The Most Important Investment Decision You’ll Ever Make About Your Portfolio
When most people think about investing, they’re thinking about stuff that doesn’t really matter. They’re caught up in the minutiae: What fund should I own? How fast did the iPhone 7 sell out (and are people really going to be okay with no headphone jack)? What sector is going to take off this fall? But that’s not really what determines your portfolio’s fate. What really matters is your ratio between stocks and bonds.
Retirement Income Planning Is As Easy As PAY
As an alternative to failure rates, I suggest calibrating the downside risk across strategies in order to match them for a level of risk the retiree is comfortable taking. This calibration is done with a customized “XYZ formula” that I first outlined in my article, “Making Sense Out of Variable Strategies for Retirees” in the Journal of Financial Planning.
Can You Time Risk Premiums?
No one really likes risk. We all have to deal with it, but that doesn’t mean we want to. Yes, there are people who live to jump out of airplanes and walk on tight ropes with no net, but I’m talking about financial risk. Unfortunately, at least in investing, risk and return are tightly intertwined. […]
The Perks Of Being A Flexible Spender In Retirement
William Bengen’s 1994 article introduced the concept of the 4% rule for retirement withdrawals. He defined the sustainable spending rate as the percentage of retirement date assets which can be withdrawn, with this amount adjusted for inflation in subsequent years, such that the retirement portfolio is not depleted for at least thirty years.
Which Are You More Worried About: Running Out Of Money While You’re Alive Or Dying?
As David Blanchett says: failure is really only failure if wealth is depleted while you are still alive, not just over an arbitrarily long time period.
How Much You Should Spend In Retirement Depends On How Long You Think You’ll Live
In regards to my last column, I find it helps to visualize the data, and Exhibit 1 shows the specific spending rates for a variety of asset allocations and retirement lengths. It also shows the withdrawal rates implied by the required minimum distribution (RMD) rates set by the IRS for tax-deferred retirement accounts.
Should You Plan On Your Retirement Lasting 30 Years Or 40?
The 4% rule has a planning horizon of thirty years. But is that a long enough horizon?
Should You Keep International Stocks in Your Portfolio?
There will always be some asset class that does poorly. Over the last few years, one of those asset classes has been international stocks. They have underperformed US stocks each of the previous three years, and it’s looking like they’ll do it again this year. Given this underperformance, we’ve had some people ask why we […]
How Long Can Retirees Expect To Live Once They Hit 65?
Life expectancy is tricky. Average life expectancy at birth is 71 years, but it’s constantly changing depending on your age and myriad other factors.
Three Questions To Evaluate Longevity Risk For Retirees
Longevity risk—the risk of running out of assets before running out of time—is fundamental to retirement. We know about the distribution of longevity for the overall population, but an individual cannot know in advance precisely where he or she will fall in the distribution.
