To Boldly Go

| October 15, 2021

Did you know that 2021 began with 50% of US senators and 32% of US representatives being 65 years old or more? Chuck Grassley and Diane Feinstein had reached 87, while 21 senators were between 70 and 80 years old. Recently, William Shatner has boldly gone where no 90-year-old Canadian actor has ever gone before. Clint Eastwood continues to produce quality films at the age of 91.

We are not living in the age of our grandparents, which provides us with wonderful opportunities and serious challenges. Because most of us are not career politicians who will collect lifetime pensions (and have other more lucrative opportunities) or famous movie stars with almost limitless funds, we need to consider how to adjust our plans for the probability of long and healthy lives.

When I began my career in finance, we assumed that people needed to plan for 30 years after retirement. At that time, AAA/AAA bonds paid about 10% and similar quality tax-free bonds paid 7% or more. Blue-chip stocks had low price-to-earnings (P/E) multiples and often had yields similar to that of taxable bonds. Those days are long gone. Today we have interest rates that are lower than inflation, even as inflation is rising. Very high P/E multiples mean that future returns are less likely to be as high as past returns.

More than ever, we need to keep our plans and our goals up-to-date. Most importantly, we need to remember that there are things that we cannot control, things that we can control, and many important aspects of our lives that we can influence. I shall explore them more in the next few posts