Whether it’s sudden and unexpected or after an already
lengthy ordeal, there’s nothing that can prepare you for losing your spouse.
Grief and mourning affect each of us uniquely, but all widows and widowers
share a painful dilemma: On the one hand, the world seems to demand rapid
response to a barrage of critical questions – financial and otherwise. On the
other hand, it’s usually a terrible time to be making big decisions, especially
if they really can wait.
Here are some helpful handholds to hang onto if you have been
recently widowed (or you know someone who has), plus preemptive steps to take
if you’re reading this in happier times.
Every year, the markets provide us with lessons on the prudent investment strategy. Many times, markets offer investors remedial courses, covering lessons it taught in previous years. That’s why one of my favorite sayings is that “there’s nothing new in investing, only investment history you don’t yet know.”
2018 supplied 11 important lessons. As you may note, many of them are repeats from prior years. Unfortunately, too many investors fail to learn them—they keep making the same errors. We’ll begin with my personal favorite, one that the market, if measured properly, teaches each and every year.
The “bucket approach” to retirement planning has been routinely adopted by financial planners, ever since it was popularized by Harold Evensky. Clients keep several years of assets in safe, liquid investments, while investing the rest of their portfolio more aggressively. But new research shows that this approach actually destroys a portion of clients’ wealth.
This research comes from Javier Estrada, a professor of financial management at the IESE Business School in Barcelona, Spain. Before we get to Estrada’s research, let’s review how the success and failure of a financial plan is measured using Monte Carlo simulations.
The challenge of measuring failure rates of financial plans
Retiring without sufficient assets to maintain a minimally acceptable lifestyle (which each person defines in their unique way) is an unthinkable outcome. That’s why, when investors are planning for retirement, their most important question is: How much can I plan on withdrawing from my portfolio without having a significant chance of outliving my savings? > SEE MORE