Uncle8888's simple asset allocation strategy:
Two classes only: Volatile and Non-volatile
Asset Class 1: Volatile asset that is marked to current market price to generate investment income.It can expand or contract.
Asset Class 2: Non-volatile asset has been planned for draw-down when necessary to meet any shortfall in investment income generated from Asset Class 1. (Target: To be at least 67% of yearly household expenses @ 3% inflation rate till 2036)
A worry less model in an uncertain future market?
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Ha! Ha!
ReplyDeleteNon-market volatile assets may caught you by surprise on the downside. Though they may seems less risky. As volatile assets do the same to you on the upside. Though you are prepared for the worse.
Another words, we still can not be sure of the outcome, try as best as we can. Even though we think we have taken everything into account but actually we can not see everything into the future. Yet we still have to try. At times, i feel why i can't make my life much more simpler as i know everyone of us is just passing through this place only.
What for trying too hard?
Why?
For whom do you strife?
Besides for yourself?
(Sorry for my ramblings)
temperament,
DeleteYou're in a philosophical mood today ;)
CW,
ReplyDeleteYou and your powerpoint is like me and my "talk male-chicken" stories
The citizens of Iceland and Cyprus woke up discovering that non-volatile assets can be quite ephemeral.
Some of our neighbouring countries' citizens also found out their non-volatile assets are now worth less by 20% or more due to currency movements. And we wonder why many foreigners like buying life insurance policies denominated in Sing dollars ;)
Those with assets approach politics differently from those with nothing to lose.
what are non volatile assets. if its annuity then it is plausible but if its equities then you run a risk
ReplyDeleteYa. Annuity class type.
DeleteEquities are too volatile for draw-down.
i think you have your CPF life for that (even though a lot of people dont appreciate such a thing). the important thing is it guards against longevity risk of running out of money so if it covers necessity that is important.
DeleteCPF Life or any fixed amount immediate Annuity has one flaw- it is not adjusted for inflation. So after 20 to 25 years if GOD permits, your annuity payment is left how much@ 3% inflation/year? No doubt you don't run out of money but your money will shrink year by year.
ReplyDeletei finally opt for CPF Life too. Because it pays higher then if i remain in RA normal DD. Those born in our year have an option to join or not to join.
Let's hope that the annuity payout increase overtime (I think fat hope).
DeleteThe min. sum will be revise upward for sure.
the thing is that most expect an old person's spending to walk lock step with inflation, which may not be that true at all. i am not trying to defend the CPF Life, but we are not talking about covering all here, but the minimal hedging of longevity.
DeleteDon't forget the payout can decrease also for CPF LIFE.
ReplyDeleteIf it happens then we got double whammy (screwed twice).
Inflation is one which we can not escape.
The other is the pool of money getting shallower and shallower (one reason is more and more annuitants live longer then 75- 80 years) therefore lower payout.
Agreed.
ReplyDeleteCPF Life payout is not guarantee. We cannot solely depend on CPF Life.
no one is saying sole depending on it. but the problem is governemnt is not saying that out loud. which is a big problem.
ReplyDeletebut you should be able to forecast whether it will be more than a certain sub due to future interest rate.
again the idea of permanently not working in retirement should be discarded.
Probably after 70s, old folks don't spent much other than on medicine and hospital bills (subsidized)
DeleteCPF Life + Medishield+ Medisave+ some asset draw-down should be enough to last till the last day.
a consideration a lot of able folks young when planning didnt think about is their retiring active condition determines the luxury they can afford.
Delete