Following the AAII Way

Comments on “A Process for Creating Your Own Investing Plan,” by Charles Rotblut, CFA, in the June 2020 AAII Journal:

I agree with the philosophy. After looking at various methods, I think I like the Level 3 philosophy best—not necessarily the allocations suggested, but the general “bucket” type philosophy. Keep three to five years of spending in safe investments, and the rest should generally be in the market.
—Dan L. Smith from Virginia

The Level 3 approach is what I like and use. Of course, the safe investments are defined and are working. The portion that is invested in the market is what I hope The AAII Way will help define with respect to my investing timeline and tolerance for risk.
—Stephen Bowles from Missouri

Same As It Ever Was

Comment on “Take Time Now to Reassess Your Risk Tolerance,” by Charles Rotblut, CFA, in the April 2020 AAII Journal:

Editor Rotblut’s column caused me to reflect on the most important lesson I have learned over 50 years of personal investing. I’ve lived long enough to have survived the 22% “quickie” crash of October 22, 1987, the dot-com meltdown of 2000–2002, the financial crisis of 2007–2008 and now the 2020 pandemic crash.

In the first three events I felt that each was a once-in-a-lifetime event. But over time, I concluded that these events were rather an inherent component of the long-term growth dynamics of equity investment (crash followed by recovery, followed by crash, followed by recovery).

Fortunately, I always stayed the course and remained fully invested. That tolerance ultimately enabled me to participate in the greatest bull market in history (2009–2019). My belief is that the current pandemic crash will also not turn out to be a once-in-a-lifetime event, but the survivors who stay the course will eventually participate in the recovery.
—Gerald Farmer from Florida

Robo-Investing Downside

Comment on “Coronavirus Returns for Robo-Advisers Expose Differences,” by Ken Schapiro, in the June 2020 AAII Journal:

I used robo-investing for several years but later went back to self-managed investing. I couldn’t handle the frequent trading, whether it was for rebalancing or tax-loss harvesting. I’m a long-term investor. Any gain (and hopefully there was some) was taxed as short-term gain.

Most advice columns advise us not to panic but to hold tight and ride out this recession. Tax-loss harvesting sells the farm. I like to understand why trades are made. Once your risk tolerance is determined and portfolio established, trading and understanding is out of your hands.
—Robert P. from Illinois

A Practical Approach to Saving

Comment on “The Relationship Between Wealth and Delaying Social Security Benefits,” by William Reichenstein, CFA, in the June 2020 AAII Journal:

I’ve been in finance since 1968, and I find that these recommendations are a bit impractical. Folks living on $30,000 to $60,000 a year should not be deferring that income if it means that they are compromising a better lifestyle―especially when you’re young enough to enjoy it. It’s reasonable to assume your quality of life diminishes with age. Each year that passes, especially the later years, your chances of dying go up proportionately.

I think a more reasonable calculation is what to do with the money you received that you don’t need in those first four years and how much that will compound for your later years.
—William F. from Connecticut

Long-Term Care Insurance Not for Everyone

Comments on “The Benefits and Costs of Long-Term Care Insurance,” by Terry Savage, in the June 2020 AAII Journal:

I found long-term care (LTC) insurance to be a poor buy. The elimination period was excessive (90 days), the benefit was limited and the cost went up every year.

I used the experience of my parents and their siblings to analyze the likelihood that LTC insurance would pay off. There was only one case in nine where the person would have survived through the elimination period.

I finally decided I was playing poker against an adversary who had unlimited funds and would keep upping the ante until I couldn’t continue to play. Your mileage may vary, but I chose to invest the premiums that I would have paid to the insurance company.
—Nick from Virginia

Anyone who has researched LTC insurance knows that there are three household groups: 1) those with limited net worth (below $250,000) that constitute 50%+ of the U.S, which cannot afford LTC and should anticipate going on Medicaid for extended LTC; 2) those with net worth of $500,000 to $1.5 million, which are the perfect target for LTC insurance; and 3) those with $2 million+ in net worth, which should consider self-insuring. I am 65 years old and made the decision to self-insure about five years ago (after doing the research).
—Fred W. from California