Foreword
This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.
Wealthion hosted a retirement planning best practices webinar this weekend, and I highly recommend it.
As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.
If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.
First do no harm
As I’ve noted in “Financial planning, portfolio management and wealth management“, financial/retirement planning is very different in practice from what most people seem to think. It is rarely about maximizing your returns, but more about maximizing the probability that you’ll attain some base level of return you need to meet your needs.
As a contrived example, let’s say you have $1 and you need to retire right now. Well, if you are trying to maximize your return, you’ll probably invest in stocks or equity of some form. But if you want to maximize the probability that you’ll be able to retire on $1, then, perhaps literally, the only option you have is to buy a lottery ticket and pray for the best.
On the other hand, if you have $10m, and you need to retire right now, then again, to maximize your return, you’ll probably invest in stocks or equity of some form. But if you want to maximize the probability that you’ll be able to retire with $300k (ignoring taxes) a year to spend, then you should probably buy 30 year US Treasuries, which currently are yielding about 3% (1).
The main idea is that financial/retirement planning is a marathon, and you’re in it for the long haul, so you need to consider risks, especially those that have low probabilities, but are highly detrimental (e.g. severe stock market crash) to your plan.
Retirement plan
As noted in “My Personal Portfolio” and “Late to the party“, I tend to manage my portfolio more conservatively, trying to avoid drawdowns more than trying to achieve supernormal gains. You can learn more about this approach and why it makes sense in the long haul in this webinar that Wealthion hosted.
It’s very long (3 hours!), but very much well worth the watch.
Footnotes
- OK, fine. In practice, you’ll probably buy some balance of stocks/bonds, though still tilted heavily towards bonds. Because everyone is at least a little bit greedy.
Janky Thoughts 
Wonderful video, worth the 3 hours, thanks for sharing!
For permanent life insurance, overfunded amount (anything contributed above premiums) grows at a fixed rate (close to 3-4% according to the video). The 3-4% return is risk free, so it compounds over time. However, treasuries are now offering similar returns (30 year treasuries yield 3.22% at the time of this comment). Why would someone prefer to pay insurance premiums and overfund to get this return instead of buying treasuries outright? Is it the case that permanent life insurance can offer the fixed 3-4% rate for longer than 30 years, making them more attractive?
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The insurance premiums has tax advantages and grow tax deferred, while Treasuries don’t (they are only state tax free).
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