Reverse Engineering To Desired Retirement Time Horizons

This article is part of a series; click here to read Part 1. Using the portfolio return and volatility assumptions determined in Exhibit 1.1, we then reverse engineer fixed return assumptions and sustainable spending levels for a desired retirement time horizon and targeted probability of success. The investment portfolio is modeled using 100,000 Monte Carlo…

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Determining Sustainable Spending from an Investment Portfolio in Retirement

Determining the sustainable spending rate from a diversified investment portfolio in retirement requires making decisions about longevity and market returns. The final section in this chapter provides an opportunity to integrate this discussion in order to obtain a better sense about sustainable distributions from an investment portfolio in retirement. Rather than blindly applying something like…

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What Does the GameStop Kerfuffle Mean?

GME and WallStreetBets

It’s been a pretty wild ride with GameStop. But while there has been a lot happening, does it actually mean much? We’ve examined the details of what happened elsewhere, so I’m going to focus on some of the bigger questions that this whole affair raises, and specifically how this all impacts long-term investors. So let’s…

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What Happened With GameStop?

It’s a bit of an understatement to say that GameStop has been in the news lately. There are a lot of people opining about what is going on, but we want to cut through that and look at what actually happened (we look at what it all means in another article). So what actually happened, and…

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Is the Value Premium Pining for the Fjords?

There’s no magic formula for investing. The financial markets seem to take some sort of cosmic joy in bringing people back down to Earth. And it’s value investing’s turn – in fact, it’s been value investing’s turn for a while now. To put it mildly, this has been a rough decade and a half for value stocks.

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Adjustments For A Conservative Return Assumption

Consider three scenarios: An individual investing a lump-sum amount for thirty years An individual saving a fixed percentage of a constant inflation-adjusted salary at the end of each year over a thirty-year accumulation period An individual withdrawing the maximum sustainable constant inflation-adjusted amount from a portfolio at the start of each year over a thirty-year…

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A Guide to a Conservative Return Assumption

A simple approach for building a financial plan is to decide on a rate of return for the investment portfolio and to plug that value into a spreadsheet to represent assumed asset growth. Historical data may be used to calculate historical average returns for different asset classes, which are then combined to create the overall…

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Planning For The Future – What About Bond Yields?

Adjustments for Current Bond Yields An important consideration is that current interest rates are lower than the historical averages. The historical average return is not relevant for someone seeking to estimate future market returns from today’s starting point. The general problem with attempting to gain insights from the historical outcomes is that future market returns…

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What To Do When Markets Plummet – Investor Behavior Gap

Another concern is whether investors are disciplined enough to stay the course with the investment strategy in order to earn the underlying index market returns. Studies on retirement spending from investment portfolios typically assume that retirees are rational investors who rebalance right on schedule each year to their rather aggressive stock allocations. They never panic…

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Making Your Investments Work For You: Things To Consider

Inflation We must remove inflation so the numbers allow for a better understanding of purchasing power growth. Real returns will be less because they preserve the purchasing power of wealth over time. Providing the discussion in terms of real returns allows us to plan for the assumption that future spending will grow with inflation. Even…

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