As we age, hold more shares?

[Value Collector]

Have I got more than when I retired? No.
Have I got about the same? Yes.
Has it devalued due to inflation? Very probably.

My point is simple

eg. When trying to work out whether you have invested well during your retirement, just looking at what you have in capital now vs what you had at the start and comparing that to what the inflation rate on that capital was is silly.

You have to add back all the money you pulled out over those years of retirement and spent along the way.

Only when you include all the money you spent as well as what you have left can you know whether the asset class you decided to store those funds in was a good place or not.

VH seems to think that all the funds you drew out as dividends and spent should be ignored, that is fundamentally stupid imo

 

[sptrawler]

am nearly '70,friends move on ( to some place or another )

the upside is planning celebrations are cheap and easy , now



the other upside is i miss the other parties ( like an extra hole in the head )

there was the swearing , and crying and fighting , and screaming ... and that was just the men , when the females go at it bones get broken

I can relate to that.

 

[sptrawler]

My point is simple

eg. When trying to work out whether you have invested well during your retirement, just looking at what you have in capital now vs what you had at the start and comparing that to what the inflation rate on that capital was is silly.

You have to add back all the money you pulled out over those years of retirement and spent along the way.

Only when you include all the money you spent as well as what you have left can you know whether the asset class you decided to store those funds in was a good place or not.

I think that is exactly what I was trying to say in my post.

 

[Chipp]

am nearly '70,friends move on ( to some place or another )

the upside is planning celebrations are cheap and easy , now



the other upside is i miss the other parties ( like an extra hole in the head )

there was the swearing , and crying and fighting , and screaming ... and that was just the men , when the females go at it bones get broken

Too true , pre pandemic i organized a surprise 50th for the wife , i organized friends from all over australia to come have a surprise holiday at Noosa , i paid for multiple 3 bedroom tree top villas at peppers for multiple days , fair to say the 60th surprise bday will be a lot cheaper , well accomodation will be anyway ...

 

[Belli]

My simplistic view is when your after-tax investment income means you don't qualify for either the:

• Commonwealth Seniors Health Card: or
• Private Health Insurance rebate,

I'd say you're cruising.

 

[divs4ever]

my thinking in 2010 when starting this journey ( investing ) with a wad of cash and some property , was

where do i want to be ?? ( in 2020 ) ( yes my health issues messed that up a little , but i was ready for unknown glitches )

how do i get there ?

now sure the original targets in 2010 got messed around ( a lot ) but i was already able to be flexible and creative in my work-arounds

good luck if you have just one strictly rigid plan those black swan things seem to be a lot more common than i was led to believe

 

[sptrawler]

My simplistic view is when your after-tax investment income means you don't qualify for either the:

• Commonwealth Seniors Health Card: or
• Private Health Insurance rebate,

I'd say you're cruising.

I would qualify that even further to say, even if you qualify for the Commonwealth Seniors Health Card, but don't want to go through the embarrassment of bearing your soul to a complete stranger, on the hope you can gain some payment.
You still have, what's sadly lacking, in Australia today.
The MIL is 91, still at home, still flicking the bird even though she qualifies for a pension and lives in a little unit in Rockingham, McGowans old seat.
They don't make them like her any more. Lol

 

[Chipp]

All i'd like to leave in my will is a leased Bentley and a loan . I think once i hit 70 i will starting spending that invesment capital as well as returns . Ive never been a $50k Rolex guy but once i am 70 i plan on being one ... Lifes too short . Live long and live fast once the finish line is in sight . Might even get my first tattoo on my 70th

 

[sptrawler]

All i'd like to leave in my will is a leased Bentley and a loan . I think once i hit 70 i will starting spending that invesment capital as well as returns . Ive never been a $50k Rolex guy but once i am 70 i plan on being one ... Lifes too short . Live long and live fast once the finish line is in sight . Might even get my first tattoo on my 70th View attachment 173814

That's my plan exactly, 7 cruises in the next 12 months plus the kids and grandkids can't complain, we are taking them all on one.
If we don't spend it, the Govt will find a new and social way of taking it off us. Lol
The wife never thought we would ever travel, well my plan is to get her to say, I've done enough travelling.
Then I will be happy about all the arguments we had about investing, when we were young and struggling, but I wont say I told you it will work out.
I'm not that brave. Lol

 

[divs4ever]

Lifes too short . Live long and live fast once the finish line is in sight . Might even get my first tattoo on my 70th

LOL

i started that at 3 the police searched for hours before i wandered home by myself

no tats for me it is nearly all scar tissue , if you can see it , it has been cut/burnt/sunburnt badly/ripped off by pavement ( or road way ) etc etc

and the rest didn't escape much either ,even my teeth are falsies since 21 ( years old )

... a clairvoyant once told me i would be married twice and dead at 26 , well two ladies got a really lucky break ( imo ) and at 25 i was in hospital for two weeks ( in ICU ) and really had them guessing/worried (and if matron ever found out i was running errands for the bed-ridden patients all over the hospital grounds ..... )

 

[sptrawler]

LOL

i started that at 3 the police searched for hours before i wandered home by myself

no tats for me it is nearly all scar tissue , if you can see it , it has been cut/burnt/sunburnt badly/ripped off by pavement ( or road way ) etc etc

and the rest didn't escape much either ,even my teeth are falsies since 21 ( years old )

... a clairvoyant once told me i would be married twice and dead at 26 , well two ladies got a really lucky break ( imo ) and at 25 i was in hospital for two weeks ( in ICU ) and really had them guessing/worried (and if matron ever found out i was running errands for the bed-ridden patients all over the hospital grounds ..... )

My sort of bloke, similar story, lost most of my teeth by 16, through motorbike accidents and fighting.

The body has more metal in it than the car and the wife's eyes roll back in her head, when I get stressed about the grandkids getting hurt. Lol

 

[Value Collector]

I think that is exactly what I was trying to say in my post.

Ok, but that is exactly the polar opposite of what VH was saying. But I will give you a pass you might not have seen his original statement which triggered our conversation.

 

[sptrawler]

Ok, but that is the polar opposite of what VH was saying.

I didn't quote all of VH's post, same as I often don't agree with everything you say, no one has all the answers, there are always too many variables.
But everyone has something to add to the conversation, when I see something that resonates, I respond to it.

Your situation is different to Value Collectors and you both have valid points from different experiences.
It doesn't mean one is right and one is wrong, it all boils back to personal experience, which everyone's is different.

Some people's life turn to $hit for a multitude of reasons and if just one of those reasons hadn't happened, they well could have ended up on the life of Riley.

I know I would be a hell of a lot richer if I hadn't married my missus, I vould list the multi millions I missed out on, because she wasn't happy with the investment.

But now I'm kicking the ar$e of 70 I ask myself, would I be any happier if I was richer but didn't have the missus, the four kids and the 8 grandkids, the answer is no.
I always asked myself the question is it worth the fight for the extra dollars, if it could cost me my marriage, then I would work through the options regarding investment, it wasn't just my future it was ours.
So we are comfortable, but not rich, we have a hell of a happy marriage and extended family and we will run out of time before we run out of money.
IMO I nailed it.

 

[qldfrog]

Ive had the exact same things happen to me . I have been labelled as lucky , i cannot talk about my finances but many of my friends bitch about theirs . Over the years I have tried to help many of my friends organize themselves financially and not one has listened . And yes i have lost a few friends over this . I had 2 friends that i started accounts to trade with that i 100% financed on a view i would educate them and then take my money back once i doubled the account . Both of them i went to put a trade on in these accounts and 50% had been drawn out on one and almost 100% on the other , all without informing me . Needless to say no longer my friends , this experience has made me vow to never help another again .

Edit .. One of these friends spent 100's dollars a week on booze and smokes and the other spent every saturday either at the TAB or the track . I should have known

Can I be your friend?

 

[Value Hunter]

I really don’t get why you are banging on about the share market not keeping pace with inflation when

1, I have already showed you that it definitely does, and that even in the silly calculation of excluding its dividends it still does most of the time.

2. you understand that it’s the total return that matters.

If you can’t understand that what matters is putting in say $1 million of spending power today and being able to pull out $5 Million over the next 30 years in both dividends and capital is what matters then I don’t think I can help you.

if you want to limit yourself to only spending dividends then you can, but at that point it doesn’t really matter what the capital value of your shares is, because you aren’t planning on selling them anyway, only the dividend matters.

So many straw mans in your argument I do not even know where to begin. its like whenever I explain things you just tune out and repeat your straw man arguments.

1) You did no such thing about showing it is the case most of the time. You cherry picked some starting points which were favorable to you. Somebody would need to write a full academic paper with thorough back-testing going back over every monthly period over the past 100 years to prove either one of us right or wrong. It is a generally safe bet that the share market will grow your wealth when you are in accumulation phase if you have a long enough time horizon. But all I am trying to point out is that its far less certain that share market in retirement can give people both money to live and maintain your capital against inflation at the same time.

2) I already gave a detailed explanation about total return and ignoring dividends. Being that however from you receive your returns you need some money annually to live on if you are retired and its generally accepted within the financial sphere (based on various academic papers, etc) that 3 -5% is the safe withdrawal rate for equities in general (of course it doesn't apply 100% of the time). It just so happens that on average dividend yields in Australia average 3 - 5% in most years plus some franking credits so the dividends paid approximate the safe withdrawal rate of money you can draw down. Therefore as a rule of thumb the dividends over time approximate the amount of money you can safely withdraw and therefore we have to see if the remainder of the money (i.e. the capital) manages to at least match inflation.

You can choose to invest all the money in an asset such as Berkshire Hathaway which pays no dividend and sell 3 -5% of your shares each year, etc. Either way you need a certain amount of money to live and we have to see if the remainder of the money at least stays intact against inflation. Ideally a sound investment should give you enough to live plus maintain itself against inflation.

Hence given the above as a short hand if you are looking at the Australian stock market I would say total return is the figure to look at for people in accumulation phase and price return is the more relevant figure to benchmark for retirees (because you assume dividends get spent).

 

[Value Hunter]

but at that point it doesn’t really matter what the capital value of your shares is, because you aren’t planning on selling them anyway, only the dividend matters.

Again you completely missed my points that I already mentioned. Even if you only spend dividends capital value still matters because as I mentioned most people want to leave an inheritance to their kids and the size of the inheritance does matter to them.

 

[Value Hunter]

Value Collector if we are talking bottom line where am I going with my argument. Where I am going is that I believe that returns for the stock market are just at the margin of being enough (sometimes a little more than might be needed and sometimes a little less depending on when you invest and therefore most retirees should try to add a little more return to their portfolio even if they decide to keep their money mostly in Australian shares.

Whether that's through the use of an equal weighted ETF such as (ASX Code: MVF) a geared ETF (ASX Code: GEAR) or adding small cap exposure when small caps are undervalued, adding international exposure to markets that are undervalued, individual stock picking, investing in alternative investments. investing in crypto currencies, etc. Even if an investor for example decided to put 70% of their portfolio in VAS if they can do something with the other 30% to earn a higher return it will make a huge difference.

The point you are missing is most retirees that have a decent nest egg want to be able to live comfortably while simultaneously maintaining or growing their nest egg vis a vis inflation. You are acting as if people do not care if they deplete their nest egg by the time they die and its simply not true in many cases. The point you are missing is you actually need a higher return in retirement than you do in accumulation phase. Because in retirement you have two hurdles which combine one is inflation and the other is your living expenses. The return needs to cover both combined otherwise you are going backwards. In accumulation phase the return only needs to beat inflation for your wealth to grow as you are not living from your investments. This is the fundamental thing you do not seem to understand.

For example if you have $1 million in capital and in accumulation phase inflation for example is 4% and you generate a 7% return your wealth is growing 3% a year so the 7% return is more than sufficient. In retirement phase if you have $1 million in capital and you need $40,000 per year to live (i.e. 4%) and inflation is still 4% you now need an 8% return to break even so now the same 7% return is causing you to deplete your wealth by 1% a year. Do you see what I am trying to get at?

Ideally most people want a retirement scenario such as for example this:

The house is paid off, the have $1 million in their super money invested in shares. It generates 6% capital growth and pays 4% in dividends (i,e, 10% total return). Inflation is 4%. They have $40,000 (plus perhaps some franking credit refunds) to spend and there wealth grows at 2% annually (6% growth minus 4% inflation). Then when they die 30 years later they leave a sizeable nest egg for their children.

In short the minimum return hurdle for your retirement assets should be your spending needs plus inflation. If you are not meeting that hurdle you need to re-balance the equation somehow either by increasing your return or reducing your spending or increasing your retirement balance (so that spending is a lower % of your capital). That is essentially what I am trying to get at.

 

[tech/a]

We all have our ways of making our retirement as comfortable as we can

Many years ago I realised it was about passive income for me!

Shares
Cash
Properties
Business’s under management
Most in Super so little tax

Don’t think it matters how just that you do .

 

[Value Hunter]

Many years ago I realised it was about passive income for me!

If I am not mistaken your share portfolio uses an active trading strategy where you trade in and out of shares based on technical analysis. How exactly is that passive income?

Also cash is just a temporary parking place for money. It provides no income after taking inflation into account. You need to reinvest 100% of the interest just to try and break even with inflation. Therefore the income is not available to spend (if you spend the income you are in effect eating your capital when taking inflation into account). Therefore I do not consider that cash generates passive income.

 

[divs4ever]

Also cash is just a temporary parking place for money.

that is the way i see it also . or put another way , a stepping stone to something else