Fidelity has increased its number to $315,000. The number is its annual update on how much money a 65 year old retired couple will need for healthcare expenses covering a 30 year retirement. Thirty years is 360 months divided into $315,000 works out to $875/mo. That might actually be low. Medicare part B premiums are $170 per spouse, so $535 for everything else? Depending on the state you live in Part G supplemental coverage if you want it ranges from $200-$300 per spouse.
We're already knocking on $875 and haven't even gotten to prescriptions yet. Insulin is insanely expense. One older relative needs blood thinners and that is north of $500/mo. An internet search said the average senior takes four prescriptions. I've been on enough medical calls through the fire department to know that plenty of seniors, and people who are Gen-X, so my cohort, are taking a lot more than four. For my money and my future, lifting weights and cutting carbohydrate consumption is the best chance we have of avoiding having to take prescriptions. Follow this list I made on Twitter to learn more.
Simple is better than complex in most things including investing. That link turned out to just be a list of principles espoused by Jack Bogle. It's worth reading if you're unfamiliar. I talk about this frequently. You should think your portfolio is simple but simple means different things to different people. One fun topic is trying to assemble something of an all-weather portfolio with just 3 or 4 funds. I don't know that it can be done but pursing it is intellectually appealing.
Maybe an all weather portfolio can be constructed with that few funds though. Constructing an all weather like we're taking about would require some funds employing complicated strategies. BLNDX has been a great performer as a client and personal holding. In simple terms, it allocates 50% to equities and 50% to managed futures. With a lot of time invested to understand managed futures long before the fund came to be, the fund seems easy for me to understand. Managed futures is not very far out on the black box spectrum. Some funds though are very black box. I'm test driving the Rational/Resolve Adaptive Asset Allocation Fund (RDMIX). It is similar to BLNDX in that it is a liquid alternative, it's multi asset and there is some sophistication to the process. It goes beyond BLNDX on the black box spectrum in that it layers volatility trades and interest rate bets into the fund.
The idea that a three fund portfolio could be very complex is fascinating to me. I'm not taking about just buying three complicated funds but assembling a combination of strategies and sized correctly to deliver a strong, risk-adjusted result. As an intellectual exercise, building a complex, all-weather portfolio with so few funds seems like a good way to understand cross market dynamics and relationships.
Now to the terrible idea which comes via Barron's about creating your own hedge fund. The suggestion was to put 50% in Vanguard Value ETF (VTV) and 50% in to an inverse fund or actively managed fund that sells short exclusively. Making that suggestion after a 15% decline for the broad market seems a little late. The 50/50 nets out to zero and zero is a big bet considering the stock market has an up year 72% of the time. I am all for trying to tamp down volatility and have used inverse funds to do this quite a few times over the years but 50/50 is a terrible idea with a very short term focus in a market whose future movements are not reliably predictable. An article about how to integrate short exposure into a portfolio would make for a great read and teach people some things. This Barron's article wasn't that.
Another Barron's article was about the challenges of retiring in another country. It raised some good points about health insurance, taxation and complicated banking procedures. Buying property in other countries can also be complicated. Not mentioned though is that some countries essentially market to US expats making it easier to learn. There's plenty of work to do to figure this out, work that should start long before you'd actually move.
I will add my regular two cents to this conversation which is that spending a few years in another country and then coming back can be a great way to bolster a retirement plan. A scenario I've mentioned before is moving overseas at age 65, renting out your mortgage free house in the US and using that rental income to live on in the well-researched foreign country of your choice not taking Social Security or portfolio income. Then coming back at age 70, to your same house, starting Social Security and if needed, taking from your portfolio. Not selling your house is important here to avoid getting priced out of your own neighborhood. Where optionality is so important to me, I would not want to make coming back for any reason more difficult than it has to be. You can always sell later but if you sell now, you may not be able to come back.
Some things that make this work much better is if you're healthy and fit enough to not need healthcare beyond annual physicals and regular dental exams and can pick up some sort of side hustle (internet based or maybe catering to other expats where you're living) to supplement your income. A huge source of difficulty with this plan though would be missing those five years of your grandkids' lives. Obviously you can fly back occasionally but at some point the financial advantages from your five years abroad would be negated.
Lastly my reply to a challenge on NotePD titled Advice for a recent graduate. Hope you'll check that out.
2 comments:
A lot of great advice involves the importance of simplicity in a complex environment.
I think Gerd Gigerenzer explains this principle well when he writes that we should use rules-of-thumb in a complex, unpredictable environment with many variables, but in a simpler, well-understood environment, we can fine-tune our decisions to make the optimal choice.
I like that quote, thanks fro sharing it.
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