When it comes to Retirement Planning we have all been told we should allocate our assets in a diversified portfolio that includes both stocks and bonds. The advisor dogma is this allows you to draw cash from a safe investment like bonds early in retirement, allowing the stocks to mature over a longer period, providing a secure retirement plan.

“Piddly-Pooh.”

Stan Richelson doesn’t believe a word of it. And he believes he has proven it and demonstrated it for 30 years.

Stan believes you should put all of your money into high quality individual bonds, whether you’re young or old.

Nothing else.

Bonds… Just the Bonds please.

Most of us have heard that the stock market over the long term provides almost 9% ROI on average. But that’s the S&P 500 average. The actual realized return for most investors is less than ½ of that.

And you would have to be roommates with Alice in Wonderland if you think the future seems more stable and secure.

Why do most investors only get 4% – 5% return on their stocks when the S&P is twice that?

Because of taxes, transaction fees, and bad timing (plain old buying high and selling low) according to Richelson.

In fact, in his 2nd edition of his book titled “Bonds” (co-authored with his wife Hildy) he references data from several sources showing bonds have outperformed stocks almost consistently over the last 30 years. And that is a straight up “apples to apples” comparison to the S&P 500, not accounting for the negative “Whammy” of the taxes, fess, and bad timing.

If you think Richelson has lost his marbles, his book has 477 pages of supporting data.

“What is really important for your Retirement Planning is to protect your principle and get a return on that principle so you can realize the magic of compound interest” says Richelson.

“I know of no other financial advisors who are recommending a “bonds only” investment strategy. However it has worked for myself and my clients for 30 years, and all the data says it is the right thing to do.” Says Richelson.

Stocks vs. Bonds, a heavy weight match-up.

The world runs on myths because we “Parrot” what others say without ever looking at it closely ourselves. Numbers of course can be tricky, but Stan’s arguments suggest he may be on to something.

You can get more information about Stan and the “All Bonds Strategy” at:

http://www.allbondportfolios.com/

You can also hear the entire interview on Stan’s Retirement Planning Strategy conducted by Nest Egg News by clicking the “play” arrow below.

One of the best ways to ensure this is to build your retirement plan around a “Basket Strategy”.

So do you put your money is low-risk safe investments like CD’s? Or risky, longer term equities like stocks?

The answer is yes.

You need a combination of low risk, medium risk, and high risk assets and distribute them using a technique called a “Basket Strategy.”

Here’s why:

Although the short term investments are low risk and provide a guaranteed growth rate, the returns are not big enough for most people to retire on comfortably. It is a good thing to plan on things like CD’s and short-term bonds for the first 5 to 10 years of retirement income, because they are low risk and the liquidity is there. But the returns are just not good enough to carry you through retirement. So you need stocks and equities as well.

Stocks and equities have a higher expected returns over the long run, but they are too risky by themselves due to their volatility. Especially if you are near or already in retirement.

So the “Basket Strategy” states that you put these longer term, higher risk equities in a later basket which you don’t touch until 15-20 years after you retire. This longer duration helps reduce the risk of stock volatility.

The “Basket Strategy” is similar is concept to CD laddering where longer term CD’s usually pay a higher interest rate, but putting all your money in one long term CD’s is a bad idea because of lack of liquidity. If you need the cash you can’t get it easily.

The “Basket Strategy” has one other key element to it. It provides a structured framework for investing and planning for retirement income. The baskets provide a discipline of framework; you keep your hands off the longer term investments and give them time to mature allowing the risk of volatility to be managed.

Nest Egg Software provides 4 different basket to implement and manage the “Basket Strategy.”

No other software program can handle this approach as easily and efficiently as Nest Egg Software.

So you need a combination of the extremes and some comfortable middle ground as well. The distribution or percentage breakdown of how much of your assets are in which basket also is determined by how many years you have before retirement and how much more you plan to save before you draw from your nest eggs.

You have been told countless times “don’t put all of your eggs in one basket.”

When it comes to retirement planning, now you know why.

The idea is you want the longer term, more volatile assets, to be in later baskets so they have more time to grow and mature reducing the risk. So for stocks for example you can look at the ratings and history for each.

As far as what interest rates to use, of course everyone knows past performance is no indicator of the future, but it is a good place to start. What has been the historical rate of return for that asset.

Also one other thing …we offer free portfolio analysis…at no cost and no obligation from a licenced financial advisor and he can help with putting the assets in the right baskets.

Read this post…get a free review. I can vouch for him….he is MY financial advisor

http://nesteggsoftware.com/blog/2010/11/free-retirement-planning-review/

Excerpt from the users manual below

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Basically you allocate your investments; cash in savings, stocks, mutual funds, 401K, and IRA’s into 4 different baskets of money. Your conservative investments go in Basket 1, the more aggressive, longer term investments in Basket 4. The logic is simple; in general if the more aggressive investments have a longer time to mature, it reduces your overall retirement risk. Moderate risk investments go in Baskets 2 and 3.

Once you have filled out the balance sheet in Nest Egg Software, the most time consuming part of the set up has always been determining how much funding must be put into each of the growth baskets. To be honest it was kind of a guessing game.

No more guessing.

We have created a handy little tool that does it for you. In the image below you can see that Basket #1 has $191,000 of funding in the basket. You can clearly see that the basket is overdrawn and therefor does not have enough funding for the basket settings that have been selected.

Next to the basket amount field is a “calculator” icon.

 
Simply mouse over the icon and it tells you, “This calculator determines the minimum funds needed for the basket based on the current basket variables”:

 
Next just click on the calculator icon and it automatically determines the minimum funds needed based on the basket settings. In this case it is $210,000 and the calculator has populated the field for you automatically.

It’s that simple.

You can change any of the variables in the basket settings like desired income, retirement year, inflation rate, etc. and then you can re-click the calculator icon and it will determine the new minimum needed.

 
Nest Egg Software used to take about 15 minutes to set up.

Now with this new Nest Egg Calculator, it should cut that time at least in half.

While many people expect to have their yearly income from their Nest Egg increase year over year in retirement, some folks just don’t see it that way. Yes you do have to consider inflation, but many retirees in their later years will have paid off the mortgage and will have cut back on their traveling and vacation costs among other expenses.

They have seen their parents spend less and less as they age, so it is a valid option to consider as one of your Nest Egg Scenarios.

So for many folks it does make sense to evaluate their retirement plan with a retirement calculator that can figure in declining cash requirement as you age. Nest Egg Software is the only calculator that we know of that has this capability.

And of course, Nest Egg Software is free!

Here is how it works.

The inflation rate in Nest Egg Software defaults to 3.0%, but you can change that number to anything you like.

In this scenario below we have changed it to a negative (-1.0%).

By doing this you can show a declining cash requirement as you age as shown in the total income on the basket illustration.

 
So it is that easy. Give Nest Egg Software a try.

You can find more details and sign up for a free account at www.NestEggSoftware.com

There are a few ways the Nest Egg Software Retirement Planning Software can accomplish these types of retirement scenarios.
 
As far as selling the 2nd home several years into retirement, you can account for this by adding a line item to your “income sources”. In general, the baskets are designed to hold and invest money “you currently have saved” and the income sources section of the balance sheet handles future money received like pensions, social security, etc.

 
 
You can add a line item for your 2nd home in the income sources section and enter the start date (when you plan to sell it). When the income sources kick in and contribute to your total income, the basket withdrawals are off set and reduced by the amount of income coming from other income sources. For example if you had $100K in desired income and the income sources were kicking in $30K, the software only draws $70K from the baskets in that year.
 
You can show the proceeds from the 2nd home in the year you sell it. For example if you sold the home for $200K in 2020, you could add an income line item to the income sources with an annual income of $200K and the duration of just one year. Or if you planned to reinvest the $200K in an annuity for example and draw from it for 10 years, you could show a $20K income stream for 10 years….or any combination of the two in between. You likely would take the proceeds from the home and reinvest in another product anyway that allows an annual distribution.
 
We have designed Nest Egg Software to be powerful, yet easy to use. So we consciously did not design in all of the possible “what if specifics”…but have made it flexible enough to handle these types of retirement scenarios.

If you are holding on to property and plan to sell it after you retire you can handle it the same way.
 
As far as the life insurance distribution or an annuity it can handle that as well. Basically it can handle any anticipated income stream whether it is a lump sum in one year or an annual draw over time.
 
The bottom line is the Nest Egg software handles 3 kinds of money:
 
1 – Money you already have saved which goes into the baskets
2 – Money you receive after retirement which goes in the income sources of the balance sheet
3 – Money you plan to save before retirement goes in a line item under cash in the balance sheet

See this Article.
 
http://nesteggsoftware.com/blog/2010/10/how-to-include-anticipated-savings-prior-to-my-retirement-date-in-nest-egg-software/
 
 You can see an overview of Nest Egg Software here:

http://nesteggsoftware.com/blog/2010/04/retirement-planning-software-quick-start-guide/

Also we are offering a free portfolio analysis for a limited time. It does not cost a thing and we promise we won’t try and sell you anything you don’t need.

Learn more about it here:

http://nesteggsoftware.com/blog/2010/11/free-retirement-planning-review/

That is exactly what the Nest Egg Retirement Planning Software’s “Basket Strategy” is all about. We provide an intellectual framework for your nest egg to grow, and you don’t have to have the IQ of Warren Buffett. Also our retirement planning strategy is designed to take emotions out of the equation.

It works like this: The software and strategy have 4 different baskets for your assets to grow. Your assets need to be treated separately because “all money is not created equal.”

Your longer term assets are placed in baskets 3 and 4 which are “hands off” in the short term. These are your more aggressive investments and you leave them alone so they have time to grow providing more money in your retirement years. The strategy helps manage your emotions because you know you have a guaranteed income in early retirement from baskets 1 and 2, so there is no need to screw around with baskets 3 and 4 trying to “guess” the market.

Not even Warren can do that.

Nest Egg Software provides a sound intellectual framework for your retirement plan.

Just what Dr. Buffett ordered.

We are offering you a free retirement planning review.

If you are interested, just simply fill out this simple form at:

www.NestEggSoftware.com/blog/review

We will get started right away and contact you when we are ready to set up a time to review your results.

And he may save yours.

My name is Mark Fox and I am the CEO of Nest Egg Software.

My financial planner’s name is Steve Swensen and he saved my life 5 years ago. He reviewed my Retirement Strategy and showed me how vulnerable I was if the market was to tank. Together we modified my 401K so that if the market had a downturn, my Nest Egg would be protected.

As a result, my Retirement Portfolio is worth more today than it was when the Dow was at 14,000!

How is that possible?

It is not what you think. We didn’t jump into risky investments. On the contrary they are pretty conservative.

I have the vast majority of my retirement portfolio in products that are still invested in the market for long term growth, but they have insurance contingencies that stop them from going backwards. They are new products/packages that just didn’t exist a few years ago.

I think it is sad that more people don’t know about some of the great financial products available today. One’s that are specifically designed to protect your 401K.

We are offering you a free retirement planning review…where Steve will explain these great new products to you, show you the pros and cons of your current strategy, and make any recommendations he sees fit.

Relax, there is no sales pitch, just a solid detailed review from a certified financial planner. Seriously, no sales pitch, because we don’t need to. Why? Because we know a few people will want to hire Steve to help them going forward. But if you don’t, that is perfectly OK.
 
If you are interested, just simply fill out this simple form at:

www.NestEggSoftware.com/blog/review 

We will get started right away and contact you when we are ready to set up a time to review your results.

Unfortunately for 26% of Americans over 65 years of age, the answer is yes. They lasted longer than their money did. 

They sold low and bought high – Ouch.  Medical expenses can fry, scramble, and poach your Nest Egg. That hot stock tip was a turd.

Sure your daughter says it’s won’t be a problem for you to live with them some day, but you would feel like a burden. Does your financial plan sit on a solid, time-proven strategy?

Get a 2nd Opinion…

Would you get open-heart surgery without a 2nd opinion?

Of course not.

So why do millions of Americans “go it alone” when it comes to retirement planning? It makes no sense. We have all heard “money isn’t everything”, but when it comes to spending retirement the way you want to, it is everything.

Get a 2nd opinion from an expert, a qualified financial planner, even if you already have one. Another set of eyes couldn’t hurt, right?

Especially if it’s free.

We are offering you a free retirement planning review.

Relax, there is no sales pitch, just a solid detailed review from a certified financial planner. Seriously, no sales pitch, because we don’t need to. Why? Because we know a few people will want to hire one of our advisors to help them going forward. But if you don’t, that is perfectly OK.
 
If you are interested, just simply fill out this simple form at:

www.NestEggSoftware.com/blog/review

We will get started right away and contact you when we are ready to set up a time to review your results.

Unfortunately this simplicity really has some drawbacks. In our opinion it is too simple to give an accurate answer. Here are some shortcomings we found with it:

1 – One of the major problems is the AARP Retirement Calculator doesn’t tell you what interest or growth rate is assumed on your assets. You have no way to pick different annual % returns and see the changes in the numbers over time.

2 – It allows you to easily change assumptions of retirement age, savings prior to retirement, and social security numbers. But it doesn’t allow you anyway to store these different scenarios so you can compare them side by side.

3 – The AARP Retirement Calculator doesn’t allow you to treat different investments with different assumptions. This is a major drawback because not all money is created equal. You may have Bonds, fixed annuities, CD’s, and Stocks that all have drastically different return expectations.

4 – There is no bucket, basket, or ladder strategy available in the tool. Most forward thinking financial advisors agree this is required for an effective growth and retirement strategy.

5 – You cannot choose how much you want to draw at retirement. Well you can sort of; it allows you to choose similar, less, and more. ..But that is way oversimplified. You need to be able to put in real numbers and see the impacts of those assumptions.

These issue combined we believe gives an inaccurate estimate of your retirement plan and in most cases paints a more pessimistic outlook on your future.

No one knows what assumptions the AARP Retirement Calculator makes on % annual return on your assets, but it is just plain wrong to assume assets you plan to spend at the begging of retirement are the same risk and expected returns for those you plan to hold for decades.

The AARP Retirement Calculator is just fine as a very simple and 1st pass at “ball parking” a number. But don’t be surprised if the oversimplification has painted a dismal future for you.

“Ball parking” is not good enough when it is your future.

You need a more detailed look at your specific assets and assumptions to get a more accurate picture.

Yes the new AARP Retirement Calculator is simple….but it’s too simple.