A reader sent me a link to a tool published by ING. Ingyournumber.com asks for six simple inputs and spits out, with clever animation, your “number,” that is, the dollar amount you will need at the start of retirement.
The six inputs are your current age, martial status, current income, planned age of retirement, desired annual retirement income, and through what age you want to have income. (In other words, how long you expect to live.)
I can immediately see why they need the last three, but the first three are mysterious. My Money Blog wrote about this tool in September and attempted to reverse-engineer the inputs. His theory on the current age input is that it is used to work out how many years you have until retirement, which is then used to adjust your retirement income needs for inflation. Apparently, all inputs are assumed to be in 2010 dollars.
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How much would you pay to lend money to the government? Most of us have this arrogant idea that the government should pay us to borrow our money. And yet, last week a Treasury auction of $10 billion in 5-year bonds resulted in a price that will yield negative 0.55% to their new owners.
It is not quite as crazy as it sounds. These are Treasury Inflation Protected Securities (or TIPS) that will yield inflation plus some stated interest rate. So these bonds are set to return to their owners inflation minus 0.55% over five years. Given that normal unprotected five year bonds are currently paying only 1.18%, this implies a five year average inflation rate of 1.73%.
Annual inflation over the past five years has averaged 1.83% and over the past twenty five it has been 2.82%. If you think inflation over the next five years will be higher than 1.73%, then the TIPS, negative interest and all, are a better bet than the regular Treasurys.
So it is not crazy after all.
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As election day approaches, I thought this would a good time to discuss a bloated federal program that wastes taxpayer dollars, annoys the citizenry, and uses up our precious natural resources. I am talking about the minting of coins.
I was reminded of this continuing national tragedy by a post at The Consumerist about a brave grass-roots effort to address this issue. Apparently, there is Dunkin Donuts shop somewhere (for obvious reasons of safety its location was not disclosed) that now rounds all purchases to the nearest nickel. If a customer for some reason actually wants the pennies (the mind boggles) the shop will provide them.
I think this is an excellent first step and one that I hope more courageous shop managers will employ. I am sure this must be a violation of federal law (why else has it taken so long?) but if all stores do it the feds will be overwhelmed. I think the Secret Service must be in charge of enforcing the penny laws.
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[Today’s Thursday re-run first ran October 5, 2009.]
Sometimes topics crop up in the PF blogosphere, seemingly out of nowhere, and rattle around from blog to blog for a while. Dollar cost averaging is a recent example. The Digerati Life brought it up on September 23, Lazy Man and Money responded the next day, and The Sun’s Financial Diary shared its 
thoughts on the 28th. There are probably several other mentions out there I missed.
Before I add my voice to the echo chamber, I’ll define the term. Dollar cost averaging refers to buying an investment, usually a stock or stock fund, over time in installments of equal dollar value.
It is often confused with the laudable and similar idea of regularly saving. Setting aside a certain amount of your pay every week or month may look like dollar cost averaging, but it’s not exactly the same thing. Implicit in the question "is dollar cost averaging a good idea" is the premise that there is an alternative, that you could have invested it all at once rather than slowly as you earned it.
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Am I in danger of becoming obsessed with plastic cards? It’s possible. But there is one type of card I have somehow managed to avoid discussing in 21 months of blogging.
That type is gift cards, the anonymous chits that are as good as money in one particular store. In their current form they are a relatively recent innovation. When I was your age (20+ years ago) stores sometimes sold paper gift certificates for specified amounts, but they were a one-use item. If you bought a $50 sweater with a $100 gift certificate you generally got $50 in actual cash as change.
It wasn’t until we entered the digital age that modern gift cards, each a miniature debit account, were born. Spend $50 with a $100 gift card and your “change” is the same old card, only now it is worth just $50.
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The six inputs are your current age, martial status, current income, planned age of retirement, desired annual retirement income, and through what age you want to have income. (In other words, how long you expect to live.)
Investing, Media, PF Blogs | Frank Curmudgeon | 
November 3, 2010 11:59 am | 
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