Delaying Social Security as a Triple Hedge (@MichaelKitces)

Michael Kitces is a fellow Financial Planner ( and all around smartest guy in the room. He recently wrote about delaying Social Security as a hedge against 1) higher than expected inflation 2) lower than expected investment returns and obviously 3) living “too” long.

I’m not sure what else you could want to hedge against.

As he’s since pointed out, there is more to the equation than just “Do I take it at 62 or 70?” But really understanding the benefits of delaying (beyond the simple “break even” analysis) is a first step to devising a social security withdrawal plan.

Here’s his post:

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“Hang On A Minute, What Was The Answer To That Last Question”

Great (and funny) video explaining debt crisis. Will make you laugh and/or cry guaranteed.

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And How Would You Like That Performance Reported, Sir?


How’s My Performance?

Justin here. This is a mock-up of something a retired investment advisor and friend of mine said he would put in front of clients. It is only halfway “tongue in cheek” and it brings up a good point about what is important and why. 

Client Reporting Process Selection


Our intent is to provide you with the most efficient report on your investment account possible. To that end, we ask you to look over the format you would be most comfortable with and check the appropriate section and return it to us.  We will do our best to keep you informed.


1.  Please let me know how my account is doing as compared with CDs and ten year Treasury Notes. (CDs are now returning about 2% to 3% per year and ten year Treasury Notes are at 2%)


2.  Please let me know how my account is doing according to the popularly used averages, Dow Jones Average, Standard and Poor Average, etc. (This program shows if your account performed as average or if it was better or worse than average.)


3.   Please let me know how my account was doing according to the Hedge Funds strategy. (A recent report in The Economist  stated “At the end of 2011, 67% of hedge funds were below their high water marks, according to Credit Suisse, and 13% had not earned a performance fee since 2007…..the average hedge fund slid by 5.2%, much worse than the S & P 500which returned 2%.)


4.  Please let me know how my account performed percentage wise during the period. (Percentages are useful to reveal how much your account moved up or down during the period.


5.   Please let me know how much my account performed in real dollar value during the period. (For instance, we can report your account grew $ 36,000 during the period or $3,000 per month.  This might effectively assist you in your spending plans.)


6.  Please let me know how well my account performed versus inflation. (Inflation varies but is commonly accepted as approximately 3% per year.


7.  Please let me know how my account performed compared with the goal we mutually set as a guide line to work toward.  I understand the account may not move up in an equal amount each year but strives to reach our goal within in a six year period.  


Thank you for being a part of this investment program.  We want you to be comfortable with our services.  Call us at any time you have a question.

I’d only add another: “#8. Please let me know how my performance was compared to a) my brother in law b) that guy I saw on CNBC this morning c) my tennis partner.

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Great Dinner Party Chatter – JP Morgan’s $2b TradingLoss

As Heidi Moore (@moorehn) explained on twitter today; she wrote a piece on the JP Morgan trading loss. How to understand it and even talk about it at a dinner party!

A truly great piece of simple yet insightful financial journalism.

JP Morgan’s Loss: The Explainer | Marketplace from American Public Media.

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Great Chart – Price Matters

Justin here. Here’s a fascinating chart on starting P/E’s and ensuing 20 yr returns. Take your pick, want to start with a PE of 23 or 8?

Sunday Spectacle CLXXII | Can Turtles Fly?.

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Like New, Never Read!

A few years back, sent me a 50% discount coupon for one of John C. Bogle’s books, “John Bogle on Investing: The First 50 Years.”  The market was roaring back then and nobody wanted to read what old man Bogle had to say about value, at least not for $29. One eager seller was willing to let this book go for $4.99, Like new, never read! he boasted.  The Dow was 11,380. My barber had just told me that his college-aged son’s roommate’s parents had just quit their day jobs, making $2k a week, apiece, day trading.  That was March 2000, peak of the boom.  Apparently, many copies went unsold.

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Jeremy Grantham’s “Notes to Myself”

Quarterly letters are usually cuter than they need to be (ours included). GMO’s Jeremy Grantham writes a great letter usually filled with analogies and backstories. But December’s turns out to just be his “Notes to Myself” and is insightful and refreshing. Here:

Spoiler Alert: he thinks the S&P could overcorrect as is the case with most bubbles and be down 30% by this time next year. #gulp

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Yesterday’s News…

Two great explanations…

from Heidi Moore’s tumblr (Marketplace/NPR): (and when she says in the first paragraph “you should go read that first…” obey her).

from Charles Rotblut, CFA (from AAII):



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“If not for Veteran I have no place to come”

Two years ago, Jonathan went on the Triad Flight of Honor. I’m pretty sure it still ranks in the top 10 days of his life. He wrote his thoughts here and how being a guardian on that day reminded him of our job as financial guardians for our clients. The excerpt is below, for the full version (with financial commentary, go here:

Some events are so enormous that history’s judgment erects a permanent monument; something that remains long after all the eye witnesses are gone. Last Saturday, I boarded US Airways Flight 9092 to Washington, DCas part of the Triad’s Flight of Honor to take 101 World War II Veterans to see such a monument, their monument: the World War II Memorial.

I was chosen to be one of thirty-six guardians, each of us assigned to accompany three of the Veterans (pictured, myself in red). Before the flight, knowing that seniors prize familiarity, I made an effort to both call and meet my 83, 86, and 91 year-old companions at the ‘pre-flight’ meeting. When the eldest couldn’t make the meeting because he was under the weather, I drove out to his home. I learned how much the last ten years have demanded of him, but I got to hear a lot of happy memories too, and I could see that the more we talked, the better he felt. The only problem, I learned, was that the t-shirt he’d been given for the trip was an XXL but he needed an L at most.  Before I could reel back in my words, I told him I’d take care of it.

After finding out there were no more shirts available, I called the seamstress who has repaired my dress shirts over the years. “Could you take a size XXL and make it into a size large?” I asked. “Sure,” she said, in broken English, “You bring large t-shirt too when you come, ok?  When you come?

Ten minutes later, the owner of Alternation Studio, a petite Vietnamese woman and I were comparing a size L to the size XXL. The shirt had the Flight of Honor logo, which she asked about. “Honor Flight,” she said, “what this?” I offered the short answer. “This you wear?” she asked. “No, no, my 91 year-old Veteran friend will wear it when we go to see the World War II Memorial in Washington,” I answered. “Veteran,” she said, her mind working, “I do for him, yes,” and with a bigger smile, said this powerful truth, “If not for Veteran I have no place to come to.”

Two days later, as promised, she produced the transformed size L t-shirt. Knowing how no one likes to wait for something, I delivered the shirt on my way home. At first I had a little trouble explaining how a t-shirt labeled XXL was really a size L, but when he understood that it had been remade just for him, you would have thought he just made a hole-in-one.

Other than t-shirt alterations, the job description of guardian was to accompany the Veterans through airport security, help them board and disembark, sit, walk and talk with them, point out access ramps and restrooms, tote cameras and pill bottles, provide an arm to lean on, circle up chairs under a big tent, and secure our box lunches.  But more importantly, we were there to listen, offer strength, and stand by them as they, the heroes, gazed into the Memorial, reflected on their own thoughts, and opened up the history books of their lives to us on that magnificent day not one of us will ever forget.

I haven’t been able to get that day out of my mind. It was such a privilege and honor to be with those men on such a gift of a day. But I’ve also been thinking about how much my job that day mirrors our job here, as Financial Guardians. We listen and plan, we direct and monitor, we share highs and lows, and offer our support and strength through all the stages of life’s journey.

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Why a Checklist Won’t be Saving Your Life

“I’m Too Busy” and Other Things You Don’t Want to Hear Your Doctor Say

Peter J. Pronovost, M.D. is an intensive care specialist physician at Johns Hopkins Hospital. In 2001, the nurses under Pronovost noticed that at least one of the steps to reduce infection was omitted in more than one-third of the patients. So Dr. Pronovost developed a simple checklist, saw dramatic results, and got other hospitals on board. A later evaluation found that over an 18 month period, this checklist saved more than 1,500 lives and saved the state of Michigan over $100 million…all through a little checklist.

In spite of dramatic results achieved in the test hospitals, Dr. Pronovost soon learned that only a small fraction of hospitals were using these procedures consistently. The lapses fell into three categories: Egotism, Busyness, and Distraction. Some nurses and physicians were insulted that professionals with their wisdom and experience should have to stoop to the level of being governed by a checklist; they let their egos get in the way. Some also felt they were already too busy and had an aversion to more “tasks” in a world consumed with bureaucracy. Lastly, many were distracted by more “exciting” issues such as disease biology and finding therapies for treatment, while often ignoring more “mundane” research that measures whether therapies are effectively delivered to patients. 
Flight 38

Inspired in part by Dr. Pronovost’s checklist’s success, but more so by its concurrent failure to gain traction in the wider medical community, Dr. Atul Gawande, a general and endocrine surgeon at Brigham and Women’s Hospital in Boston, wrote The Checklist Manifesto: the Power of Getting Things Right. While recounting the story of Flight 38, Gawande points to one more reason we don’t follow checklists: Emotions. Following the near-fatal crash of British Airways Flight 38 from Beijing to London on January 17, 2008 (pictured), an inquiry led investigators to conclude that during the cross-polar flight, when atmospheric temperatures typically reach negative 105 degrees, moisture as sparse as two drops per gallon of jet fuel can crystallize. There was little risk to Flight 38 while on cruise control, but on approach, the pilot accelerated only to experience severe rollback: both engines lost power. Continue reading

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