Whole Life Insurance has a bad reputation in the FIRE community! Does anyone here have a Whole Life Insurance (WLI) policy? Anyone? It seems so toxic that even if anyone had a WLI policy they’d be afraid to admit it for fear of ridicule. I only recently “came out of the closet” when I was chatting with folks at the April CampFI over lunch and the topic came up. People were astonished: Huh? Big ERN has a WLI policy? And his wife, too? Isn’t WLI only for naïve and unsophisticated folks that fall for the insurance salespeople’s pitches? Sometimes! But just like many all other issues in personal finance, there’s rarely a simple, clear-cut and universally applicable recommendation. I would argue that WLI is not a bad option if certain conditions are satisfied! And it’s a loooong laundry list of issues to consider and conditions to satisfy. I came up with no less than ten things to consider and in an absolutely shameful, “clickbaity” kind of way, I call them the Ten Commandments of Whole Life Insurance.
Since I first published Part 7 of the SWR Series with the accompanying Google Sheet in early 2017, I’ve made several changes and enhancements. Sometimes without much explanation or documentation. So, it would be nice to do a quick update and itemize the changes since then. Whether this is the first time using the toolbox or you check it out again after more than a year, I hope you all find the new features useful…Read More »
Welcome back! It’s time to add another piece to the Safe Withdrawal Rate Series (see here for Part 1). After churning out over 20 parts in this series so far I wanted to sit back and reflect on some of the things I’ve learned from my research. And something occurred to me: Withdrawal strategies in retirement aren’t easy! Contrast that with Mr. Money Mustache’s Shockingly Simple Math of Early Retirement post and Jim Collins’ Equity Series that was rewritten into a book The Simple Path to Wealth. Very influential posts and they are among my favorites, too! So, naturally, I agree 100% that saving for retirement is relatively simple!
Disclaimer: Saving for retirement with a savings rate of 50% or more as is common in the FIRE crowd requires a great deal of discipline. Especially over a 10+ year time span. It’s not easy! Only the math behind it is simple! It’s a bit like dieting; conceptually very simple – healthy diet plus exercise – but it’s not that easy to implement and stick to the plan!
Then, shouldn’t retirement be just as simple? Why am I making everything so complicated? I’m approaching 30 parts in this series, many of them with heavy-duty math and simulations and still a few topics on my to-do list! Am I making everything more complicated than necessary? Am I just trying to show off my math skills? Of course not! Just because saving for retirement is relatively simple it doesn’t mean we can just extrapolate that simplicity to the withdrawals during retirement. And that’s what today’s post is about: I like to go through some of the fundamental factors that make withdrawing money more complicated than saving for retirement. Think of this as an introduction to the SWR Series that I would have written back then if I had known what I know now! 🙂 Ironically, some of the issues that make saving for retirement so simple are the very reason that withdrawing during retirement is more challenging! So, let’s take a closer look…
Welcome back! I hope everyone had a great 4th of July Holiday (U.S. Independence Day for non-U.S. readers)! Before we get started I have a small favor to ask: At the upcoming FinCon in Orlando in September, it’s time again for the Annual Plutus Awards. As you may recall, last year, my small blog was one of the finalists in the “Blog of the Year” category, thanks to the support of the many faithful readers. If you like what I’m doing here on the blog please nominate the ERN blog again in the relevant categories! Please head to the Plutus Award Nomination site and enter your ballot! You can nominate up to three choices per category and you don’t even have to fill out all categories. Only one submission per IP address, please! Thanks in advance for your support!
Today I have a case study about whole life insurance. Not the most popular investment vehicle among the FIRE enthusiasts, see, for example, an excellent summary of the disadvantages of Whole Life by White Coat Investor (though, for full disclosure, I don’t agree with all of his claims and calculations). But let’s face it: a lot of folks have policies and now wonder what to do about them. Here’s a case study about the tradeoffs when considering either cashing out the policy or keeping it intact. Let’s look at the numbers…
Welcome back! It took me two weeks again to put together a full blog post. That’s what early retirement does to you! Especially while we travel – pretty much permanently between now and December – I figure I will scale down the blog frequency to every 2 maybe 3 weeks. I hope people don’t mind. If two weeks is what it takes to come up with quality content then so be it!
For today’s post, I thought it was time to add another installment to the Safe Withdrawal Rate Series. 25 posts already! What have I learned after so many posts? Well, I started out as a skeptic about the so-called “4% Rule” and I thought it might be the time to poke a little bit of fun at the “makers of the 4% Rule.” Just to be clear, this post and the title are a bit tongue-in-cheek. Obviously, the “makers” of the 4% Rule, the academics, financial planners and bloggers that have popularized the rule aren’t part of any conspiracy to keep us in the dark. Sometimes I have the feeling they are still in the dark themselves! So here are my top ten things the Makers of the 4% Rule don’t want you to know…Read More »
Welcome to the newest installment of the Safe Withdrawal Series! Part 25 already, who would have thought that we make it this far?! But there’s just so much to write on this topic! Last time, in Part 24, I ran out of space and had to defer a few more flexibility myths to today’s post. And I promised to look into a few reader suggestions. So let’s do that today pick up where we left off last time… Read More »
It’s been three months since the last post in the Withdrawal Rate Series! Nothing to worry about; this topic is still very much on my mind. Especially now that we’ll be out of a job within a few short weeks. I just confirmed that June 1 will be my last day at the office! Today’s topic is not entirely new: Flexibility! Many consider it the secret weapon against all the things that I’m worried about right now: sequence risk and running out of money in retirement. But you can call me a skeptic and I like to bust some of the myths surrounding the flexibility mantra today. So, here are my “favorite” flexibility myths…Read More »
I started a new series in February on Market Timing Risk Management (part 1 was on macroeconomics) but never got beyond the first part. So, finally, here’s the second installment! Part 2 is about momentum (sometimes called trend-following) and this is a topic requested by many readers in the comments section and via email. Specifically, many readers had read Meb Faber’s working paper on this topic, which by the way is the Number 1 most popular paper on SSRN with 200,000+ downloads. I always responded that read that paper and found it quite intriguing but never followed up with any detailed explanations for why I like this approach. Hence, today’s blog post!
And just for the record, I should repeat what I’ve said before in the first part: I have not suddenly become an equity day-trader. I am (mostly) a passive investor who likes to buy and hold equities. But with my early retirement around the corner and my research on Safe Withdrawal Rates and the menace of “Sequence Risk,” I have that nagging question on my mind: Are the instances where an investor would be better off throwing in the towel and selling equities to hedge against Sequence Risk? At the very least, I’d like to have some rules and necessary conditions that need to be satisfied before I would even consider reducing my equity exposure. I think of this as insurance against overreacting to short-term market volatility!
So, without further ado, here’s my take on the momentum signal…
But this topic just keeps coming back. Most recently in the ChooseFI podcast episode 66 and the discussion that ensued afterward. One unresolved issue: the pros and cons of investing the emergency fund in the stock market. As I’ve mentioned before, I am not against having an emergency fund. Quite the contrary, if you’re on your path to Financial Independence (FI) you strive to accumulate 25 years (!) (or better 30+ years) of expenses – much more than the 3-6 or even 8 months of living expenses normally recommended to keep in the emergency fund. In other words, I view our entire portfolio as one giant emergency fund invested in productive assets (mostly equity index funds) and I don’t see the need for keeping a separate bucket of money in low-risk assets. One could view this as having an emergency fund that’s invested in stocks! 100%! How crazy and/or how irresponsible is that? That’s the topic for today’s post. Let’s look at the numbers and quantify the tradeoffs…
Today’s post is about one issue I raised in the post last month: What asset classes – if any – are useful in hedging against inflation? Simple question, not an easy answer. It all depends on the horizon!