AAII Journal May 2017 Issue Now Available


Feature Article:

thumbnail AAII Cover ArticleWhen You Haven’t Saved Enough for Retirement

Saving more, working longer, delaying the claiming of Social Security benefits and tapping home equity can all help fund retirement.
by Charles Rotblut, CFA

In This Issue:

Stock Strategies »
What Is Your Investing Edge?

Many investors focus on trying to gain an information edge, but the bigger advantage comes from taking a longer-term view. by John Huber

Stock Strategies »
A Dividend Approach to Judging the Value of Stocks

A stock’s valuation can be judged by comparing its current dividend yield to the historical range and analyzing the payout ratios. by John Bajkowski and Jaclyn N. McClellan

Stock Strategies »
The Advantages of Quantitative Approaches to Stock Selection

Quantitative strategies allow thousands of stocks to be ranked by specific characteristics, such as value or momentum. by Charles Rotblut, CFA and Sudhir Nanda

Portfolio Strategies »
The Trinity Portfolio: Combining Diversification, Tilts and Trend-Following

A strategy for combining global exposure, value and momentum, and both buy-and-hold and trend-following into a single portfolio. by Mebane Faber

Retired Investor »
Common Questions About Medicaid and Medicaid Planning

Estate planning and gifting strategies can be used to preserve assets, while still allowing a person to maintain eligibility for Medicaid. by John Horn and Dera Johnsen-Tracy

AAII Model Portfolios »
Model Fund Portfolio: Don’t Fear Real Estate or the Stock Market

Real estate can have its own short-term cycles, making it a good diversifier. Plus, it can be riskier to stay out of the stock market than to stay in it. by James B. Cloonan


Briefly Noted

Current news items of interest to individual investors.


Members speak out about retirement strategies, closed-end bond funds and factor-based investing.

AAII Journal Editor photoEditor’s Note

As the financial industry continues to focus on the fate of the Labor Department’s fiduciary rule and Congress has already voted to block state-sponsored IRA plans, America is facing a potential retirement crisis. For those who haven’t saved enough, the back-and-forth arguments over regulation and government-sponsored savings initiatives aren’t nearly as consequential as the prospect of not being financially able to retire. For an individual or a couple, either there is enough in savings and income to live on or there isn’t.

The 2017 Retirement Confidence Survey puts numbers behind the problem. In response to a question about how much they currently have in savings and investments, 38% of responding workers said they have less than $10,000. If the proportion of people with little to no savings seems high, consider an Associated Press-NORC Center for Public Affairs Research poll conducted last year. In this survey, 38% of households earning more than $100,000 admitted to having at least some problems coming up with $1,000 to cover an emergency.

There are various reasons why we see surveys uncover these financial issues. Medical bills, housing costs, college expenses and slow wage growth all have taken their toll on the ability of many to save. Social pressure (be it real or perceived) to do certain things—such as putting Johnny or Suzie on travel sports teams—don’t help. Add in behavioral errors, improper investment decisions and, in some cases, undisciplined spending, and the problem worsens.

There are bigger, macro issues at play as well. Globalization, automation and low rates of wage growth have not helped. Comprehensive reform of both taxes and health care is needed, yet both are bogged down by Washington politics.

I do think there are smaller things that can be done: Make it easier for those not covered by a defined-contribution plan, such as a 401(k), to save for retirement. Raise the contribution limit on individual retirement accounts (IRAs). Move forward on instituting the fiduciary rule to prevent individual investors from being fleeced by high commission salespeople parading as advisers. (The argument being floated about how the rule will keep small investors from getting good advice is hogwash, to put things politely.) Educate people more about the advantages of postponing when Social Security benefits are claimed. Even getting more of the public to understand basic concepts of financial literacy would be a positive step.

As a nonprofit focused on education, some of these things are beyond our scope. For instance, we are not allowed to lobby Congress. Others, however, are within our scope. For instance, we’ve published several articles over the years about Social Security claiming strategies. (See “Social Security Basics” in the October 2013 AAII Journal, for instance.) It’s also within our scope to suggest strategies for those of you haven’t saved enough for retirement. You will see them here.

I’ll give you a brief synopsis here: a retirement savings shortfall is a math problem that requires a concerted effort to save more. There is simply no way around this reality. The good news is that even at age 50 (which now, GASP!, includes some of us Generation Xers), there is still plenty of time to save. Consistently saving and investing $24,000 a year can create $1 million in savings. (I used an 8% rate of return in the article, but it’s also possible at a more modest 6% rate of return.) Even if you can’t save that much each year, whatever you can consistently save will have a large cumulative impact on your wealth.

One thing I’ve found incredibly useful is automatic deposit. Between the time I’m paid and I see my updated bank account balance, a portion of my paycheck has been diverted to my 403(b) plan, my wife’s IRA, my Roth IRA and my savings account. Given the very small amount of time it took to set them up and the very big impact on future wealth, I consider setting up automatic deposits to be among the smartest financial moves I’ve ever made.

Wishing you prosperity,


Charles Rotblut, CFA
Editor, AAII Journal



Leave a Reply

Your email address will not be published. Required fields are marked *