Mutual Funds: investing in fixed income

Mutual funds are numbered in the tens of thousands investing in every conceivable investment opportunity. They range from equity (stocks) to fixed income (bonds) to money markets, commodities and beyond. And they break down even further to investments focused on domestic offerings to international, emerging markets to total global coverage. You can read the full article here.

The High Cost of Good Health in Retirement

The High Cost of Good Health in Retirement
The oddest item of all, being healthy in retirement, while less painful and more convenient than the being unhealthy, is more costly in the long run. This may have been something you have already considered had you run the numbers the way Boston College did in a recent report for the Center for Retirement Research. You may have said that health care is going to cost something and if you were typical, you went with the averages of about $220,000 per couple over the remaining years in retirement.

But good health could point to longevity. And longevity means additional years of costs and the real probability that during those added years, you will get something you hadn’t bargained on getting.

Now the knee jerk reaction would be to ask yourself: “why bother?” And this would be reasonable. If you can’t come close to estimating this cost (it is tough enough trying to figure out tax liabilities, inflation’s impact and the future of the investments you hold in your retirement accounts), what should you do?

Can You Invest Enough to Cover those Costs
You could try to add to your investments and hope that you have added enough. The problem with trying to offset insurance costs is you may never know whether you need it. But if you don’t have it, the costs can be very difficult to absorb and doubly so if you are in the fixed income world of retirement.

More here.

Retirement Planning: Fixed Income is Worrisome

If retirement is the goal, why would you handicap your chances of arriving when you imagined? Evidence of this shift has challenged those imaginations: Year-to-date  (third quarter 2009), the US household sector is shown to have purchased $529 billion of US treasuries. Granted, a great deal of this was due to money flowing into more conservative 401(k) investments via mutual funds. This pace, the purchase of approximately 45% of what the Treasury was selling, is four times that of the previous year.

This sort of immunization has not gone unnoticed. The problem with many of these commitments to a more conservative approach may be creating a bubble of their own.  These types of debt instruments are based on price and yield.  As one goes up, the other goes down.  The more someone is likely to pay for a bond, the lower the yield that is offered. 

If this sort of pace continues, and it looks as if it may as the temptation to be able to even consider retirement strengthens as the economy gradually improves.

But with more people flocking towards these fixed income investments, the price paid will begin to become unattractive, in large part because inflation remains benign.  That won’t last forever.  And when those conservative investors begin to realize that the yield is now negative to inflation, the selling will begin.

The real paradox will then kick in.  Now what? More