Category General

Your Nest Egg: How Much Do You Need to Retire?

By John Spitzer, Ph.D. and Todd Houge, Ph.D., CFA

With employers shifting away from traditional pension plans to defined contribution plans such as the 401(k), most of us are responsible for building a nest egg that will provide the financial security we need in retirement.  How much do you need to have in your 401(k) account in order to retire? To answer this question, we recommend that you follow three basic steps.

In our discussion, we focus on Traditional 401(k) plans, where retirement distributions are taxable. For Roth accounts, you would reduce the required balance to reflect the fact that distributions from Roth accounts are tax-free.  Our discussion applies equally to 403(b) plans and IRAs.

The first step is to estimate the level of before-tax income, in today’s dollars, that yo...

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Should I Care How My Financial Advisor is Paid?

By John Spitzer, Ph.D. and Todd Houge, Ph.D., CFA

There are four common methods for compensating financial advisors: commissions on product sales, fees calculated as a percentage of assets under management, salaries paid by a financial institution, and hourly rates. In this article, we explore the potential biases introduced by each form of compensation and identify important criteria for investors to consider when working with an advisor.

Historically, one of the most common methods for compensating financial advisors is to charge a commission based on the products, such as mutual funds, tax deferred annuities, or insurance policies, sold to their customers...

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Retirement Portfolios: Skip the Pie and Try the Cake

By John Spitzer, Ph.D. and Todd Houge, Ph.D., CFA)

What mix of assets should form a retiree’s portfolio?  Conventional guidance for asset allocation often uses pie charts to show the percentage weight of the portfolio assigned to each asset class, such as stocks, bonds, real estate, and cash.  For example, one popular financial guru recommends the following portfolio mix for retirees: 35% stocks, 40% bonds, 15% real estate, and 10% cash.

We believe using percentages to form a retiree’s asset allocation, while easy to explain and simple to understand, is seriously flawed.  Why?  Consider the slice allocated to cash.  Is it there for liquidity?  If so, that is misleading...

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