Comments on: Be your own President by turning your retirement savings into your very own monthly 'social security' check

By: AJC

AJC — Thu, 13 Mar 2008 14:05:04 +0000

Hi Ed … no trust in Uncle Sam? Hmmmm … but, I do trust Zvi Bodie … he a well credentialled, highly respected, and independent professor. You can ensure the upside by throwing in the Call Options that Zvi also recommends in his book … I may cover this part of his strategy in a later post.

By: Ed

Ed — Thu, 13 Mar 2008 06:38:02 +0000

The problem with TIPS is that the government has every incentive to under-report inflation. Every added point of inflation means more money they have to pay to government employee pensions, social security recipients, and holders of TIPS.

Did you know that the federal government’s definition of inflation has been changed several times over the last two decades? Each change has caused the number reported to be lower than before. If you use the same metric that was used before Clinton took office, you get a current inflation rate of 8% vs today’s official rate of 4%! That makes a huge different in whether TIPS are a good idea or not.

Anyone who has paid close attention to their expenses can see that the real inflation rate is higher than 4% today. Look at food, healthcare, education, energy, housing. These are the things people have to spend money on, and they’re all going up much faster than 4%.

The bottom line is, the government doesn’t need to default to cheat holders of TIPS, or any other treasury debt. They just need to let the dollar fall fast enough and not let the official statistics catch up until it’s too late for you.

By: AJC

AJC — Thu, 13 Mar 2008 02:02:06 +0000

Checkout The Tycoon Report, Diane, (they have some Free and Fee Option courses available) and Tickerhound.com (in case you want to ask other members some questions). If you are serious about speculating in Options (greater risk, greater reward), you can subscribe to sites like Investools.com – they have tools and online courses – but, they don’t come cheap!

By: Diane Eats the Elephant

Diane Eats the Elephant — Thu, 13 Mar 2008 01:43:34 +0000

Thanks for that advice – part of what drew me to the book was he did get into call options. I know based on where I am age-wise and financially, that I have to take more risks. I just like to make them a bit more educated, so I know I have to understand calls better than I do. Appreciate the extra advice!!

By: AJC

AJC — Wed, 12 Mar 2008 12:46:02 +0000

Diane: Just remember, like Social Security, this is a low-risk, low-return approach … but, could be very good if we have extended ‘stagflation’ (high inflation, poor economy). To accelerate returns (albeit at some increased risk, consider Zvi’s advice to add call options … sounds scary but get a good full-service broker to help you). Also, check with your financial advisor re tax implications of investing in TIPS or using the Inflation-Protected MUNI alternative.

By: Diane Eats the Elephant

Diane Eats the Elephant — Wed, 12 Mar 2008 12:35:53 +0000

Well-written! I’d not heard of Zvi Bodie before, but checked out his credentials and would have loved to have taken some classes from him. This new book (Worry-Free Investing) looks designed for folks like me on the tail end of the Baby Boomers who won’t have Social Security (tho we really shouldn’t perhaps). It gives a lot of his wealth of knowledge watered down from the techno-speak we’d get from his textbooks to something I can read and understand on a plane. Found one within my price range – used – at $16 and ordered it. I do enjoy your blog!

By: AJC

AJC — Tue, 11 Mar 2008 23:26:06 +0000

Thanks MoneyMonk … I enjoy your blog.

By: Moneymonk

Moneymonk — Tue, 11 Mar 2008 22:32:27 +0000

Good advice. I never looked at it from this point of view