Should Your Portfolio Include Commodities?
When it comes to investing, a whole bunch of magical investment solutions seem to be floating around out there, but should you really do anything differently?
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Retirement Income Planning Should Focus On Saving, Not Withdrawing
This case study illustrates the safe savings rate concept using someone saving for retirement during the final thirty years of her career, and she earns a constant real income in each of these years.
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A Safer Approach To Retirement Income Planning
The relationship between stock market valuations and sustainable spending rates has great implications for retirement planning when we consider how the pre-retirement savings phase and the post-retirement withdrawal phase can be linked through the stock market valuation level at retirement.
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Does the 4% Rule Work in Today’s Markets?
This is a matter where Monte Carlo simulations are able to shine, by allowing simulations to begin from today’s starting point rather than incorporating historical outcomes generated from completely different market environments.
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Don’t Bet Your Retirement On History Repeating Itself
People nearing retirement should take note of the fact that U.S. financial markets have entered uncharted waters now in regards to the low bond yields and high stock market valuations facing investors.
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Does The 4% Rule Work Around The World?
From a global perspective, asset returns enjoyed a particularly favorable climate in the twentieth-century United States, and to the extent that the U.S. may experience reversion in the twenty-first century, present conceptions of safe withdrawal rates may be unsafe.
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Should We Base Retirement Income Planning On Historical Data?
William Bengen’s 1994 study and the Trinity Study were only meant to serve as starting points.
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Navigating One Of The Greatest Risks Of Retirement Income Planning
The financial market returns experienced near retirement matter a great deal more than most people realize. Even with the same average returns over a long period of time, retiring at the start of a bear market is very dangerous.
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What Do Market Expectations Have To Do With Safe Withdrawal Rates?
Rather than asking for the probability of success associated with a particular withdrawal rate, we could calculate the highest sustainable withdrawal rate linked to a particular probability of success.
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The Advantages Of Monte Carlo Simulations In Retirement Income Planning
One of the classic approaches to studying retirement withdrawal rates is to use Monte Carlo simulations that are parameterized to the same historical data as used in historical simulations.
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Does Asset Allocation Affect Withdrawal Rates?
One other important factor from William Bengen’s original study is asset allocation. In particular, he recommended that retirees maintain a stock allocation of 50-75%, writing, “I think it is appropriate to advise the client to accept a stock allocation as close to 75 percent as possible, and in no cases less than 50 percent.”
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What Can We Learn from the Market Disasters of the 1970s?
Throughout history, when bad news and events touched the daily lives of investors and caused nest eggs to shrink, it’s been natural to ask, “Is this the end of investing as we know it? Have new developments changed things so much that…
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