How to Use A Guide to Personal Finance Blogs – Example 2

The goal of A Guide to Personal Finance Blogs is to help readers navigate the vast seas of personal finance blogging to find new blog sites that best fit their specific tastes.  I’ve recently had several discussions with people on the best ways to use the Guide to fulfill that lofty purpose.  Not too long ago I posted one example on how to use the Custom Search Engine in the Guide.  I thought a more comprehensive example might be useful, particularly because I’ve added some new features to the Guide in the last few weeks.

One good way to use the Guide is to start with a blog you already know and like, and let it lead you to other blogs with similar characteristics.  So, let’s try that method using the example of The College Investor.  Why use that particular blog as an example?  There are several reasons.  One, it’s a well established and respected blog that’s been around since 2009.  Two, it’s not so big (e.g., about 11,000 followers on Twitter) that it creates a huge constellation of blog spin offs.  In contrast, if you started with Mr. Money Mustache that would probably lead you to a bewildering array of blogs, because so many people have been influenced by MMM over the years.  Three, in the interest of transparency, The College Investor recently mentioned Mindfully Investing in a post about the Best Investing Blogs of 2017.  If I am going to use an example, I at least want to use one that’s recognized the stunningly great content available at Mindfully Investing. 

So, let’s say for our example that you are a fan of The College Investor.  What next?

Blog Styles

Personally, I like to start with the writing Style of a blog.  If you like reading personal and touching stories and go straight to a similar sounding blog that has hard-nosed research and education pieces, then you’re going to be disappointed.  Accordingly, let’s start by clicking on the Blog Styles page of the Guide.  There you will find a nifty graph that plots over 1000 personal finance blogs on two style “coordinates” that looks something like this.

You can go to the actual interactive graph by clicking on the graph picture above.  You can read more about what the graph style coordinates mean on the Blog Styles page, but for now, just know that the styles sort into four broad categories tracked by the colors in the graph:

  • Stories (green)
  • Examples/Advice (yellow)
  • Education (red)
  • Opinion/Motivation (blue)

The particular graph above is for well established blog sites (blogs started prior to 2013).  There are too many blogs plotted on this graph to easily pick out The College Investor, so instead, we’ll click on the Styles Table page, and enter the first few letters of “college” into the filter form at the top of the table.  This gives you a smaller table with The College Investor showing up as an “Education” style blog (red).  You can click on the example below to take you to the actual interactive table.

The College Investor turns out to be clearly in the Education style (red) category with ratings of 2 and 2 on the two styles axes.  A rating of 5 and 5 would indicate a blog is strongly educational, which probably means it’s going to read very much like a text book or technical journal article.  Some people love that, others’ don’t.  It’s a matter of taste, and that’s exactly what we are trying to divine here.  So, The College Investor is not extremely far into the educational quadrant, which means it tries to entertain to some degree as well educate.

So now we can go back to the graph of well-established blogs and look at other blogs that have a Style of 2 and 2.  These include:

  • Before You Invest
  • Lazy Man and Money
  • Money Under 30
  • SeedTime
  • Miss Thrifty
  • The Military Wallet
  • The Chicago Financial Planner
  • Lauren Greutman
  • Money Smart Guides
  • My Own Advisor
  • Retire Happy
  • The Work at Home Wife
  • Femme Frugality
  • Chris Reining
  • Financial Best Life
  • Living on the Cheap

You can also obtain this same list by going back to the Styles Table and sorting blogs by the year they were started and filtering for blogs with a style of 2 and 2.

Blog Topics

That’s still a pretty big list and it clearly covers a range of topics of potential interest from military to retirement, etc.  So, let’s look next at the factor of Blog Topic.  On the topics page you will find a similar interactive table that summarizes recent content from all the blogs in six topic areas.  You can find The College Investor just like we did before using the table filter.  This gives the following result:

Recent articles in The College Investor covered mostly topics of investing, saving/budgeting and debt/credit.  This is a somewhat eclectic mix of topics, and mixed topic blogs are color coded gray on the topics table.   We can look for similar blogs by looking at other mixed (gray) blogs, or we could recognize that The College Investor recent articles were most often about investing with saving/budgeting articles coming in second.  We can find other blogs with similar topic mixes looking at the Blog Topic Graphs page and then clicking on the page with graphs focused mostly on investing.  That graph shows us investing focused blogs with significant red (representing saving/budgeting topic) right at the top:

One member of that list stands out because it was at the top of the list of blogs with similar Style to The College Investor that we generated above.  That one blog is called “Before You Invest“.   I urge you to take a look at this blog and compare it to The College Investor by reading a few articles on each site.  I think you’ll find considerable similarities in style and topic mix between the two.  There are other similarities including they both are well established (Before You Invest started way back in 2000) and both are from the United States, which can be easily determined by looking at the table on the Geography page.

Style, Topics, and Recent Posts

Many folks are looking for fresh content.  We can see by looking at the Blogs over Time page that “Before You Invest” has not posted in the last week (as of the writing of this article).   To look for similar blogs with more recent posts you can use table in the Blogs over Time page and filter it for education style and mixed topic focus (because these are the general style and topics categories for The College Investor).  (This sorting and filtering process is exactly like we followed on the Styles and Topics tables above.)  You can then sort that smaller table by the year the blog started (to get well established blogs like The College Investor) and by “days since last post” to get blogs with the most recent posts.  This results in the following list of established blogs similar to The College Investor, which have also posted within the last week.

  • I Will Teach You To Be Rich
  • Getting Your Financial Ducks In A Row
  • Money Under 30
  • Lazy Man and Money
  • Money Ning
  • Everything Finance
  • Your Smart Money Moves
  • Couple Money
  • Frugal Confessions
  • Lauren Greutman
  • Femme Frugality
  • jlcollinsnh
  • My Money Design
  • Penny Thots

Again, we see a couple of overlaps with the previous lists including: “Lauren Greutman” and “Money Under 30“.  If you peruse these blogs, I think you will again find some clear similarities to The College Investor.  One caveat is that Lauren recently posted that she is taking her blog in a new direction.  So, her blog may start to drift away from some of the characteristics of The College Investor in the next few months.  Also, in my opinion Lauren’s blog has more a feminine touch than The College Investor.  But I’d suggest that this is not necessarily a bad thing.  Finding one blog that is similar to, but not exactly the same as a blog you like may be a more fruitful outcome in some respects.

Results of the Chase

So, we pretty quickly came up with three blogs (Before You Invest, Lauren Greutman, and Money Under 30) that may be worth exploring if you are already a fan of The College Investor.  I should also add, that I find it quite helpful to randomly select some of the blogs on all of the above lists.  I often find that there are a few more blogs that interest me in these slightly wider lists, and it’s definitely a much more efficient hunt than randomly clicking on websites in some giant list someone presents as “awesome”.

There are many other ways to use the Guide to Personal Finance blogs.  So, this really is only one example.  Another approach is to simply look at a few random blogs of various styles, topic mixes, new vs. older blogs, countries, and post frequency to get a sense of the content you like in general.  For example, once you determine that the Story style seems to drive much of your preference for any given blog, you can just focus your search to other blogs that have the Story style.

Another big factor in determining blogs you may like has to do with the type of blogger writing the content.  Are they male/female, young/old, single/married, and do they have kids or not?  And what’s their profession and claimed focus of their blog?  Do they claim to be blogging about being in the Military, being Millennial, their family life, or something else?  These factors often help further determine the blogs you may like, and I am currently working on a new page for the Guide that will tackle exactly this issue.  Of course, I will post again and tweet when this new page is available.

As always, please let me know if you see any other ways I can improve or augment the Guide to Personal Finance Blogs.

Blogs over Time – New Addition to A Guide to Personal Finance Blogs

I’ve added a new analysis of Blogs over Time to the Guide to Personal Finance Blogs.

With this new addition to the Guide to Personal Finance Blogs, my intent is to provide a quick way for readers to find bloggers that have posted most recently.  Many readers want to focus on new content.  This addition to the guide will help avoid the scenario where you find the perfect blogger for you (using the styles, topics, and geography guides), and then realize that your new-found blogger has not posted anything for the last 2 or 3 weeks.  While personally I feel that too much emphasis is often placed on frequent posting, the whole point of this guide is to help you to navigate to the content you want to read.  So, if you put a high premium on reading content that is less than a week old, this new addition should help you out.

To further assist your quick access to recent content, the new Blogs over Time page includes a table of all the blogs in the database (over 1000 and counting) that also includes summary information from the blog styles, topics, and geography guides.  This table is default sorted by most recent posts.  So, you can quickly scan the top rows of the table for recent posts from bloggers with the style, topic focus, and/or country of origin that you prefer.  As with other tables in the guide, direct links to all the blogs are provided.

Note that I am in the process of expanding the time coverage of this analysis.  Right now, I have been tracking posts of more than 1000 personal finance blog feeds for 6 days.  So, the graph and table in the analysis show post activity over this time span.  I will continue to track posts on a daily basis for about a month.  At that point, I plan to switch to a weekly time resolution.  That is, recent posts will be categorized by occurrence in the last 1, 2, 3, or 4 weeks.  From that point forward, the analysis will be updated weekly.  My view is that a weekly resolution should give most readers a good sense of who has posted recently (say within the last week) and not so recently (within the last 3 or 4 weeks).

Enjoy playing around with this new information.  As always, let me know if you have any suggestions on how I can improve or clarify the analysis of blogs over time or any part of the Guide.

 

Blogs by Geography – New Addition to A Guide Personal Finance Blogs

I’ve added a new geographical analysis to the Guide to Personal Finance Blogs.

The newest addition to the Guide to Personal Finance blogs is pretty self-explanatory.  We all know that blog content can vary substantially between countries.  For example, the tax rules and investing plans available in Canada vs. the U.S. vs. the U.K. are completely different.  So, a blog post that discusses minimizing taxes for retirement plans won’t be much use to you if it’s not written for your home country.  You can use the maps and table contained in this section of the guide to find blogs of the type you like, but limited to any given country, world region, U.S. State, or Canadian Province.  Blog geography is cross indexed with blog styles and topic focus presented in other sections of the Guide.  As with other tables in the Guide, direct links are provided to every blog once you’ve found the one that’s just right for you.

Enjoy this new addition to the Guide to Personal Finance blogs!  Let me know what you think about it and how you think I might be able to improve it.

Guide to Personal Finance Blogs – Search Engine Ideas

I recently introduced the Guide to Personal Finance Blogs, which organizes over 1000 personal finance blogs by author styles and topics covered.  More features are coming to the Guide soon.  The idea behind the Guide is to help readers navigate the vast seas of personal finance blogging and find the sites that best fit their specific tastes.

Guide to Personal Finance Blogs – Custom Search Engine

There has been a fair amount of interest in the Guide so far, but I’ve noticed that people aren’t yet taking much advantage of the Personal Finance Blog Custom Search Engine.  This search engine allows you to simultaneously query over 1000 blogs.  More importantly, it excludes the rest of the internet.  So, your search results will be purely personal finance, with none of the clutter from the rest of the internet.

I was thinking about different potential uses for the custom search engine.  One use could be to see where a blogger you respect (or alternatively, disdain perhaps) is involved in other personal finance blogs.  Who do these bloggers associate with in the personal finance blogosphere?  Where are they mentioned?  Where do they comment?  Where do they guest post?

Here are a few example search results using some actual bloggers from the Guide database.  These examples give you a glimpse of what you could discover with the custom search engine.

First, I searched for “My Retirement Rehab” author Ian Bond, shown here in a picture from his blog.

Here is where this fine gentleman pops up in the personal finance blogging world, beyond his own website, of course:

It seems that Ian has been busy.  Using these results you can easily see what blogs he likes to comment on, where he’s mentioned, and where he has guest posted.  If you like Ian’s blog, perhaps you should visit and comment at these other blogs yourself.

Next I searched for Amanda at My Life, I Guess… Here’s her smiling face from her website picture:

The search engine reveals that Amanda has been mentioned or commented here:

It’s interesting to see how different bloggers are traveling in different circles and where they like to interact.

Finally, I looked for FIRE Millennial.  He seems to be a mystery man.

This one was a little harder because, I couldn’t use FIRE Millennial guy’s name to refine the search.  Still, I was able to find him mentioned in a list of “folks who retired early (or are on the path to retire early) and ARE NOT male engineers” at:

This has to be one of the stranger lists out their, but regardless, we’ve learned that FIRE Millennial guy is not an engineer.  He’s slightly less mysterious now.  Interesting or not?  You decide.

“But how is this better than a standard Google search?”, you might ask.  Well a standard Google search for “Ian Bond”, for example, gives high-ranking results about Ian Flemming, author of the James Bond novels, as well as details about some anesthesiologist in Oklahoma City.  I have never read a James Bond book, and I’m not planning to get sick in Oklahoma anytime soon.  So, both these random tidbits aren’t doing much for me.  You’d have to wade many pages deep into the standard Google search results to find the blog connections that easily surfaced using the custom search engine in the Guide to Personal Finance Blogs.

Anyway, perhaps you have been curious about what some of your favorite bloggers do all day on the internet.  If so, here’s your chance.  Happy hunting.

8.4 – The “old” investor Part 3 – Mindful bucket plan and conclusions

Article 8.3 defined the contents of three buckets for mindful “old” investors.  Here’s where we put them together into an overall mindful plan so that all the buckets work seamlessly together.  You can read all the articles by going to the Articles section of this website.

The mindful bucket plan for “old” investors

Based on all the information presented in Articles 8 through 8.3, we can see that:

  • Cash and bonds historically have performed nearly identical ballast functions in terms of portfolio success rate.
  • Using some bonds in place of cash for ballast will increase (perhaps only slightly) the terminal value of your portfolio in most cases.
  • After a period of about 2 to 3 years, the risk of permanent losses from intermediate duration bonds is low.
  • After a period of about 5 years, the chance of permanent losses in stocks is likely less than about 20%.

To honor all these facts, a mindful break down of the buckets is:

  • Short-term – The next 3 years-worth of spending in cash
  • Mid-term – The following 2 years-worth of spending in intermediate duration bonds (with a potential preference for TIPS to hedge against inflation).
  • Long-term – The remainder will be in stocks, representing any spending that is more than 5 years away.

Because of the inherent uncertainties about future market and economic conditions and your specific health and retirement situation (among other factors), somewhat different buckets may be more mindful and rational for you.  For example, if you expect to spend more early in retirement, you might make the short and/or mid-term buckets bigger.  Similarly, if you intend to tighten your belt in the first few years of retirement as a safety measure, you might make these ballast buckets smaller.  And given some of the studies I reviewed in Article 8.2, I can make a mindful case for simply holding 100% stocks along with a plan to reduce spending if/when a stock crash occurs.  Even with these sorts of personal variations, I would say the facts support that most investors should define:

  • The short-term cash threshold as no more than 5 years, because too much cash is a substantial drag on portfolio performance.
  • The mid-term bond threshold as no more than the next 5 years for the same reason that too much ballast will drag down portfolio performance.  Also, the risk of a permanent bond loss is extremely low beyond this threshold.
  • The long-term stock threshold as no more than 10 years, because stock returns are very unlikely to be negative when held for more than this time span.

Bucket Maintenance

We must also consider 1) how to use the bucket contents as market gyrations unfold and 2) how/when to replenish shorter term buckets with money from longer term buckets.  This process has been described as bucket “maintenance”.

Mechanical Approach – The simplest approach to bucket maintenance is to let money flow from one bucket to the next each year as shown in my rudimentary graphic.  (I know. I shouldn’t quit my day job for a career in graphics production.)

This is sometimes called the “mechanical” approach.  To implement the mechanical approach in any given year you would:

  • Replenish the short-term cash bucket by selling a years’ worth of bonds from the mid-term bucket
  • Replenish the mid-term bucket by selling a years’ worth of stock from the long-term bucket

This process is then repeated each year.  It maintains 5 years’ worth of spending as ballast in the short and mid-term buckets, or about 20% of your portfolio, assuming you are using the mindful bucket plan described above.  (Of course as the stock value moves up and down and eventually grows over time, the ballast won’t represent exactly 20% of the total portfolio value all the time.)  One clear problem with the mechanical approach is that in the very first year we must sell some stocks, even though the original intent was to hold stocks for at least 5 years.  If we intend to avoid the threat of permanent losses by selling stocks too soon, the mechanical approach doesn’t help us much.

Sequential Depletion Approach – It’s important to remember that we are trying to avoid the scenario of permanent stock losses in the vulnerable period, which is early in the spending phase.  Consequently, we don’t need to keep the short and mid-term ballast buckets full throughout the entire spending phase.  We only need the ballast in the first few years, because we have established that after about 5 years the stocks will likely have a positive return.  This is the reason that Michael Kitces and some others recommend that ballast be maintained only in the first part of the retirement period, which creates the so called “ascending glide path” for stocks as discussed in Article 8.2.  We need an approach where we deplete the ballast over time to reduce the need to sell stocks early in the spending phase.  The simplest of such approaches is to use the ballast in sequence without replenishing it.  You can accomplish this “sequential depletion” approach by using:

  • The short-term cash bucket over the first three years (and not touching the mid or long-term buckets)
  • The mid-term bond bucket over the next two years (years 4 and 5)
  • The long-term stock bucket after year 5.

Using this “sequential depletion” approach, the first bonds you sell will have been bonds for at least 4 years and the first stocks you sell will have been invested as stocks for at least 6 years.

However, if we look at the amount of ballast in the first five years of the “sequential depletion” approach, it gets progressively smaller each year.  As I discussed in Article 8.3, to boost the recovery of your portfolio after a crash in the vulnerable period you want a substantial amount of ballast available to buy stocks.  By using a simple no growth assumption, which is one possible scenario for stocks and bonds over any given 5-year period, we can eliminate a variable and make a rough comparison of the ratio of ballast versus stocks for any given ballast depletion plan.  For the sequential depletion approach, the percentage of ballast in the first six years looks like this:

  • Year 1 – 20%
  • Year 2 – 17%
  • Year 3 – 13%
  • Year 4 – 9%
  • Year 5 – 5%
  • Year 6 – 0%

For the five years before the ballast is gone, the ballast only averages 13% of the portfolio.  This means for most of this period you won’t have very much ballast to invest if a stock market crash occurs.

Hybrid Depletion Approach – We are looking for a bucket maintenance approach that provides a balance between selling too much stock too early and not having enough ballast in the critical early part of the spending phase.  We can accomplish this by moving some stocks into ballast during the first few years of the spending phase, but not so much that we lock in large permanent losses should the stock market crash in those specific years.  Such a “hybrid depletion” approach looks something like this in the first 12 years, with no change in the pattern in the subsequent years.

Summary of the Hybrid Depletion Approach
 

Years Invested in Each Bucket Before Being Spent

Percent Ballast (No Growth Assumption)

Spending Year

Cash

Bonds

Stocks

1

1

0

0

20%

2

2

0 0

21%

3

3

0 0

22%

4

3

1 0

23%

5

3

2 0

19%

6

3

2 1

15%

7

0

5 2

11%

8

0

5 3

6%

9

0

0 9

0%

10

0

0 10

0%

11

0

0 11

0%

12

0

0 12

0%

This table needs a little explanation.  The columns headed “Years Invested in Each Bucket Before Being Spent” track how long each years’ worth (let’s call them “chunks”) of money was invested over time before it was spent.  For example, the chunk spent in Year 6 would have been previously invested as cash for the last three years, as bonds for the two years prior to that, and as stocks for one year prior to that.

This hybrid depletion is accomplished by:

  • For the first four years, spend the available cash and replenish the cash bucket each year by selling some stocks to buy bonds and selling some bonds to provide cash
  • In the fifth year, start sequential depletion of all remaining ballast (cash and bonds) and hold all remaining stocks until the ballast is all spent. The ballast will be finally depleted at the end of the eighth year.
  • Sell stocks to fund spending from the ninth year onward.

The red text in the above table shows the critical period where you would be spending chunks of money that had been invested in stocks for only one to three years.  But because these same chunks were subsequently invested in bonds for 2 to 5 years, some or all stock losses for these chunks might be recouped by the subsequent bond returns.  So, there is some susceptibility to permanent stock losses with the hybrid depletion approach, but it is mitigated somewhat by the subsequent investment of that same money in bonds.  The other side of the balance we are trying to achieve is maintaining a substantial ballast proportion during the vulnerable early phase.  The left most column in the table shows the hybrid depletion approach keeps the ballast right around 20% for the first 5 years, which is considerably better than using sequential depletion.

It’s important to note that the above table represents only one flavor of hybrid depletion.  You can tailor your own bucket maintenance to achieve slightly different goals consistent with your specific situation.  As appropriate, you could replenish ballast for more or fewer years than the above example before starting the sequential depletion procedure.  If you have absolutely no interest in attempting to tailor your own plan, I think the above example would work well for most, but perhaps not all, “old” investors.

Switching Horses – All the above scenarios assume that the stock market does not crash like it did during the six worst events in history that I discussed in Article 8.3.  Obviously, if the stock market crashes in the first few years of your spending phase, the ballast should be immediately invested in stocks and the ballast buckets would all go to zero, except for your most immediate spending needs.  This was the whole point of holding the ballast in the first place.  If a crash happens in the first five years of your spending phase, that’s when you will need to buckle your seat belts, use all your mindfulness powers, and invest almost all your “safety” money during a time when there’s blood in the streets and every news headline screams “sell everything”.   Knowing that you planned for years to execute exactly this game plan will mostly likely help steady your nerves and allow you to proceed.

One remaining concern is deciding when it’s time to depart from the hybrid depletion plan, switch horses, and convert any remaining ballast to stocks.  Should you convert the ballast to stocks if the market declines by 20%, 30%, 50%, or something else?  There are an infinite number of stock market scenarios that could play out, and we can’t anticipate them all.  However, we can develop some general guidelines about which horse to ride, and for how long, during various possible stock market gyrations.  I will discuss that subject in more detail in Article 8.5 on “Timing the Market” (coming soon).

Withdrawal plan for “old” investors

Our mindful investment plan for “old” investors is taking shape.  We now know how much money to allocate to cash, bonds, and stocks at the start of the spending phase, and we know how to maintain and use the buckets as we proceed through the spending phase.  However, for the plan to work, we need a third leg to the stool, which determines how much to withdraw each year during the spending phase.  Because the Mindfully Investing website is focused more on how to invest than how to spend, I won’t get into the withdrawal rate topic in detail.  However, there are a few key spending and withdrawal concepts I should briefly describe to help you create a stable investing stool.

The 4% Rule – If you regularly withdraw more than your portfolio of investments can sustain, you may end up poor at a relatively young age.  You probably noticed that I keep using a 4% withdrawal rate assumption in the previous discussions of portfolio success rates and performance.

(It’s important to note at this juncture that in the previous analyses I often assume a constant 4% withdrawal rate to provide simple examples of what percentage of a portfolio would be held in each investment type.  In other cases, like determining the success rates of various portfolios over 30 years, I use an inflation-adjusted withdrawal rate or online calculators that do the same.  In this case, the withdrawal rate starts at 4% of the total portfolio value but then increases by the amount of inflation each year.  The 4% rule that I discuss below is based on the inflation-adjusted approach unless otherwise noted.)

The 4% “safe withdrawal rate” assumption comes from the so-called “Trinity Study”.  The Trinity Study, and related studies pre- and post-dating the Trinity Study, are described at the Bogelheads website in more detail.  Although the results vary somewhat across these studies, they all support the concept that there is very little chance of running out of money in a 30-year period with a 4% withdrawal rate, if you have a substantial portion of your portfolio in stocks (typically in the 30 to 80% range).

The blogger calling himself the “MadFientist” reviews the 4% rule for early retirees using mostly information from Michael Kitces and concludes the 4% rule is “very safe”.  He also notes that even for very early retirees, a 3.5% rate is the lowest you would probably ever need to go.  I highly encourage you to read his article, because it is very consistent with a mindful approach (it’s rational, relatively objective, and empirically based).  So, I won’t repeat that discussion.

Similarly, the folks at Early Retirement Now (ERN) conducted a very detailed analysis and posted a 12 part series on safe withdrawal rates that specifically targets early retirees.  They calculated over 6.5 million safe withdrawal rates based on all possible combinations of:

  1. retirement starting dates from 1871 to 2016
  2. retirement horizons ranging from 30 to 60 years
  3. portfolios with 0 to 100% stocks
  4. five different final asset values
  5. nine withdrawal patterns.

In other words, it’s a comprehensive analysis!  You can read more of the details of the methods and results over at ERN, but the key results are shown in this table.

You can use this table to pick the withdrawal rate that you consider “safe” for your situation.  Assuming you are using the mindful bucket approach described above (80% stocks in the vulnerable period ascending to 100% for the rest of retirement), a 3.5% inflation adjusted withdrawal rate is very likely to ensure you have sufficient money in retirement, even over 60 years.  Using a mindful perspective, where you don’t worry so much about low probability outcomes, might lead you to a withdrawal rate that is a little higher than 4%, especially if you think your retirement period is likely to be 40 years or less.

Tailoring Your Withdrawal Rate –  Because there are many variables, I highly encourage you to conduct your own calculations or closely review detailed studies like the one at ERN and avoid rules-of-thumb in general.  The 4% rule is a good starting place, but why would you leave your retirement up to a one-size-fits-all estimate?  In addition to the ERN analysis, you can use online calculators such as:

Using any of these approaches you will need to consider factors such as:

  • The types of investments you expect to make (like the bucket approach above)
  • How you will maintain your investing plan over time (like the hybrid depletion approach above)
  • How much in dollar terms you would like to withdrawal annually
  • A reasonably conservative estimate of how much money you expect to have accumulated by the time you start retirement (or the spending phase in general).

To help determine this last variable (how much you will have at retirement), various free retirement calculators are reviewed by:

By planning your spending just like you plan your investing, you can answer questions like:

  • Is your planned retirement date reasonable? Or does it need to change?
  • What is the amount you will have to live on year-to-year? Is keeping to this level of living expense realistic for you?
  • What are the dynamic spending options applicable to you that might improve your plan’s probability of success?
  • How much flexibility do you have to drastically reduce your spending during and after market downturns?
  • How aggressively (more stocks and less ballast) do you need to invest to meet goals that are consistent with the answers to these other questions?

I may do some blog posts in the future that explore the whole spending and withdrawal rate discussion more, but I’ll stop here for now.

Conclusions for the “old” investor

We’ve come up with a pretty mindful investing plan for the “old” investor.  Although there is no perfect answer or ideal plan that works for everyone in all future unpredictable situations, the Mindful Investing Plan for the “old” investor sets some key guidelines you can use to develop your own plan:

  • When you enter the spending phase, you need to avoid the bad luck of early stock declines, so called “sequence of return risk”
  • The best way to avoid this bad luck scenario is to add some ballast (intermediate bonds and cash) to your portfolio just prior to and during the vulnerable period; long-term bonds should not be used as ballast.
  • Even experts don’t agree that one ballast approach is always better than another
  • Bucket investing is one useful concept to help you decide how much ballast to include in your portfolio and how to maintain or deplete that ballast over time
  • Ballast in the 20% range that is maintained for the first 5 to 10 years of the spending phase provides a reasonable safety margin against bad luck, while not dragging down your overall portfolio performance too much
  • Ballast should be used to buy stocks if a large stock market decline occurs early in the spending phase; this is the primary way that ballast mitigates portfolio declines
  • Your withdrawal approach must dovetail with your investment plan to ensure you balance spending with reasonable growth expectations for your overall portfolio.

We can safely say there are quite a few possible investing plans for the “old” investor that fit these mindful guidelines.  Moreover, when you start to build in flexibility to change your withdrawal rate over time, many more mindful options become available.  For example, you can reasonably decrease the amount of ballast in your plan if you intend to:

  • Adjust your withdrawal rate relative to changes in your portfolio value
  • Reduce your withdrawal rate later in the spending phase
  • Severely reduce your withdrawals if an early stock market crash occurs
  • Start with a relatively low withdrawal rate, like 3% or less, and assess changes to the withdrawal rate as you start to see how your portfolio growth is playing out.

Also, per the Estrada study, a 100% stock portfolio might perform better than some ballast approaches even if you maintain a preset inflation-adjusted withdrawal rate.  So, if you add in the benefits of a highly flexible spending plan, a 100% stock portfolio is likely the most mindful approach, and you can simply ignore the mindful investment plan presented in Article 8.3 and above.  This makes me wonder why I even wrote that stuff!

Other important conclusions for the “old” investor worth reiterating or mentioning are discussed below.

Bucket Mirage – Michael Kitces discusses that bucket investing is in some ways a “mirage”.  He notes that bucket approaches typically produce outcomes that mimic simply holding similar amounts of ballast and proportionally withdrawing from all holdings each year.  However, if we apply Kitces observations to our mindful investing evaluations, I would say the portfolio ratio should still be about 20% ballast and 80% stocks in the vulnerable period, which provides a good balance of portfolio success rate with reasonable expectations for portfolio growth.  In contrast, Kitces and others often recommend higher amounts of ballast early in this period.  A mindful approach also suggests moving toward holding 100% stocks after the vulnerable period, and Kitces would agree with this “ascending glide path” for stocks based on his research with Pfau.

No Ideal Plan – Although there may be more ideal “looking” ballast plans based on back-testing (like the Kitces bond tent idea), any ballast approach will still be subject to future market unpredictability.  Just like the diversification discussion in the Article 7.3, trying to highly optimize a retirement plan is fooling yourself into thinking you have more control over your investments than objective facts indicate.  Therefore, a simple investing plan that does not attempt to be “ideal” is often going to be an easier one to follow and maintain.  For this reason, Ben Carlson rightly points out that we should all:

  • Have a plan, even if it’s a bad one.  A bad plan is better than no plan at all.

Bonds Still Problematic – The mindful bucket plan described above makes some assumptions that, moving forward, bonds will at least approximate their historical function in the mid-term bucket.  However, as I have copiously pointed out in the Article 6 and 7 series, the current economic and market conditions strongly suggest bonds are unlikely to provide this historical function anytime soon.  As of the writing of this article, a typical 3-7 year bond ETF (like symbol IEI) yields only about 1.3%.  A typical 5-year TIPS ETF (like symbol TDTF) currently yields only 1.9%.  And importantly, these bond funds (and their underlying bonds) may soon produce negative returns if they are not held for a sufficient duration.

In contrast, it’s easy to start a savings account right now for amounts as little as $10,000 that currently yields 1.0%, and with almost zero risk of losing principal.  From a mindful perspective, a virtual guarantee of a 1% return is likely better than taking a gamble that you will either gain a mere fraction of a percent return or possibly just lose money.  As interest rates rise, intermediate duration bonds are expected to slowly return to their proper place in the mid-term bucket, but for right now, an equally good choice for “safe” ballast in the mid-term bucket is cash.  As suggested in Article 7.3, intermediate bonds will probably make sense again when the yield on a 10-year U.S. bond is around 4%.  This assumes inflation does not unexpectedly flare up, in which case it would be prudent to seek an even higher bond yield.

Other mechanics

There are quite a few other mechanics involved in retirement investing, particularly related to retirement account regulations and tax laws.  This includes issues like:

  • When to use tax advantaged accounts
  • Different ways to use tax deferred versus tax-free (Roth) accounts
  • How to reduce your tax burden both early and late in retirement
  • Considering different tax rates for capital gains, dividends, and ordinary income
  • Minimum required distributions from tax advantaged accounts
  • Factoring in Social Security or pension payments
  • And other issues.

These are important details that, if properly considered, can save you substantial money, boost your portfolio growth over time, and provide a wider range of sustainable withdrawal rates.  Although I may hit some of these topics in future blog posts, for now, I refer you to:

Article 8.5 (coming soon) will address another aspect of investing over time: whether it is prudent to attempt to “time the market” as part of executing either “young” or “old” investing plans.  Article 8.5 will also present some broad guidelines for when to convert ballast to stocks as market gyrations unfold during implementation of your Mindful Bucket Investing Plan for the “old” investor.

A Guide to Personal Finance Blogs

A Guide to Personal Finance Blogs

I have just completed my first version of a “Guide to Personal Finance Blogs“.  I reviewed over 1000 personal finance blogs and created a tool to help guide readers to the content that best fits their preferences and needs.  The guide currently contains:

  • A custom search engine that searches over 1000 personal finance blogs (and nothing else) on the internet.  This is a great way to find the personal finance content you’re looking for without all the clutter of the rest of the internet.
  • Personal finance blogs categorized by style.  Over 1000 personal finance blogs are categorized by four style parameters and presented in interactive graphs and a table.  The table can be sorted, filtered, and searched and contains direct links to every one of the blogs reviewed.
  • Personal finance blogs categorized by topic.  Over 1000 personal finance blogs categorized by topics such as saving/budgeting, investing, lifestyle, frugality/minimalism, earning/income, debt/credit, and FIRE/retirement.  This includes an interactive table providing links to all blogs that can be sorted, searched and filtered as well as a series of graphs that help you find blogs that address multiple topics of your choice.  Rather than assigning each blog to just one topic, proportions and mixes of topics covered recently by each blog are provided.

The foundation for the guide was provided by the outstanding Rockstar Finance Directory.  While that directly is an extremely valuable tool for finding personal finance blogs, the idea behind this guide is to provide additional information and assistance to help readers find just the right content for them.  My hope is that it will help readers further navigate the vast seas of personal finance blogging and provide more ways for readers to connect with bloggers.

I plan to regularly update this guide and will soon be adding additional features such as an exploration of blogs by country and U.S. state, over time factors (age, years blogging, and posting frequency), and author types.  So, please check back for the continuing growth and expansion of the guide.

Drop me a line if you have any questions at all about what this guide is about, how it was created, or how it can be improved.  Also, if you don’t see your blog here, let me know and I will add it in future updates.