I turned 70 recently and maybe this is the real reason for this post but I don't believe it is. Aging is one of the facts of life that never changes, it merely is a question that arrives at various times for different individuals and probably it is part of the reason for this post. But fundamentally the question is whether the economic/financial life I have lived will have much relevance for my adult children and my grandchildren. In addition, it relates to an on going decision I have to make each year affecting what to do with significant annual TPA distributions.
Each time there is a financial crisis or bubble, the question arises "is it truly different this time?" It is a timeless question that most likely has dogged humans for eons and in some cases obviously the answer has been that indeed it did turn out that it was different at times. But this takes a long-term view of human history and that is not what I am concerned about. What I am concerned about is the economic/financial future for investors; for my family and for myself and my wife. I suspect I have lots of company in/with this concern.
My children, both professionals as you might expect, have grown up in a financially secure world, one in which my modest income, my university's retirement plan with T-C, and with the performance of my investments, has provided this financial security. As a result, they have tended to minimize risk - a characteristic of the young in most cases. I see this in their investment decisions, a tendency to invest 100% in equity. Though I have suggested this is not the prudent thing to do, they continue to do it. Now with recent and current economic and financial conditions I have to ask myself, how hard should I push on this; should I "insist" they invest more conservatively? Is the future truly different this time? I don't know but I think the answer to the second is a qualified "yes" and if that is the case, I should try to moderate my kids' aggressive investment tendency. Should I make the attempt?
On a truly personal level the question causes me to rethink what to do about the remaining annual distributions from my TPAs. Keep in mind that I have set aside a balanced portfolio of equity invested in DFA funds and Treasury bonds (mainly TIPS) that is our "inheritance account" which is destined for the children at the death of either myself or my wife. The TPA funds are part (about half) of our (my and my wife's) income "bucket" which will supplement our SS and a modest Federal pension. I had thought I would invest the future annual TPA distributions in a combination of equity and the REA but now I wonder - should I return the annual distributions to my RA and leave them grow there in comparative safety, including comparative safety from likely future inflation? For the Traditional did hedge inflation quite effectively in the 70s and 80s. Will it do it again?
Well, enough. Perhaps no one else has an interest in the question. I can't believe that but I can believe that no one really has the answer for as we know all too well, the future remains unknown.
Ray
