I have posted before about my trend tracking investment philosophy. This week I sold off small cap and mid cap positions due to downside technical breaches. Large caps are on the bubble. Monday will tell. I don’t know where the market goes from here, but I urge you to stick with your discipline. Avoid large losses and you will make money over time. Get your emotions out of it, and trade when your rules say to trade. I personally like a 7% down rule for domestic stocks. 10% for emerging markets, commodities, and other volatile investments. Pay close attention next week!
An easy way for the SEC to make progress on the fiduciary duty issue is to impose a fiduciary duty on all advisors and salespeople dealing with seniors. Research shows that even healthy seniors experience declines in their ability to make financial decisions as they age. It is a steadily progressive decline that begins in a person’s 20′s. Sometime between age 60 and 100 it becomes dibilitating to the point where a person should not make financial decisions. But the senior won’t know it or won’t admit it. What if every transaction with a person over 60 was subject to a fiduciary standard? Everyone from the parish priest to the annuity salesperson to the undertaker would be bound by this standard and held liable if a transaction was not in the senior’s best interest. The financial ripoff of seniors is a huge problem with an easy fix.
First, I should say that I have a bias toward taking Social Security at age 70. As I have posted before, you can’t buy a better inflation protected annuity, and the almost 8% boost each year you wait makes it almost too good to be true. How do you cover your expenses until you turn 70? My best advice is to keep working if you can. Other than that, my 2nd best ideas are: 1) start withdrawals from tax deferred accounts, and 2) get a reverse mortgage on your house. Yes, you will pay taxes on the tax deferred account withdrawals, but they will reduce the withdrawals you will be forced to take later, thereby reducing the amount of social security subject to income tax. The reverse mortgage supplies money 100% tax free, and you can stop it as soon as you start your age 70 social security. You never have to pay the money back, but it does remain as a lien against your house until you (and your spouse) die or sell the house. You still own th ehouse and the bank can’t make you move. The primary argument I hear against waiting for social security is that people want to make sure they get their money back before they die. But if you change your mindset to think about it as longevity insurance, you can begin to see it in another light. (Do you hurt yourself to make sure you collect your heath insurance, or crash your car to collect on your auto insurance?) Of course, this means you will actually have to buy a house, and pay it off by the time you want to retire – but that is another blog.
