@ClementsMoney Hump Day Help – Take Stock of Your Bonds
Welcome to the Hump Day Help. Each Wednesday we take one of the weekly actions from Jonathan Clements‘ blog Humble Dollar and “militarize” it for you. Jonathan Clements was a longtime personal finance columnist for The Wall Street Journal, and he offers great advice at the best price you can get…free. Here is this week’s Hump Day Help:
TAKE STOCK OF YOUR BONDS. Our financial lives are chock-full of bond lookalikes, including savings accounts, our regular paycheck, Social Security and any defined benefit pension—all paying us regular income, either now or in the future. Set against these income streams is a big income drain: our debts. Result: Our finances may be riskier or more conservative than our bond position alone suggests.
One of the keystones of the financial independence, retire early (FIRE) message of Military Millions is the value of our military pension. For example, if you look at that post you’ll see that my 21 year O6 pension is worth just under $1.6 million. A 20 year E7 pension is worth just under $700K. You can look and see what your pension is worth.
When you look at your retirement savings as a whole, including the value of that inflation adjusted and government guaranteed pension as a “bond lookalike” in your overall asset allocation will allow you to take more risk. You can allocate more of your investments to riskier assets like stocks or real estate than someone without a pension.
In a previous post, Mr. Clements responded to me and explained how he’d handle the value of a military pension when planning for retirement. Give it a read if you haven’t already.