Investing in retirement (school, opinion, taxes, 401k)
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Those of you who are just moving towards retirement might have a different outlook than I do. I retired over 3 years ago. What do you think happened with my 4% inflation-adjusted withdrawal plan? Totally blown out of the water. I can withdraw much more and I had a really good start towards building my investments as a hedge against future downturns. I am not even sure I see a near term future downturn. The Fed continues to stimulate our economy and the future looks pretty good with companies doing well, big improvements in productivity and lower energy costs. I would not be surprised if the stock market continued upwards at a nice rate for another year or so. If there happens to be a serious downturn, I am in a good position to buy and do well for the next recovery.
Having thought about an investing plan were I would put 60 to 70% into stocks, the other
30 to 40% I would like to be in a more conservative place. Bond funds don't seem to be the answer
for fear of losing principle when interest rates go up. I would like to generate at least 3% from
my conservative allocation. Is that even possible today? Also, if mutual funds are my choice of
Investment, would 1 or 2 funds be right or 4 to 5 for more diversification.
Sorry for losing focus on your OP. I am bumping it back to help folks answer your question.
Those of you who are just moving towards retirement might have a different outlook than I do. I retired over 3 years ago. What do you think happened with my 4% inflation-adjusted withdrawal plan? Totally blown out of the water. I can withdraw much more and I had a really good start towards building my investments as a hedge against future downturns. I am not even sure I see a near term future downturn. The Fed continues to stimulate our economy and the future looks pretty good with companies doing well, big improvements in productivity and lower energy costs. I would not be surprised if the stock market continued upwards at a nice rate for another year or so. If there happens to be a serious downturn, I am in a good position to buy and do well for the next recovery.
Remember the OP is asking a in retirement question with a pension and eventual SS so his horizon is short term. I have been there and it is different.
Those of you who are just moving towards retirement might have a different outlook than I do. I retired over 3 years ago. What do you think happened with my 4% inflation-adjusted withdrawal plan? Totally blown out of the water. I can withdraw much more and I had a really good start towards building my investments as a hedge against future downturns. I am not even sure I see a near term future downturn. The Fed continues to stimulate our economy and the future looks pretty good with companies doing well, big improvements in productivity and lower energy costs. I would not be surprised if the stock market continued upwards at a nice rate for another year or so. If there happens to be a serious downturn, I am in a good position to buy and do well for the next recovery.
i think the point everyone needs to understand is that the 4% theory is only a floor for day 1. it was never intended to be or used as some life long plan.
however the rules still apply , and if you fall below that 2% real return number the first 15 years you would be smart to review things again because you are on a slippery slope and although you may not fall off the cliff you are certainly walking along the edge so to speak.
folks like numbers they can hang a hat on and so you hear terms like 4% rule or safe withdrawal rates thrown around with out anyone understanding what they mean or how to utize them since they are not life long plans and never meant to be..
all they are is i have this big pile of cash , how much can i safely START OUT spending so i have a floor under me for bad stuff starting day one.
thats it, after you start you switch to real time but at least you are in the ball park most of the time.
it avoids someone coming to the gate with 100% in cd's and expecting to pull 4% -5% with any high reliability built in when rates are low..
Let me try this again. You MathJak are happy with your beliefs/practices and results yes or no? If yes will you not continue to read and adapt your thinking based on what you consider learned thinking ( writing and talking heads)? Will you not continue to use calculators and other number crunching tools? If yes that is my point. You are happy with yourself and will disagree even with people trying to say that.
well i have to say my answer would be i would need to nudge the big ship gently to keep it on course over time .
i think it would be quite foolsih to say this is my plan and it worked the first 5 years so i am never changing or i am not open to learning new ideas that might better fit the conditions we have migrated into..
the prudent person would see how things unfold and nudge things to better fit the times and events..
i can tell you i know so many who entered retirement with balanced portfolios only to be blown out of their comfort zone with the new normal in volatility that their old plan was scrapped and they now follow a much more conservitave path with a slight cut in income to match.
Having thought about an investing plan were I would put 60 to 70% into stocks, the other
30 to 40% I would like to be in a more conservative place. Bond funds don't seem to be the answer
for fear of losing principle when interest rates go up. I would like to generate at least 3% from
my conservative allocation. Is that even possible today? Also, if mutual funds are my choice of
Investment, would 1 or 2 funds be right or 4 to 5 for more diversification.
I am still wondering what you see the role of your portfolio will be after SS and any other income streams kick in.
This has been an interesting thread. A couple of comments....
- I really try to ignore those one-size-fits-all rules that get bandied around, like an annual withdrawal rule. They are OK to give you a rough idea, but I prefer to know what my own situation requires.
- I run a Monte Carlo calculation every year to see where I am. When you guys refer to "calculators", not sure if you mean a deterministic model or a statistical model. MC is of course statistical. And the outcome of MC is of course a probability which only gives you an idea but I find it more useful than a deterministic number which then has to be nuanced and caveated to account for the fact that investing is not deterministic.
- I am just starting retirement but my plan is to use a feed-back process: Run the MC calc using withdrawal figures based on my actual spending over the last 12 months. See if I am falling in the 90+% confidence range. If not, adjust my budget accordingly and rerun the thing. That sets my budget for the next 12 months.
- Those are really the only two "dials" I have to adjust: my budget, and the confidence level I want to shoot for. I suppose there is a third dial: If I am consistently hitting the 95% confidence level, I would consider pulling money out of equities and putting it into something "safe".
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