the economic value of the policy today if I live to my normal life expectancy (present value of proceeds at death less present value of premiums paid between now and then)?

What alternatives do I have to maintain coverage (borrow to maintain premiums, convert to a paid-up policy, etc.)?

If I can’t or don’t want to maintain the policy, what alternatives do I have besides letting it lapse (give or sell the policy to someone who will maintain the premiums and designate them as beneficiary)?

Most policyowners should work with an insurance expert to fully evaluate these (and probably other) alternatives. This is especially true when considering selling a policy; this “life settlements” arena has seen lots of shady dealings and abuse, both from buyers and sellers, so be careful.

But, don’t just let your life insurance policy lapse without considering the alternatives. That could be the worst lapse . . . of judgment.

Developing Financial Discipline

Most of us near-retirees and many actual retirees were raised by people who lived through the Great Depression of the 1930s. Most of them were quite thrifty, maybe even miserly. This trait was almost universally attributed to their life experience – to their environment.

Most children of these Depression era parents are thought to be not very thrifty, maybe even spendthrifts. This is usually attributed to their opposite experience – their formative years’ environment of ready employment and rapidly advancing standards of living.

I’m sure these differences in external influences made a difference in how these two generations thought of and used money. But, I also think there is another factor. And, I base this opinion on my own personal experience

One of our two sons has an almost manic compulsion to spend. The other is still in college, but already has a pretty nice liquidity cushion in his savings account as well as a few mutual fund investments. Yet, they grew up in the same environment.

At least part of this financial characteristic has to be innate in each individual.

I recently ran across some confirmation of this. George Lowenstein of Carnegie Mellon University monitored actual brain functions as people made purchases and found that everyone experiences pleasure from buying, and also subsequent displeasure with having to pay for the purchase (buyers’ remorse?). But, some experience this displeasure/remorse far less than others. For them, it’s all gain and no pain.

The significance of this in the retirement realm? Don’t expect your spending patterns to be easily changed in retirement. Without a lot of work, however you behaved pre-retirement is likely to continue post-retirement. You’re wired that way.

Contrary to the usual perception of our generation noted above, the study also found that under-spenders are more prevalent in the U. S. today than over-spenders, but are just less visible. I guess spenders love to spread the joy of their purchases while the more penurious among us are quietly watching their wealth accumulate. I wonder who’s happier (at least until the money runs out).

Dow hits record high! Yawn.

Dow 13000 is certainly a milestone. But, really, it’s no more noteworthy than your last birthday (nothing personal), which by definition is your personal best in the age department, but does not warrant notation in the annals of mankind.

In fact, just like your age, reaching higher and higher levels is the natural progression of stock markets. It is what should be expected to happen, especially when the index represents some of the currently strongest companies operating in a steadily growing economy that is supported by (or supporting) an ever-growing and geographically expanding population base.

What’s remarkable to me is not that the stock market’s long-term growth has been so persistent, but that its short-term growth is always so erratic.

This was nicely illustrated not two weeks ago as the market reached for another “record.” It clocked eight straight days of up markets. The all time record is only 14 days (May 28 through June 14, 1897). There have been only eight instances of eleven or more consecutive up days. And, the percent of months that saw positive index price moves is a mere 59% – indexes have declined in four of every ten months on average, or about five months every year. The percent of days that saw positive price moves is (prepare to gasp) only 50% rounded to the nearest whole number! Almost exactly half of stock market trading days have been losers. No wonder the market so rarely puts two weeks or more of up days in a row.

This kind of short-term randomness is not what any normal person would expect of a market that averages advances of about 10% annually and has never had a negative return for any 20-year period. But, this is exactly why investors in retirement need to be careful not to depend on their stocks rising steadily along with their living costs. Historically, stocks have matched or exceeded the rise in living costs on average over time, but if you want steady, you’re not going to get that from stocks.

You might relate this short-term variability to how old you feel, which can vary markedly day-to-day or even hour-to-hour. The long-term growth persistence relates to how old you really are, which steadily grinds higher no matter how you feel. Until some unknown point in the future, of course. And, then it doesn’t matter any more. Yawn.

How’s that again?

So far, it seems that the number of questions answered in this retirement-focused blog is exceeded only by the number of questions the answers raised:

New Question #1
You say you plan to sell (more than your normal, periodic, small liquidations) when everything looks rosy, and not sell (any more than your normal, periodic, small liquidations) when you’re feeling depressed about the market. How are you feeling today?

New Answer #1
Fine, thanks. Not particularly positive or negative. If I had to choose, I’d say things may be closer to too rosy than to too depressed, but not close enough to alter anyone’s strategic retirement funding program.

New Question #2
You said you will do some things to help assure that your level of cash reserves is sufficient. What things?

New Answer #2
I’ll try to limit the possible costly surprises. Here’s how.

a. If those who depend on me would be hurt financially by my death, I’ll maintain enough life insurance to cover the loss of income (wages, pension, whatever) that would occur with my death.

b. If those who depend on me would be hurt financially by my disability, I’ll maintain enough disability insurance to cover the loss of income (wages, pension, whatever) that would occur with my disability.

c. To protect against high and increasing health care costs, I’ll carry some health and long-term care insurance.

d. To offset any large casualty losses, I’ll insure my home and cars, but with large deductibles to keep the premiums down.

e. To help me weather any mid-retirement financial set-backs, I’ll try to keep my fixed costs of living to a minimum.

f. To keep myself and my spouse financially flexible, I’ll constantly work to appreciate the multitude of non-financial gifts we are so fortunate to have so that we won’t be so troubled by things financial.

Other suggestions? (There may be prizes involved!)