Constancy, not timing, beats markets

Q: I am a longtime index fund investor. My question is: If you are adding to a total bond fund position, is now a good time? Or should an investor wait until interest rates go up?

I am sure many investors are giving this question consideration.

- J.P., by email

A: If you are a Couch Potato investor, who is someone brave enough to admit that he or she doesn't have a clue about the future, you use new money in a way that rebalances your portfolio back to the asset allocation you originally chose. If you make any other choice, you are pretending that you know the future. Remember, it's constancy, not timing, that beats markets.

There are a great many logical reasons to assume that interest rates will rise in the future. But those logical reasons have been wrong year after year. Meanwhile, our debt-heavy economy struggles under the ever-increasing burden of government debt. So there are reasons for interest rates NOT to rise, as well.

The best course of action is to "tend your own garden" - reduce or eliminate your own debt and keep putting money away.

Q: My question is about taking Social Security benefits. It is unquestionably clear that, in general, waiting is better. The exception is the unfortunates who intend to wait until 70 - but die at, say, 69.

(As an aside, I've always felt that it should not be possible to lose the "lottery" in this way since there is no choice on contributions. I think everyone who puts in contributions over 40 years should get something. At least the heirs should get something.

(I know, I know, that is not how it is set up or how it works. And I realize this would mean everybody would get less overall, but I still think it should be considered in regard to fairness.)

I have been thinking about my father, who is now 82 years old. I believe he started taking Social Security at around 63. He is probably now at the age that would have been the break-even point had he waited. It would have been better financially to wait, but for what?

At this point, he is in assisted living with many health problems, including memory problems. He no longer drives and generally does not travel. He has a long-term-care policy, so the "extra" dollars would probably sit in a bank account.

On the other hand, he did have extra money in his 60s, when his spouse was alive and he was mobile, independent and active. I believe those dollars at that time were much more meaningful to his life overall.

Fortunately, he is not in a position where he relies only on Social Security for his well-being - so maybe that is my answer. But I am wondering if you believe lifestyle can reasonably be considered when making this difficult decision. His only real expenses now seem to be the facility and medical expenses. I am starting to think that everyone should start at 62, unless those extra dollars, starting in the late 70s, will be critical to maintaining your lifestyle.

- J.S., by email

A: The most common argument for taking Social Security ASAP is that death and disability are just around the corner. That means we might as well live it up today. But, like most things in life, this is not a true-or-false question. It's a grasshopper/ant question. More important, we have no way of knowing which of us will suffer debilitating illness while still young and who will live into their 90s in surprisingly good condition.

As the old saying goes, "You pays your money (and you takes your chances.)"

The answer here won't come from some kind of financial calculation. We can only deal with probabilities. But here's what's likely. If you have enjoyed the work you do or did, if you've had significant freedom in that work, and if you have a college education or more, the odds suggest that aggressive spending isn't a good idea because you're likely to live longer than the average person.

• Scott Burns is a principal of the Plano, Texas-based investment firm AssetBuilder Inc., a registered investment adviser. Questions about personal finance and investments may be sent by email to scott@scottburns.com.

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