The LESSon of MORE for MORE’s Sake ©

The LESSon of MORE for MORE’s Sake ©

Fatal Addition: More, Better, Now becomes Less, Worse, Later

a.k.a MORE: The Gift That Keeps On Taking---MOREons

MOREon's & STUFF

MOREon’s  ‘TURKEY’ STUFFING(c)

Right Stuff             One is Right                                        One is Wrong

(& if RIGHT)                                      (& if WRONG)

Double Stuff          One gets MORE                                One gets LESS

(& if one gets MORE)                      (& if one gets LESS)

Upscale Stuff         One is BETTER                                  One is WORSE

(& if one is BETTER)                         (& if one is WORSE)

Strut Stuff              One is a WINNER                      One is a LOSER                                                                                   if one is a WINNER                               (& if one is a LOSER)

Hot Stuff                 One is GOOD                                     One is BAD

(& if one is GOOD)                            (& if one is BAD)

Full of Stuff         One is WORTHY(2)                           One is WORTHless

(& if 1 is WORTHY)                          (& if  is WORTHless)

Full of S…               One is GODLY                                  One is EVIL

Untold Personal Financial Planning Dirty Little Secrets© #1 Assets under Management (AUM) & Retirement Withdrawal Rates: The Conflicted Dirty Little Secret

Untold Personal Financial Planning Dirty Little Secrets© #1

Assets under Management (AUM) & Retirement Withdrawal Rates: 

The Conflicted Dirty Little Secret

            We fear outliving out money – dreading being beholden, dependent, under other’s thumb, being obliged, having to take sh*t (either with our mouths open or closed), and or catering (when we actually resent).

            And weather consciously or not, asset under management compensated planners prey on this fear – what is called ‘longevity risk.’

            And rightly, so, asset under management planners (as well as others) run ‘monte carlo analysis’ to assess the probability of not running out of money (longevity risk) – usually seeking a 95% (the maximum) probability of not running out of money. (See The Flaw of Averages)

            And yes, stipulating that there is the potential of sequence risk – such that adequate resources could be depleted prematurely due to especially large market declines in the beginning years (like 1973 and 1974).

            And secondly, qualifying that there are inherent conflicts of interest in all methods of personal financial planning compensation be it churn and burn (commissions), hourly (where the client is afraid to call cause the meter is always on – and therefore preventative measures that could have been taken are ‘too late’) etc.

            But the inherent conflict of assets under management compensation impacts, in particular, the withdrawal percentage in retirement of clients – possibly causing the client – in the name of fearing out living their resources and or minimizing their legacy to heir – to under spend.

            And what is the conflict?

            Given the more assets under management the greater the compensation to the planner – the lower the percentage of withdrawal by the client – the more assets under management for the planner’s compensation. (Some planners have even been involved in the creation of trust companies – to ‘capture’ the assets upon a clients’ death – and continue the assets under management compensation of the deceased client for heirs.)

            Furthermore, assets under management becomes a more saleable and scaleable asset in the buy out of the assets under management compensation planner – planning firm.

            But WAIT – like the infomercial would blare – we don’t want to out live our assets!

            True.

            And it is also true, that the only certainties are death, taxes, and one won’t return the rental car having taken it to a car wash before remittance.

There are no solutions, only tradeoffs

Thomas Sowell

            Regardless Bergin’s or Trinity study 4% withdrawal rate let alone someone’s 3.62% etc, we adapt to circumstances. We not only adapt buying chicken breasts at $1.77 when steak is $5.99 – but in entertainment etc. Furthermore, there seems, in general to be 3 phases in retirement: go go (where we may spend more even), slow go (spending reduces), and no go (where spending – yes, other than health) is even further reduces.

            Flexibility isn’t theoretical back testing – but it deals with the real.

            And we rarely give ourselves (please none of the retorts – that was easier when I was in my 30’s) recognition of our adaptability and resourcefulness (including utilization of guilt on progeny). Currencies change, but to our adaptability and resourcefulness (and its flexibility) we give little recognition – they are almost persona non grata on our mental ‘balance sheets.’

            Furthermore, the axiom of never spending principle (living off of interest, dividends and capital gain distributions) – get over it. Living lifetime goals should take precedence (other than adequate spouse income should you predecease) over the lucky sperm & ovarian club progeny or one’s charitable legacy – even if invasion of principle. PS those restricted charitable legacy gifts have had a lurid history not being  unfulfilled and often redirected for other purposes and giving good lunch by the executive directors.

            So if one’s assets under management personal financial planner compensated planner says 2.62% or 3.60% withdrawal rate is all that is really sustainable or scares the crap out of you so you should buy single premium insurance annuities (forgetting Mutual Benefit Life rated A+++ and other top rated went out of business covered up by mergers i.e. New England Life, Connecticut Mutual etc)  remember the the inherent conflict of interest. Also, ask the planner, ‘do you have has clients in Trust companies that cater to personal financial planners? And do you have a stake in the Trust company? Lastly, as for the Single Premium Insurance Annuities evangelists, wasn’t it the insurance company actuaries (cpas without personalities) who also screwed up royally in the long term care market having not learned their lessons in the 80’s about lapse supported premiums – such that insurers are losing their tuchis, down to a few offering LTC, the premiums have skyrocketed and the coverage has been greatly reduced. So much for guarantees of insurers and ‘certainty.’

            And while you are at it, you might ask your dirty little secret asset under management compensated planner, if there are alternative fee arrangements relative to your engagement of his or her services.