An Introduction

Hi. Welcome to BourGroup and my blog. Phil

Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.

I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.

"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.

Wednesday, April 6, 2011

Pensionize Your Nest Egg (Part 1 of 2) by Moshe Milevsky and Alexandra Macqueen

Excellent book and I highly recommend you read this if within 10 years of retirement or in retirement now.

The key phrase that continues to pop up in this book is the reminder that "...in retirement, the key is having enough income as opposed to enough money..."

Three major risks can affect you and your money in retirement:

  • The randomness of longevity (no one knows how long or short we are going to live)
  • The randomness of stock, cash and bond investments (the sequence of those returns can damage a portfolio even though you started out with enough money - or so it seems)
  • Inflation (it really does eat away at your purchasing power even in small doses and it is your personal inflation spending that matters more than the government's reported CPI)
The answer is in yet another type of diversification: product allocation. We have discussed stock versus fixed income diversification and tax location diversification and sector/size/growth/value diversification. Those are important, too. Now...

Product allocation. Maybe a portion (note: a portion, most likely no more than about 25%) of your investments should be in an annuity (social security and other monthly resources you might have count towards that 25%) which this author calls "pensionizing your nest egg".

It depends on how much your fixed expenses are in retirement and what income is guaranteed to come in to cover these needed expenses.
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