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Retirees can protect themselves from stock market volatility with insurance.
volatility means little unless you have a very low pucker factor. even at 65 you have money you won't eat with for 20-30 years . that is all long term money that still needs to be in equities to produce at least a 4% draw rate .
the failures go up and up once you dip below 40% equity it works the opposite and it becomes as risky as can be trying to support a 4% draw which really is not even that much .
in fact even 100% equities has a very high success rate . if you just spend down in good and bad times from your equities and used nothing else your success rate would have been 93% over the 117 rolling 30 year periods we had , just a tad under 50/50 .
the reason is cash ,bonds and insurance products act as weights and weigh down the up years so much . the truth is 100% equities would be nerve racking as hell but it worked very well too as the bigger up years cushioned the down year spending.
good calculators can stress test your allocations against the worst outcomes to date , and we have not had anything worse than some of them in 50 years . if you use monte carlo simulation ones instead of historical they seek to stress test against the worst outcomes they can come up with ,even worse than actual.
the 2 best in my opinion are the fidelity investment calculator and firecalc .
no matter which you go with fixed income ends up being the most riskiest and has the most failures to date .
a popular way to enter retirement is a rising glide path. you basically reduce your equity position a few years before retiring , then you slowly build the level back up to your desired allocation . yes , you increase equities over time ! 2% a year up until your desired allocation is a good rate for the glide path .
but that is only if you are gun shy and are nervous about a prolonged hit day 1 of retirement . which by the way has never ever happened in this country. not even if you retired in 1929 . if you retired in 1929 your equities were ahead in dollar terms in just 4-1/2 years .
Last edited by mathjak107; 10-17-2017 at 03:13 AM..
If you retire with a million dollars, you're going to go completely to cash/CDs on day 1 of retirement?
Of course not, but you're not putting your money in stocks and bonds either, not unless you have money to play with. Let's face it. Even if you're aggressively investing, have seen time and again that the gains generally stick around a certain percent, and anything higher usually is not legitimate.
there is so much wrong with that statement . unless you need a very small draw rate you absolutely need stocks and bonds and at least 35- 40% in diversified equities .
a typical safe withdrawal rate is 3-1/2 -4% inflation adjusted and that must have equities or the risk of failing is way to high .
i suggest you at least learn about what safe withdrawal rates mean and entail before making statements like that because that is very poor advice . .
there is so much wrong with that statement . unless you need a very small draw rate you absolutely need stocks and bonds and at least 35- 40% in diversified equities .
a typical safe withdrawal rate is 3-4% inflation adjusted and that must have equities or the risk of failing is way to high .
i suggest you at least learn about what safe withdrawal rates mean and entail before making statements like that .
In other words you're telling me that stocks and bonds aren't volatile? Of course you can run your mouth because you're sitting on real estate. Someone who doesn't have a backup plan in terms of cash flow would be a fool to have their nest egg that they're depending on tied up in the market. We've seen it time and again where people become greedy and try to obtain returns that are simply unrealistic and they are left with nothing because they have their nest egg tied up in the market. Usually swindled, and others just don't know how to invest.
read what i wrote , i never said they are not volatile . they certainly are . but over decades of time the volatility smooths out . you don't use equities for short term spending . you use it for the money you will eat with decades out . even at 65 you have money that will not be needed to eat for decades .
do your home work . learn about safe withdrawal rates and we can have this conversation . you would have already failed 64% of the 117 rolling 30 year periods with fixed income only .
you are really way off in what you think here . in fact i challenge you to find one accredited study that shows you can retire on just fixed income and draw 4% inflation adjusted .
as far as real estate i don't live off real estate at all . i only live off my portfolio in retirement , all diversified equity funds and bond funds .
you really are arguing in an area you clearly know nothing about .
you can start by googling bengan's - safmax or the trinity study since all modern day retirement planning is based on those 2 studies .
you can also read the work of michael kitces , blanchett , milevsky or dr wade pfau for an education . all can be easily googled .
until you do , it is a waste of time discussing this with you . you really have no idea how silly what you are saying is . i don't know where you get all this mis-information from but as a friend i am telling you . find a more knowledgeable source before you screw up your own retirement believing your own bull .
this is not the forum to discuss this but this is discussed all the time in the investing and retirement forums here .
Last edited by mathjak107; 10-17-2017 at 08:37 AM..
read what i wrote , i never said they are not volatile . they certainly are . but over decades of time the volatility smooths out . you don't use equities for short term spending . you use it for the money you will eat with decades out . even at 65 you have money that will not be needed to eat for decades .
do your home work . learn about safe withdrawal rates and we can have this conversation . you would have already failed 64% of the 117 rolling 30 year periods with fixed income only .
you are really way off in what you think here . in fact i challenge you to find one accredited study that shows you can retire on just fixed income and draw 4% inflation adjusted .
as far as real estate i don't live off real estate at all . i only live off my portfolio in retirement , all diversified equity funds and bond funds .
you really are arguing in an area you clearly know nothing about .
you can start by googling bengan's - safmax or the trinity study since all modern day retirement planning is based on those 2 studies .
you can also read the work of michael kitces , blanchett , milevsky or dr wade pfau for an education . all can be easily googled .
until you do , it is a waste of time discussing this with you . you really have no idea how silly what you are saying is . i don't know where you get all this mis-information from but as a friend i am telling you . find a more knowledgeable source before you screw up your own retirement believing your own bull .
this is not the forum to discuss this but this is discussed all the time in the investing and retirement forums here .
*lol* Am diversified, but also am nowhere near retirement. Am not *misinformed*. Simply stated that those who try to be greedy usually get burned, and that is true. As one nears retirement, portfolio should be conservative, as you will need to start drawing money from the nest egg.
The original article is stupid.
One of their factors is: "Banking: average savings account interest rate and average two-year CD account interest rate"
Who cares what interest rates on savings accounts in a state are?
1. We live in the United States.
2. Who has money in a savings account at a bank?
Another stupid article. A million $$$. No Social Security factored in. Nor pensions or investment income. We Have somewhat less than a million in reserve, but with a paid off house, SS and a two pensions we will die in CA before we runout of money. Plus small town CA, where people retire has a COL a third of the overall average of the state.
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