Now that we have decided to use CollegeSure CDs to save for our daughter's college the question is – how? The answer turns out to be non-trivial in that we need to figure out how many CDs of what duration at what cost to buy each year between now and when she finishes college. After some experimentation I came up with an approach that seems to provide a reasonable cost and purchase plan. Below I explain how the approach works and provide a calculator that creates a purchase plan using the approach. Please keep in mind however that I'm no financial expert, that the code hasn't been properly tested and that objects may be closer than they appear.
Stuff about personal finance
After looking at the various options available in 529 plans from stock mutual funds to bond mutual funds to age appropriate funds and so on the choice for us came down to TIPS mutual funds or CollegeSure CDs. We have decided to use CollegeSure CDs to save for our daughter's education. Yes, they have a horrible return and are quite possibly not FDIC insured (read the fine print) but of all the options this is the one that seems most reasonable.
Buying a house brings many joys, amongst them is insurance. This is an update to my last article on buying insurance and covers auto, home and umbrella insurance. I explain how I evaluated companies to buy insurance from and how I choose the limits for our insurance policies. In our case we bought everything from Amica. Our total cost savings by going with Amica over staying with Allstate was 17%.
I work hard to keep both junk mail and identity hijacking opportunities (you can't really steal someone's identity so I don't like the term identity theft) out of my mailbox. So you can imagine my surprise, especially after signing up at https://www.optoutprescreen.com/, that I got a credit card offer in the mail.
My first stop when I am in the mood for comparison shopping is Yahoo's shopping page. They have a huge selection of stores and a good rating system. But when I went today looking for ink cartridges I noticed something that renders Yahoo Shopping completely useless – it no longer appears to be possible to order search results by price. You can 'refine' your search by price and essentially implement your own bounds search but that is a huge waste of my time. They actually crippled their own site! I hate it when a good site goes stupid. I guess I'll have to us my backup sites.
I love owning a home. And even better, owning a home free and clear by the time we retire will make our retirement less expensive and more secure. But I personally don't see a home as an investment. It's not diversified and if we depend on the ability to cash in on it then we have to give up our freedom to choose where we live. So for now our goal is to own a home free and clear by the time we retire but not to rely on the equity in the home for living expenses during retirement.
Defined benefit assets are assets that pay out a fixed sum of money, typically until one dies. There are three traditional types of defined benefit assets – Social Security, Pensions and Fixed Annuities. Both Social Security and pensions are basically a form of insurance, the business model is that lots of people 'pay in' but most people die early enough to use their contributions to pay other people's benefits. Well, that was the theory, and it worked just fine until people did the really inconvenient thing and started living too long. In the case of annuities the business model is built more around offering lower than market returns. In either case Marina and I are assuming we will have no defined benefit assets available to us during retirement.
I'm good at obsessing. That's why it was so important for me to understand the limits of what I could know about the future. But in the same sense I also need to understand that the specific plans I make today for how to achieve our retirement will, inevitably change. Thankfully, change in the financial world doesn't come all that quickly.
As I stare at the hundreds of pages of notes, several programs (including a seemingly endless series of discarded macros and source code), numerous spreadsheets, piles of academic articles, endless websites, a shelf full of finance books and of course years of effort, I can't help but think this all would have been a lot simpler if I had just hired a financial planner.
As Bernstein explains in [SWN] just about everything I need to know in order to plan for retirement isn't just unknown, it's unknowable. Geometric average stock returns? Distribution pattern for bond returns? Correlations between stocks and bonds? Nobody knows and it looks like no one actually can know. My solution to this conundrum is relatively straightforward: I guess.