Creating A Successful Outcome

A college buddy shared on Facebook that he is unexpectedly out of work and looking for a job. I know nothing of his financial situation so I am not talking about that. More generically, this is another anecdote of someone in their mid-50's who has had his hand forced. The reality is that it is not easy to find a job at that age, pretty much my age, that pays about the same. That might be unfair that we can't easily find jobs but I think people would accept that as mostly true.

This is going to happen to more of us. How vulnerable are you if this happens to you? If you don't think you have a lot of money saved, can you save more? Can you create an income stream somehow? How about more than one? We look at these things all the time so I won't rehash this again for this post but get started figuring this out now, before you need it, hopefully you never need it but the sooner you start the better off you'll be. 

Barron's wrote about expat living which is something we've looked at quite a few times. One aspect we haven't hit on but that Barron's looked at pretty closely is that it can take a while to create residency status in another country and even longer to gain citizenship. So it's another example of something retirement related where it is better to start early. 

There are plenty of places in Asia, eastern Europe and South America where people can live very comfortably for just a couple of thousand per month. Part of the equation is very inexpensive healthcare costs. I've questioned a few times whether the situation in Ecuador has gotten to a point that makes the country an inadvisable choice these days. Another college buddy is visiting there right now and he's posted a ton of pictures and video from Cuenca, although he is covering more ground than that, and if the political and gang related headlines are causing strife in day to day life, he doesn't appear to be finding any evidence of that. 

I will reiterate the idea though of keeping a hopefully paid off home in the US in case there is ever a need or desire to come back. The rent from a US property might cover all expenses in some countries allowing savings to keep growing and give more optionality on when to take Social Security. Even just a five year "adventure" to another country could have a hugely beneficial impact on retirement outcomes. 

Larry Swedroe had a long writeup about the LifeX mutual funds from Stone Ridge that we've looked at quite a few times. Basically, these funds turn into longevity pools at age 80, offering the potential for higher incomes than 4% from your own account. They are not annuities but they do annuitize the income stream. As opposed to be extremely expensive like regular annuities, these are merely not cheap although Allan Roth thinks the price is more than fair. 

As I have been saying, the concept of annuitizing without annuities is useful and Swedroe offers a couple of other points we have not explored here. Even if these are not the solution, they are at least a  step towards a solution.

A related idea that that tries but is not better than the LifeX funds is converting 401ks into annuities as we looked at a few weeks ago. Plan Advisor looked at whether target date funds could be converted into annuities. So, they are trying but I would run screaming from the room waving my arms frantically above my ahead if I was pitched a target date fund that converted into an annuity. 

There was an interesting point made though...interesting if it's correct which is that "participants already think some kind of guaranteed income is built into their plan." I'm not sure I believe that but if it is true, that would be a serious gut punch when they learn that is not the case. 

To the extent that "no one will care more about your retirement than you," actions like problem solving, learning about alternative forms of retirement living and keeping informed on investment product evolution is an important component to creating a successful outcome. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.