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Old 03-13-2017, 06:41 AM   #51
jjshabado
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Re: Retirement

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Originally Posted by Baltimore Jones View Post
I realized recently that long-term disability insurance is something overlooked by healthy young people, and it shouldn't be. My work gives it for free but I would have looked into buying it if not.


Yeah, we got it early. My goal is to live under my income in my prime earning years and take steps to minimize the risk of ever needing to go down in standard of living.
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Old 03-13-2017, 08:25 AM   #52
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Re: Retirement

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Originally Posted by jjshabado View Post

Also, people are being advised to forgo paying down debts or to save an emergency fund before other investing - so I don't agree that it barely moves the needle on EV.
I guess I missed this if that's in this thread...I agree that saving up a full emergency fund prior to paying off debt / saving for retirement is a mistake. I like something similar to Dave Ramsey's model for this:

1. $1,000 emergency fund
2. Pay off consumer debt (non-house)
3. Start saving for Retirement
4. Emergency Fund 3-6 mo
5. More Savings (Additional retirement, Education)
6. Pay off house

There is certainly grey even there tho. For example, I'd certainly tell people to take advantage of retirement matching long before they pay off low interest consumer debt for example. So much of this is dependent on the details of the situation to determine best approach.
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Old 03-13-2017, 09:39 AM   #53
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Re: Retirement

I think I moved into a more general rant about EF advice. Like even in the above I don't see how 1 is more important than 2 in most cases. 1000 toward lowering something like high interest CC debt is much preferable to 1000 in the bank.
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Old 03-13-2017, 11:03 AM   #54
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Re: Retirement

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Many definitely means 'lots' and not 'most'.

Let's turn this around, why 3-6 and not 9-12? What makes 3-6 so obviously correct to you?

Also, people are being advised to forgo paying down debts or to save an emergency fund before other investing - so I don't agree that it barely moves the needle on EV.

Edit: And I disagree with the 'many many more' comment of Brian's.
I've had to hold >12 months in the past due to highly volatile income.

In the US, paying down student loans reduces your expenses, as the extra money you put in counts as an early payment.

Given that most people don't have anything set aside for emergency, don't have access to retirement withdrawals w/o penalty or access to any government programs, disability insurance, etc., I stand by the "many, many more" statement.

Putting money away is much cheaper than disability insurance. It is no-fee self-insured disability insurance and you don't even have to worry about whether the reason you might be out of work is covered by the policy.
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Old 03-14-2017, 03:49 AM   #55
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Re: Retirement

The EV difference is enormous. Something like 25x over a lifetime. If someone is spending 2x of what they save each month (lol), this is equivalent to 1-2 decades of additional savings.

Funny how math works at times.
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Old 03-14-2017, 08:02 PM   #56
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Re: Retirement

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Given that most people don't have anything set aside for emergency, don't have access to retirement withdrawals w/o penalty or access to any government programs, disability insurance, etc., I stand by the "many, many more" statement.
I don't accept the given here. Even in the US there are programs like unemployment insurance. Families with dual incomes where one income would meet a large percentage of the actual core expenses of the family. And so on.

And even of the people that don't have any savings/insurance/family support/etc. I'm guessing a large percentage of them have credit card debt and so should still NOT being setting money aside in an emergency fund.

Maybe you're right about your numbers, but I doubt it, and its definitely not something I'll just accept at face value.

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Originally Posted by BrianTheMick2 View Post
Putting money away is much cheaper than disability insurance. It is no-fee self-insured disability insurance and you don't even have to worry about whether the reason you might be out of work is covered by the policy.
No, personal savings are in no way the same as disability insurance. This is a silly statement.
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Old 03-15-2017, 03:44 AM   #57
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Re: Retirement

Mother of god you're dense. I'm really looking forward to your first real experience with insurance companies... And why they don't give us older people peace of mind.

Cash is king. You never, ever, ever want to not have at least some cash. Partly because you never want to be caught flat footed by life without enough cash to avoid a 'liquidity event', and partly because you want to keep some of your powder dry to be available to deploy if you see something really good.
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Old 03-15-2017, 08:09 AM   #58
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Re: Retirement

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Mother of god you're dense. I'm really looking forward to your first real experience with insurance companies... And why they don't give us older people peace of mind.

Cash is king. You never, ever, ever want to not have at least some cash. Partly because you never want to be caught flat footed by life without enough cash to avoid a 'liquidity event', and partly because you want to keep some of your powder dry to be available to deploy if you see something really good.


Lol. Your argument is so convincing.
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Old 03-15-2017, 08:19 AM   #59
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Re: Retirement

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Lol. Your argument is so convincing.
I'm not arguing with you. This is one of those situations where you're just going to have to learn the truth face first.
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Old 03-15-2017, 09:21 AM   #60
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Re: Retirement

I can't imagine a situation where I didn't know someone(s) who wouldn't instantly give me 20k for a reasonable problem.

Does that cover me even in case of civil forfeiture where cash doesn't?
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Old 03-15-2017, 10:23 AM   #61
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Re: Retirement

Even people with bad credit can borrow some amount of money. Even people with weak social networks and a shaky reputation can find people that will loan them small amounts. Even poor people have something of tangible value that can be liquidated in the case of an emergency.

... and for everyone else there's a church.
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Old 03-15-2017, 10:54 AM   #62
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Re: Retirement

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No, personal savings are in no way the same as disability insurance. This is a silly statement.
That is correct (in a way). Insurance is an extremely -ev play. Cash is neutral ev.

If I remember, I will find the other numbers for you.
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Old 03-15-2017, 11:17 AM   #63
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Re: Retirement

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Originally Posted by BrianTheMick2 View Post
Are you Canadian? We don't have "government programs" in the US and most Americans have no insurance that would cover loss of income.
Social Security disability would kick in if you are no longer able to work, assuming you have some point worked enough to qualify for SSDI. If you lose your job you have unemployment insurance.

I'm not saying these are fantastic options, but they do help provide some sort of floor during tough times.

I think 6 months of expenses is a lot to have idle, but I am a 3 month kind of guy.
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Old 03-15-2017, 12:00 PM   #64
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Re: Retirement

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Originally Posted by BrianTheMick2 View Post
That is correct (in a way). Insurance is an extremely -ev play. Cash is neutral ev.

If I remember, I will find the other numbers for you.
1) Cash is negative real return. So that is wrong.
2) I can tell you now that you 'won't remember' since there is no possible universe where a few months of a negative real return investment covers your for living expenses for the rest of your life. (Like disability.)

Insurance is obviously -EV in all forms, the purpose is to limit risk.
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Old 03-15-2017, 02:05 PM   #65
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Re: Retirement

And just to put it in context my annual disability payment is less than 1/10 of my monthly core expenses and significantly less than what I spend a month.

Disability insurance for healthy people isn't very expensive.
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Old 03-16-2017, 02:57 AM   #66
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Re: Retirement

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Social Security disability would kick in if you are no longer able to work, assuming you have some point worked enough to qualify for SSDI. If you lose your job you have unemployment insurance.

I'm not saying these are fantastic options, but they do help provide some sort of floor during tough times.

I think 6 months of expenses is a lot to have idle, but I am a 3 month kind of guy.
SSDI doesn't kick in if you are unable to work. It is unable to work for 5 months, and a medical reason why you are unsuited for any sort of work (or have one of their listed maladies). It also won't cover the core expenses of anyone other than the very very poor.

Unemployment insurance doesn't cover the monthly nut of most people.

These are a sort-of floor, but most people will find no difficulty in falling through that floor.
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Old 03-16-2017, 03:08 AM   #67
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Re: Retirement

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Lol. Your argument is so convincing.
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Originally Posted by BoredSocial View Post
I'm not arguing with you. This is one of those situations where you're just going to have to learn the truth face first.
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Originally Posted by jjshabado View Post
And just to put it in context my annual disability payment is less than 1/10 of my monthly core expenses and significantly less than what I spend a month.

Disability insurance for healthy people isn't very expensive.
What BS is saying here is that disability insurance won't cover most cases of being disabled from working. The job of the insurance company is to do anything they possibly can to avoid making a payment to you.

I had long-term and short-term disability and was hospitalized for over a month due to a medical problem. It seemed quite obvious to me that being in the hospital for over a month with a pretty severe medical problem would count as a short-term disability to go to work. Never saw a dime from the insurance company because I didn't have the correct medical condition.
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Old 03-16-2017, 08:10 AM   #68
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Re: Retirement

Obviously there are cases where insurance companies suck. But this may come as a shock to you, I've dealt with them on issues before. Sometimes its easy. Sometimes its not. Although, I've never actually been screwed before, I realize its a possibility. The whole "you're just going to have to learn the truth face first" is hilarious.

As for what BS is saying in general. I'm not sure why I should take him seriously? He's saying that you need to have cash on hand, because... reasons. Oh, but also, you should spend that cash if you see "something really good". In which case, I guess now its not that important to have cash on hand*?

Both of you guys are just making a bunch of statements, but not showing your work. You never answered my question on why 3-6 and not 9-12 or 15-18 or 36 months. Most of your arguments don't seem based on math, but on generic statements that would 'work' for anyone arguing for a bigger emergency fund.



*Note, if you're a knowledgeable investor who can identify great opportunities, by all means keep a bunch of cash around. But its not an emergency fund.
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Old 03-16-2017, 11:06 AM   #69
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Re: Retirement

Here is most of the "other" stats from above: http://www.usfinancialcapability.org...l_Findings.pdf

I wasn't "screwed" by the insurance company. The policy stated what was covered and what wasn't. I wasn't disabled (per the insurance contract), I was sick and in the hospital (per normal definitions).

The reason to have cash on hand is for the unexpected, such as the 50% chance that your marriage will end,* or that you will need a sudden root canal. It sucks when the unexpected event happens at the same time your investments are down and you have to sell something to meet the needs of the unexpected event.

The amounts (number of months or amount of cash) are just rules of thumb. Please note that no one here has calculated the ev of having a certain percentage of assets in any asset class. Have you calculated the loss of ev one would get if you put 3 months in cash? What would be the loss of ev if you didn't just put it all into the South African stock market? It is the best performing market.

*the 50% chance only applies to people who aren't whoever reads this, of course. I am quite certain that statistics apply to none of you.
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Old 03-16-2017, 11:32 AM   #70
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Re: Retirement

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Originally Posted by BrianTheMick2 View Post
Here is most of the "other" stats from above: http://www.usfinancialcapability.org...l_Findings.pdf
Ignoring your nonsense arguments, let's take a really quick look at this.

"I have too much debt right now" -> 40%
"Carried a credit card balance in the past year" -> 36%
"2 or more types of debt 52%" (So at least one non-home equity debt)" -> 52%

The vast majority of these people shouldn't have an emergency fund. They're carrying high interest debt that should be paid off as quickly as possible. And if the unexpected happens to them down the road, they can likely get credit at (or close to) the same interest rates they're already paying.

"Spend less than income" -> 40%
"Find it not at all difficult covering expenses and paying bills" -> 48%
"Receive money from family members who do not live in your household" -> 19%
"Home ownership" -> 60%
"Other federal or state benefits (e.g., unemployment, disability, SSI, TANF)" -> 16%
"Have taken a hardship withdrawal from their retirement account" -> 10%

These stats all seem to lead me to believe that your "many many more" comment was wrong.
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Old 03-16-2017, 11:49 AM   #71
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Re: Retirement

Can't we all just agree that everybody needs some sort of plan - be it an emergency fund, or insurance, or a rich uncle - if their income is cut off or they suffer some sort of major financial setback?
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Old 03-16-2017, 01:35 PM   #72
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Re: Retirement

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Originally Posted by BrianTheMick2 View Post
Here is most of the "other" stats from above: http://www.usfinancialcapability.org...l_Findings.pdf

I wasn't "screwed" by the insurance company. The policy stated what was covered and what wasn't. I wasn't disabled (per the insurance contract), I was sick and in the hospital (per normal definitions).

The reason to have cash on hand is for the unexpected, such as the 50% chance that your marriage will end,* or that you will need a sudden root canal. It sucks when the unexpected event happens at the same time your investments are down and you have to sell something to meet the needs of the unexpected event.

The amounts (number of months or amount of cash) are just rules of thumb. Please note that no one here has calculated the ev of having a certain percentage of assets in any asset class. Have you calculated the loss of ev one would get if you put 3 months in cash? What would be the loss of ev if you didn't just put it all into the South African stock market? It is the best performing market.

*the 50% chance only applies to people who aren't whoever reads this, of course. I am quite certain that statistics apply to none of you.
Assume a 5% ROI for n number of years and do the math. Its pretty simple and the make some assumptions about expenses/savings rate. For most people who need to work most of their lives it'll be a big chunk.

What you're doing is guessing. What other people are doing is taking a model and then using that decision to help make informed decision making.

I'm not sure if you honestly believe this foolishness or are just trolling.

Also, the idea that a divorce would be "unexpected" is hilarious. That is like calling home renovations "unexpected".
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Old 03-16-2017, 02:08 PM   #73
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Re: Retirement

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What other people are doing is taking a model and then using that decision to help make informed decision making.
Where? I saw no maths in this thread. Perhaps you can direct me to the posts that mentioned even one math.
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Old 03-16-2017, 02:13 PM   #74
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Re: Retirement

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Ignoring your nonsense arguments, let's take a really quick look at this.

"I have too much debt right now" -> 40%
"Carried a credit card balance in the past year" -> 36%
"2 or more types of debt 52%" (So at least one non-home equity debt)" -> 52%

The vast majority of these people shouldn't have an emergency fund. They're carrying high interest debt that should be paid off as quickly as possible. And if the unexpected happens to them down the road, they can likely get credit at (or close to) the same interest rates they're already paying.
These are the exact ones who absolutely need an emergency fund far more than you or me. Defaulting on debt (and the subsequent rate increases) because of some unforeseen expense or loss of income is devastating for them.
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Old 04-01-2017, 01:47 AM   #75
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Re: Retirement

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eh, in nazi germany many jews were able to bribe people to get out with gold/diamonds.

Its not for a mad max scenario, but for a war time type scenario.

for the record I own no physical gold but being jewish can understand it based on history
This is a very good reason to own a SMALL amount of physical gold/silver/diamonds/etc.

I would add another reason to own these items...there is no counter party risk to this. You own AND have possession of the gold/silver it is yours. You can easily take it with you, and you are not depending on somebody else to come through. You still have some amount of risk even with cash. I've got some Austro-Hungarian gold "ducats". When they were issued, they were money in the Austro-Hungarian empire...after WWI, no that government went busto. Their paper currency is not worth anything...their gold ducats are still worth serious money because of their gold content! I don't think that will happen in the USA...but is it a 1% chance that it could? What about the next 4 years?, what about the next 8? Probably not, but who knows? Gold & silver bypass that problem...

If you've got an ATM card, or $ in the bank, you are depending on them to be open, to be there on the other side of the transaction, and to honor that transaction. 99.8% of the time there is no problem...but every once in a blue moon, there is a problem. I've experienced it myself. It sucks when the bank says you don't have that money (bad check, clerical error, IRS hold, bank error, etc.)

Also, think about this...I think it would be EXTREMELY foolish NOT to have a small percentage of your net worth in tangible assets. I'm talking a single digit percentage, 2% or 3%. If you are worth $250k, why not have $5k in gold/silver? That gives you an insurance policy against SHTF, and counter party risk.

Also, let us say that you have 98% of your net worth in stocks, bonds, etc. Is having that extra 2% going to be that big a difference in your investing results?

What is the risk/reward ratio?

Finally, I am going to guess that I'm older than most of the posters in this thread. When you are thinking investing/retirement, you need to be thinking of years & DECADES. Most of the time, everything works out as reasonably expected...but I've personally been through the S&L crisis, the internet bubble, the real estate crash, the market crash of 08, (and many other crazy situations) and hopefully will make it through a lot of other stuff. It was coming through this stuff that really made me think to have physical/alternate assets.

Good luck to everyone!
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