Blessed by the Potato

I just identified a major flaw with my job search strategy: I’m taking waaaay too long on my cover letters. I’ve been doing a big round-up of job postings towards the beginning of the month, then spending a few days each on my top few postings to get a submission in, only sometimes to find the competition closed before I could submit! “Drat,” said I, “what terrible luck.” Well, no, now I see that there were a bunch of postings that were only open for a few days by design, so I’ve got to retool my strategy to one of constant searching, constant applying, and to not fret so much about perfecting my cover letters.

Oh, and if you’re in the Toronto area and hiring, hey, here I am. I’m awesome at lots of stuff, not just science.

Anyway, it’s been a pretty slow couple of weeks. I’ve had a nasty cold that I just can’t seem to get over, going on almost two weeks now. The upside is that with the lack of appetite I’ve lost about 5 lbs — I just hope that wasn’t all muscle mass from lazing around.

Looks like chewing gum may help with concentration. I do like to eat snacks or chew gum while studying/writing… I should really focus more on the sugar-free gum for that.

A bunch of warnings from the Bank of Canada this week.

Even the banks are calling for mortgages to be further tightened, not that they actually expect the government to do anything. “I think the government will pause here and not do any tweaks, because they’re hoping that the housing market is slowing down on its own but not collapsing and they don’t want to push it over and make it go down rapidly,” Mr. Clark said.

Not a very in-depth report, but one of the first I’ve seen on Toronto news that was so bearish. In fact, I think the first I’ve ever seen on Toronto news where they didn’t cut from the latest bearish housing report to spend 5 minutes with a pumper. This is a naturally slow period for the housing market anyway, must be a good time to get out all the bad news.

There was some speculation around the net-o-sphere that this year would see the TFSA limit bumped with inflation; the CRA has just announced that it will remain at $5000 for 2012.

I’ve seen people get mad at really bizarre things, but here’s a weird one: an investor that didn’t buy a stock until 2009 is upset about the long-term returns, even though their returns from 2009-now have been fantastic. Also, a rather poor article for comparing returns without taking into account distributions. Consumer’s/enercare would have still under-performed the TSX, but it was at least a positive return including distributions.

Amazon makes a dick move against bricks-and-mortar stores by encouraging customers to go in, scan an item with their smartphone, then buy from Amazon (with a coupon). [HT: John Scalzi, worth reading his take too] I know that comparison shopping has long been the norm, and that many people will check out an item in a bricks & mortar store only to go home and order it online if the price is better. And I’m certainly not one to disparage being price-sensitive — it’s nice to support your local businesses, but you’ve gotta eat too [though for books in particular, I get a lot from the library]. So it was perhaps inevitable that comparison-shopping would evolve from trying to store things in memory or take notes to taking cell phone pictures and even shopping with your phone on one site while being in another business’ store. By creating a barcode reader sales app, Amazon was being three parts ingenious, business-savvy, and ahead of the curve, and just one small pinch of a dick. But then going out and encouraging people to do exactly that, with coupons? That’s evil genius territory.

Michael James looks at the volatility drag effect of owning a small subset of stocks (i.e.: a dividend portfolio) vs the whole index. Check out the comments section for a good (but long) discussion of sampling and where that volatility drag comes from. I was particularly interested in this one as I was starting to draft a post about whether you could sample the index and “make your own ETF” with even lower fees at a discount brokerage. I might still publish it, though now of course I’ll have to point out that it’s wrong…

Also check out some articles on a new fund facts disclosure for mutual funds. The big question is, how do we get everyday investors to appreciate the importance of fees? Percentages don’t seem to be doing it, and as Jonathan Chevreau pointed out in his article, converting a percentage to a cost per $1000 isn’t helping much. Michael James suggests another method with percentages, and in the comments there, I suggest using dollars, but not as “per $1000”, but per some kind of large-dollar-value standard portfolio over some reasonable life-time: e.g., “this fund will cost you $90,000 more over a standard investment period than a lower-cost equivalent.”

Happy last-minute shopping, everyone! (PS: for the person on your list who’s not much of an investor, did you know I have a book? ;)

I’ve taken a few days off here with a nasty sore throat that seems to just start to get better, only to remiss as soon as I spend a day back at work. I think I’m finally over it, but maybe I’ll say that only to be bedridden again tomorrow :( Anyway, this has given me an opportunity to so some reading, so here are a few short book reviews for you:

The Alloy of Law, Brandon Sanderson.

This is a follow-up book to his Mistborn series, and I have to say that I loved the Mistborn Trilogy. Uncharacteristically for Brandon Sanderson, the Alloy of Law is actually fairly short, which I think was good because it was just as hard to put down as his other ones, and I needed my sleep. The original Mistborn trilogy took place in a quasi-medieval setting with a particular brand of magic (allomancy) included. That world was facing some cataclysmic events, which naturally, were resolved by the end of the trilogy. The Allow of Law now brings us a few hundred years into the future of that world, now populated with guns and railroads. Part detective novel, part western, and part action-packed fantasy thriller, I was well-pleased. It’s a totally different tone, with a totally different set of characters, yet it all fit nicely into the Mistborn universe. I think he could build a lucrative career just writing allomancy books, but of course Brandon Sanderson is too damned prolific to be tied down like that. Ah, well. I await the next entry!

The God Engines, John Scalzi

This one is even shorter, I think qualifying as a novella. Part sci-fi, part fantasy, this story tells the tale of warring gods, who are made stronger by the faith their followers have. So far, the storyline of Populous. Anyway, instead of trying to flatten all the things to help organically grow their followers, these gods have wars to convert or exterminate those of their enemies. When we enter the story, one god in particular seems to have largely taken over the known universe, and has enslaved the lesser gods to use their god-like powers to run the ships (hence the title). It’s a neat take on the technobabble behind FTL travel, using tangible yet still metaphysical gods to bend space-time to their will while chained in the bowels of a ship. Anyway, I don’t want to say much more than that because it’s already such a short book it’s hard not to release spoilers. I will say that the characters are well-fleshed out, and it’s another solid piece of Scalzi writing. Though I did include a link above to Amazon with my affiliate code, I think $20 is a bit steep for a novella; you may be better-served by the $5 Kindle version.

Hull Zero Three, Greg Bear

I find myself torn on this one: on the one hand, I did not enjoy the book, on the other, of the three it was the one I spent the most time thinking about the themes and meaning. Before I get to that and have to get to spoilers though, I’ll just say that though I liked the concepts Greg Bear was writing about, I did not care for how the story played out. For a short book, it took way too long to get going, which was compounded by the fact that most of the first third of the book might be considered non-stop action scenes. There was zero character building until about the half-way point, which I think is why all the action-y stuff at the beginning fell so flat. The main character comes out of some kind of pod in a freezing cold space ship, not sure if he’s been in suspended animation or what has happened. He’s badly lacking in memory and ability to think clearly, which leads to a really broken first-person narrative. I find that kind of amnesiac story annoying at the best of times, and this one is not well-executed. From there, mysterious monsters chase him through the ship, which is in obvious peril. Sounds like Pandorum, the book. Now, on to the meat, right after a:

Spoiler warning!

The big concept here is a “generation ship” launched from a dying earth to the unknown void to carry on for humanity. The reason I threw generation ship in scare quotes there is because the ship is not your typical generation ship: though it’s moving at barely relativistic speeds on a journey that will take centuries, it is not carrying an awake human crew that will reproduce on the journey, nor is it carrying colonists frozen in suspended-animation. Instead — and this is where the concept gets cool — it’s carrying some really powerful genetic engineering technology combined with in-vitro memory implantation, so that it can grow colonists to spec, and have them emerge as fully-developed adults complete with skills and implanted memories. Then the concept gets even better because the ship’s designers tried to account for all possibilities, including in the genetic library the ability to not only make humans as we know them, but to modify them to suit other environments, and to create lesser organisms to build up a biosphere if the planet they find is lifeless. And more: a whole library of killer creatures, designed to wipe out any indigenous life if the distant target colony is inhabited. There are all kinds of ethical questions to mine in those scenarios: do you try to make peace and co-exist if you’re approaching a system with intelligent indigenous life, or do you strike first to ensure that you complete your mission to preserve Earth-based life?

Rather than directly explore these questions and possibilities, the story instead spends the vast majority of its time mucking about on a broken space ship — far too much time on the issues of dealing with the cold and changing gravity as the cylinders spin up and down. Far too much time snapping out of the amnesic brain fog of being born/thawed out. Far too much time running away from barely-glimpsed impossible monsters. Yes, we learn at the end (I warned you there would be spoilers) that the whole point was that the ship went to war with itself after selecting a destination with indigenous life: the bioreactors started getting programmed for eliminators (hence all the monsters that have been spawned on board), but a small faction was having an ethical dilemma and tried to create something closer to a set of stock humans to take over and change course. But then recreating those same few individuals hundreds of times over, only to have them die in confusion… I just didn’t like it, and I don’t think much came of that. It didn’t even really seem to shake the main character when he found the freezer full of hundreds of copies of himself.

One interesting throw-away twist was the question of what if the indigenous life was other humans? That’s another theme sometimes explored in sci-fi with generation or sleeper ships moving out under conventional drive: after centuries in space, they arrive at their colony only to find that Earth managed to recover from its near-catastrophe, develop faster-than-light travel, and beat them to it. So what if your ship is busy breeding the best killers genetic engineering can imagine, and is setting up for an unannounced first strike on your own great great grand-nephews, who leap-frogged past you after developing warp drive?

Anyway, I didn’t think it worked very well as an amnesiac-finding-himself story, nor as a romp-in-the-monster-ridden-ship-with-variable-gravity-and-heat story, and the cool concept/big idea part just got relegated to a few pages at the end. A story I might like to see is with basically this ship (or I guess more properly, the gene library and bioreactor) that Greg Bear has come up with, but from the point of view of the indigenous population, or the crew when it’s not hundreds of years into a feud that no one remembers. How would the little ship-board war have played out if a conclusion was reached within a single generation, while people still knew what they were fighting over and had their brains and weren’t taking time to marvel at words like umbrella as their memory defrosted? What would it be like if such a ship appeared in our skies?

Maybe they’d realize they could hang out in lunar orbit, and it would take us a few years to build any kind of rocket to hurt them. Then the crunch is on to explore those ethical issues: can a peace be brokered between such different species? Can they trust us, can we trust them? Do we share the Earth, or let them have Mars? What is the interaction of their own hawks and doves? What if they realize their ship isn’t big enough to totally take on a planet the size of Earth?

I recently was pointed to Canadian Doomer’s site, where I saw this comment:

“Ontario Hydro is paying $0.80/kwh to those who sell them electricity on the MicroFIT program. But consumers are paying $0.05 to $0.10/kwh. This makes absolutely no sense, unless Ontario Hydro knows that they will soon be charging consumers MORE than $0.80/kwh. Look at your hydro bill and imagine it multiplied by 8.”

Well, no, it’s the price they have to pay to get solar off the ground. Very few people wanted to pay ~8x the price of grid power to buy their own solar panels, so the companies weren’t making panels, so the panels were expensive, etc… By offering enough money that PV would be profitable, it bootstrapped the industry, and broke the vicious cycle. The industry has already brought the price down by huge amounts (panels now cost half or a third of the price in just 3 years), and the government is going to cut microFIT any day now (they’ve already started dragging their feet with applications).

That lead CD to ask the follow-up question:

“Why does Ontario Hydro care so much about getting solar off the ground when they’re not making money on it?”

The short answer is that it’s because it’s the right thing to do.

The longer answer is to first up realize that Ontario Hydro is not an independent company: this isn’t Capital Power or Emera or Fortis offering money to install panels, it’s the government. And sometimes the government subsidizes things for social rather than strictly economic reasons.

Consider other breaks offered recently for green technologies:

The federal government was offering up to $2000 to buy a hybrid car, until just a year or two later, they changed their minds and took that incentive away. Many provincial governments (including Ontario) also offered rebates of several thousand dollars ($2k in Ontario) for hybrid cars (and similarly, no PST on bicycles). Those rebates by our government as well as others around the world — notably the US, which had various tax credits as well as other incentives to buy hybrids like free parking and HOV lane passes — were very helpful in getting this fuel-efficient technology off the ground. Hybrids are now reasonably mainstream, something like 4% of the overall passenger car market, and still growing quickly. However back 10 years ago, a hybrid was a very difficult sell: they were more expensive than a traditional car, there was a lot of uncertainty over how reliable they would end up being (a sentiment that still persists, even with over a decade of experience), how much they would cost to maintain… and all that was on the back of gas prices that were still measured in cents per litre. So those subsidies helped level the playing field until the cost of the cars and the price of gas brought us to where we are today, where $1.20/L looks cheap, and it seems stupid to buy anything other than a Prius. And while I tend to focus on how awesomely quiet my car is and the gas savings, the fact is that the gas savings is in part a side-effect of the hybrid’s original goal, which was to reduce pollution — an important social goal in an urban country.

So back to the solar subsidy: by guaranteeing a certain return on the panels, people became interested in purchasing them. The government could stand up and say that, for at least the next few years, there would be a certain level of demand for panels, which allowed panel manufacturers to go to their investors and raise money to build factories and invest in R&D to make more efficient and cheaper panel technologies, and basically got the whole ball rolling. Ontario and Germany really lead that area*, and factories really started churning out panels to meet the new demand, and to build capacity in the hopes that a certain superpower with a lot of desert would also decide to start subsidizing solar energy in the future (let’s call it “Nerizonda”). In just a few years we’ve gone from a world where you had to be an eco-nerd and know someone at NASA just to get a panel, to one where salesmen call up on a weekly basis to let you know how much the panels are on sale this week. Indeed, the build-up has been so rapid that now we’re facing a glut (exacerbated by Germany and other nations scaling back their subsidies for new projects now that they can declare victory), and panels can in some cases be had for below cost.

Now, the solar subsidy could have come in many forms: the government could have directly purchased the panels themselves, and installed them in parks or on government buildings, or even installed government-owned panels on private homes. They could have subsidized the purchase price directly. Instead, they chose this strange scheme that involved all the overhead of metering the panels, and making regular payments (or deducting from the power bill) for 20 years running. And that decision comes down to politics: the budget looks cleaner with a long-standing trickle of money for a program than it does with a big buy over just a few years, even if the total cost is the same. Furthermore, to give Dalton a little bit of credit for being political operators, there was going to be a big delay between starting the MicroFIT program and when the bulk of the payments would start rolling out the door, and in-between was another election. So for the 2011 election, hardly any microFIT payments would have shown up on the budget, and by the ~2016 elections, the program will have ended; off the radar either way.

It’s also important to note that there were several levels to the FIT program: for large commercial solar farms, the rate was less than half what an individual could get under the MicroFIT program. So from a “this is how much OPG expects power to cost in the future” point of view, that might be the upper-end figure to use. Why pay more for smaller systems? Several good reasons:

• In part as an experiment. People have been talking about distributed generation for years, and the government wanted some data on what that would actually look like. Which meant that you had to find some way to get people to put some kind of generator in their homes, and test out how well the load-balancing and monitoring systems worked. So getting solar out there in particular was a bit of a bonus on that front.
• In part to raise awareness. You can give money to a big corporation like Samsung to build a giant solar farm in the middle of nowhere, and accomplish your goal of bootstrapping the industry. But if you can get it on people’s homes they’ll see it every day, they’ll talk about it with their neighbours, and it’s also nice to pay your own citizens rather than a faceless corporation. From a political point of view, that also helps make it an issue you can focus on in an election if you want to.
• In part for long-term efficiency synergies. A giant centralized solar farm is a great way to quickly get solar power on the grid if that’s your only goal. But one of the beautiful things about solar is that its nicely correlated with peak air conditioner demand: just as the sun is beating on your house is also when your panels are at their maximum output. That benefit could potentially go away if Toronto is getting sun while the solar farm on Lake Huron is experiencing clouds. Though you need more inverters and monitors, you don’t need any transmission capacity to be built or maintained, since the generation is right at the site of demand. And on top of all that, you get the synergies that come with rooftop solar: the panel itself helps to shade a house and keeps it cooler than a typical asphalt shingle, further reducing peak power demand.
• In part for short-term inefficiencies. The fastest, most efficient way to get X number of panels installed and tied into the power grid is to go with a giant centralized solar farm: make braces and connect panels in assembly-line fashion in a consistent, controlled environment. You can even bulldoze any hills if you can’t find a naturally flat spot. But when you’re introducing a program in the middle of a recession, maybe you don’t necessarily want to be as efficient as possible, maybe you also want a little bit of economic stimulus for good measure: help create jobs for guys to crawl around roofs and take measurements and figure out where the bolts should go.

As for that central question of why? Well, because it’s a green, emission-free, renewable energy source. It has some side-benefits (correlated with air conditioner demand, cooling synergies), but also some negatives (inconsistent, extremely difficult to plan power loads with, expensive even after the cost reductions from recent investments). It has a good image, and getting to some single-digit percent of our power mix being wind and solar is something we can do a little chest-thumping over (never underestimate the importance of chest-thumping, it’s a trillion-dollar industry). Plus, innovations that are created for stationary solar may translate to other applications (space systems, remote self-sustainability).

* – I’m going from memory here folks, apologies if I forgot any other pioneers.

One of the great things about TD e-series index funds are their simplicity: with just four low-cost funds you can build a complete, diversified, passive portfolio. There are no sector or specialty funds to distract you, like there are in the ETF space.

That can also be seen as a downside though if you do want to get that exposure. Jeffery writes:

I’m interested in purchasing an index fund focused on the Emerging Markets. However TD Eseries does not offer anything targeted towards the Emerging Markets. After looking around, I found that the CIB519 mutual fund seems to be the best in terms of ratings from Morning Star and it seems to have been around for some time. The MER for this though is quite high, 1.36%.

First of all, I don’t really think it’s totally necessary to chase certain sectors if you’re going for a passive investing strategy. The whole point is to try to not make any unforced errors, as they say, or to try not to let your own (amateur) analysis interfere with a solid middle-of-the-road strategy. It’s also not really necessary in my opinion because you’ll still have some exposure to various sectors through the larger indexes: there’s lots of energy exposure in the Canadian index, and multinationals in all equity indexes will to some extent share in the upside from maturing developing economies. You’ll likely want to keep any “flavour” or “kicker” sector exposure small as well, and if it’s going to be a small part of your portfolio, will you really miss it that much if you just stick with the basics?

That said, what if you do still want to get more specific than the e-series lets you? Well, there are a few ways to go. One is what Jeffery has already found: use a higher-cost mutual fund to get the exposure, and just pay the MER.

If you’re not going to be making many transactions though, a better route would be to look at using an exchange traded fund (ETF) for that exposure, and that’s part of the beauty of using TD Waterhouse for your e-series account over TDMF. If you have $50,000 or more in assets at TD, it’ll be $10/trade, $29/trade otherwise. You don’t want to make frequent transactions for small amounts when you have to pay commissions for each trade, but if you’re just looking for a small bit of flair, that’s fine. You can pay the commission once, and not be too strict about your rebalancing — will it really matter if your emerging market or energy or whatever ETF goes from 4% to 6% of your portfolio (or 4% to 2%)?

The math on the expenses is pretty simple: you’ll have a commission for every transaction, plus the MER of the fund itself. So for example if Jeffery wanted to buy the iShares emerging markets ETF XEM and was investing $3000 in it, and paying $10 in commissions to buy, $10 to sell, and planned on holding for 5 years (without further rebalancing over that time), the overall expense would be: $20/3000 = 66.7 bp/5 years = 13.3 bp per year for transactions, plus the 79 bp of the fund itself, for a total expense of 92.3 bp (or 0.923% if you prefer). That’s a better option than the mutual fund he found, but not by a whole lot — some of these specialty funds are expensive even as ETFs. If he planned on investing a little bit over time rather than a lump-sum up front, then it would make more sense to go with the mutual fund; if he had more to invest, or an even longer time horizon, then the ETF may look more attractive. There are of course lots of ETFs out there by providers like iShares, BMO, and Claymore in Canada, as well as some available on US exchanges by Vanguard. Speaking of which, the Vanguard emerging markets ETF, VWO, has a MER of just 0.22%, but then you have to pay to get your Canadian dollars converted into US ones to buy it on a US stock exchange, which can cost ~1.5% each way at TD (there are some cheaper alternatives, like using a “gambit”, but those generally require larger sums to be worthwhile). For longer timelines, VWO is probably the way to go.

So I don’t think it’s necessary to add emerging market exposure to your portfolio, and if you have less than $50k to invest the slice emerging markets would represent (assuming you’re aiming for something in the ballpark of market weight, ~5-10%) it’s probably not going to be meaningful enough to worry about anyway; you can just stick with the basic e-series. If you have more than $50k, then you’ll get the $10 commissions, and the ETF route is probably the best one to take.

Jeffery also had this detail to add:

I noticed an offer for PCF customers where if they open an investment account through them, they offer a discount of 0.10% off of the MER for any Index fund from CIBC. Which means that the MER would be lowered to 1.26% if I bought it through a PCF account.

I’m all for saving money, but 0.1% off is not a very big savings — if you have $2000 to invest in this particular side pocket, that’s $2/year. $2 isn’t nothing, but I’d be tempted just to pay it rather than deal with the hassle of opening another mutual fund account. And if you have more than $2-3000, then the better option is to use an ETF through Waterhouse.

This is perhaps one of the weakest sections of the book, since it largely tells you to just back-of-the-envelope it if you’re young, and to go visit a planner or read a dedicated planning book if you’re older. But it does give you a feel for the writing style, and if you like this, hey, you’re gonna love the book.

Putting together a plan is important: the plan will shape your investing/saving activities, so having a plan is obviously a must, but putting one together yourself (even if only very approximately) is also important because there are so many bad planners out there (mostly salescritters posing as advisors). If you rely on their plan you may be setting yourself up for disappointment, so it’s important to at least know if they can get you in the ballpark before you go to a “planner”.

—-

Planning

It’s important to come up with a plan to guide your financial life. There are many factors to consider, including:

• how much you should save
• your return on investment
• how much you’ll need to spend per year in retirement
• your timelines (how long you have to save/invest, how long you have to support yourself after)
• other goals
• tax issues

For each be sure to consider a range: what if returns were 4%? 5%, 6%, 7%, 8%? Be sure to be realistic, as it does no good to come up with a plan that won’t even come close to a realistic return (as easy as retirement saving looks with a 20%/year return, it’s not realistic).

There’s a whole profession of financial planners out there with their own professional designation (CFP) with a host of detailed, complicated software tools that can account for different investment returns, inflation, taxes, etc. When you get closer to retirement (within a decade or two) then it may very well be worth paying a visit to one to draw up a detailed plan. But if you’re younger (20’s and 30’s) then the uncertainty of the future is so great that the details probably aren’t all that important: you can get close enough by yourself with a few minutes of careful thought and a spreadsheet.

Just try to save as much as you can get away with early on and you’ll set yourself up to be in fine shape by the time you’re ready to have a professional look at your situation.

Your investments are just one part of the overall plan, but the part that is really the focus of this book…

—-

That’s exactly how it appears in the book. Now one of the objectives of the book was to keep things brief, and cover a lot of important topics. Here I’ve got a chance to perhaps reflect and expand and maybe even edit myself a bit. Recently Netbug asked “what should be in a plan?” So to make a convenient list:

1. How much you should save.
• Take the time to go through the exercise from both ends: starting from where do I want to end up, how much do I need to save to get there? And also starting from my current budget, how much can I save?
• Remember that your savings rate likely won’t be the same through your whole life, and you can include that in your plan, though also remember that the more you do early on, the more effective those savings will be.
• Don’t forget to stock that emergency fund!
2. Your return on investment.
• You’ll want to plan for several scenarios. Remember that you have basically no control over your investment returns.
• Be realistic. Saving for a lavish retirement seems easy if you assume you’ll make 25%/year on your money, but 2.5% after inflation and taxes might be more realistic.
• Also consider at this point your asset allocation and risk tolerance. If you have a low risk tolerance, you’ll likely also need to allow for a low return on investment.
• Remember to use real returns, or to otherwise factor in inflation.
3. How much you’ll need to spend per year in retirement.
• A good starting point is how much you spend now (go back to that budget you made in step 1).
• Don’t forget occasional big ticket items, like new cars, vacations, etc.
4. Your timelines (how long you have to save/invest, how long you have to support yourself after).
5. Other goals.
• Saving up to go back to school, buy a car, a house, or whatever? These should also be part of your plan.
• Do you want to die broke, or try to live off just the returns, leaving behind a large estate for your kids or charity?
6. Tax issues.
• Don’t forget to account for tax burdens when projecting out over the years. Also, where is it best to put your savings? TFSA vs RRSP, one spouse’s account vs the other?
• But also don’t worry too much about taxes — they’re another level of complication, and they can’t be entirely avoided or deferred. Many people make bad investing and life decisions attempting to minimize taxes paid.

As for determining what to plan for each of those items, I’ll say that like many things in life, it’s a balancing act. You want to save enough that you’ll be supported in retirement, but not scrimp so much that you sacrifice your quality of life today. Though a hint: very few people hit retirement and say “oh darn, I saved too much!”

You’ll have very little control over many of the factors in your plan, and not much clarity over exact figures on the ones you can. Early on, like in your 20’s and 30’s, don’t worry too much about it: it’s more important to have the outline of a plan and to just get started than it is to have a binder of projections and precise scenarios prepared. As you get closer to retirement, you’ll want a more detailed plan, so in your 50’s it may be worth moving on from ballparking with a napkin and Excel to paying a planner. In fact, why not make a visit to a fee-only planner a 50th birthday gift for your friends and family?

And of course, sticking to a plan is important (more important than getting that plan perfect), and this flowchart by CPFB is relevant.