Investing does not need to be complicated. In fact, the simpler the better in my opinion. I'm retired and did so at age 42 with about $1.1M for two people. We had an advisor from Morgan Stanley in our corner. Maxed 401k for many years and then saved additional in index funds in taxable account. Our rate of return has been around 10% percent per year in the taxable account over the last 10 years.
Agreed. I have some fun money in RH but the big majority is managed by Morgan Stanley. I’m actually outperforming them this year but the value they’ve added in other ways over the last several is well worth it for me.
That's amazing congrats. I grew up in a cash only savings environment and a mother who has a small 401k saving. I’m just now learning about the stock market creeping towards 30 so I would appreciate more information about your advisor.
Nancy Magaret Delony is the licensed advisor I use. Just google the name and you’d find necessary details. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.
I use vanguard personal advisor services. They charge 0.3% a year. I could tell you what he has me invested in, but AGE matters so much. I am 52 and retired. So I have stocks and bonds. Stocks are in "Vanguard total stock market fund", and some in "Vanguard international fund". There might be a third similar one. I'd have to look at my bond fund. For you at age thirty, mostly stocks is advised.
I am 74, and have been retired for 17 years. I have never used the 4% rule, nor do I know anybody who has ever used the the so called 4% rule. The 4% rule is just a rule of thumb, and gives you a place to start when you are planning. Nothing more.
The idea that my money runs out towards the end of my life is terrifying. An older lady at the grocery store had her debit card declined in front of me. Whatever was going on in her head at that moment is something I never want to experience. Her groceries were essential foods, nothing at all luxury. While it felt great to take way her pain in that moment by swiping my card, I bought her maybe a week before this happens again.
@xzygy did you really? That's awesome! Talk about good karma! I used to be so tight with my money, tipping a bare minimum, looking at unfortunate people as victims of their own decisions. Over time I became more empathetic humble and generous (still have miles to go). But it was AFTER I became more generous that I became more prosperous. Its funny how that works. "you can't receive blessings with a closed hand"
I think the 4% rule is best understood as a way to teach the principle behind it, which is planning for how much money you need for a “safe” retirement at your chosen lifestyle level.
We're taking out a little less than 4% but that works out, after taxes, to be the same amount of money we've been living on. When we get more comfortable with this whole idea of taking money out rather than putting it in we may up it a bit. But after a lifelong career as an engineer it's hard to not be conservative on estimates. But I do not want to do what my parents did and not do things that they really would have enjoyed doing and could well have afforded. They lived through the great depression, and that left scars.
A lot of this has to do with your risk tolerance and how the market performs. 100% with Azul In retirement since ‘16 (age 56), I grew my Net Worth from $750k to $1.1M, while spending an avg of $90K/year I spent very lean ($50K/yr) in ‘22-23., while the market was recovering. This also allows for a very realistic picture of how much money you need at a minimum. I will spend down my IRA and then go on Social Security in ‘27/28 (age 67+) I will spend my Roth money, after taking SS and plan on using 5% It’s about time in the market, not timing the market. Always give yourself time to be right.
I’ve worked hard to save about $500,000 for retirement, and now I’m ready to turn my savings into a paycheck. But how much can I afford to withdraw from savings and spend is what I don’t know. If I spend too much, I risk being left with a shortfall later in retirement. But if I spend too little, I may not enjoy the retirement I envisioned. What’s your advice on this please?
stay flexible - If the market performs poorly, you may not be comfortable increasing your spending at all. If the market does well, you may be more inclined to spend more
Personally, I used the 4% rule as a guideline, didn't follow it precisely. For greater level of confidence around portfolio longevity and ability to meet my goals, I use a well experienced advisor from Pennsylvania. In a nutshell, I'm semi-retired and only work 7.5 hours weekly since getting fully invested in the markets for 5 years now, amassing about $1.3m so far, after subsequent investments.
@@Charlesman_T such an eye opener! never heard or used the 4% rule, I spend what I want and when I want, however i'm interested in adding to my streams of income by investing, mind if i look up your advisor please?
I'm still planning around 4% to have some padding for downturns and inflation. We'll adjust as we go. Retiring in two years at 62, taking SS immediately (will be over $2300/mo for me, $1800 for wife), selling a rental, paying off mortgage and hopefully will be healthy enough to make it another 30 years, but I'll be happy with 25.
At the high risk of being labeled a “fear monger“, I think all these “rules” will quite possibly go out the window over the next 30 years. What kind of withdrawal rate are we going to have when the fiat dollar system collapses? We’ve been kicking the can down the road for longer than my 58 years of life and I think we run out of road in my lifetime. I still invest, and I retired last year with a sizable nestegg. However, we must protect ourselves from an unprecedented economic hurricane that’s headed our way. 👌🏼
A little bit of fear and a healthy dose of caution is not a bad thing. Come up with a long term allocation that is right for you in both good and bad times. Too much optimism or too much pessimism can lead people to asset allocations that can eventually hurt them. “Your cautious optimist”, Azul
I don't think it's a guideline. It's simply a principal to keep in mind that at 4% your success rate for 30 years is 100%. I retired at 56 and for the first 5 years I withdrew 7%, the last two years I only took 4%, because I became debt free. My retirement account is marginally higher now than 7 years ago. What I think people fail to realize is the loss of buying power due to inflation. In reality, my portfolio has lost roughly 20% of it's value.
You're right, expenses are up and down. Once MRD kicks in many will have taxes on SS & it is just going to get worse if it stays non-indexed to inflation
I retired 19 years ago and my wife retired 26 years ago.i’m now 73 and my wife is 69. We both have pensions from our former jobs and along with SS, we are comfortably able to meet our yearly expenses. We have been investing for over 40 years and have over $2.75 million in investment dollars. We have never had to take more than 2% out of investments in any one year but on average we take out 1.5% a year which allows us to travel frequently but it also allows our investments to continue to grow year after year.
How about this for a novel idea? Do a line by line of revenues and expenses until you’re 90/100 .. and be conservative (ex: give yourself a rate of return on your portfolio that YOU have been having, not the hypothetical 7-10% and adjust expenses by real rates of inflation by expense category) .. I do that and adjust monthly for new information .. it’s a big spreadsheet but it also tells you each month what you have as a budget per expense category and how you did and how the future looks .. bingo
If you was using the 4% rule as a simple guide, should you not be planning for and saving into savings pots for planned maintenance inc. foreseeable replacements eg. house roof replacement, boiler, gutters. windows car maintenance (inc. more expensive parts if running a reliable older out of warrantee car - the car might keep running but bolt on bits will periodically need changing), and eventual car replacement, just as you were when you are working. Surely these things shouldn’t be a surprise and should be the planned maintenance (savings pots) being factored into annual living expenses? Eventually in the no-go years the car might drop out but, but some of that factored in “savings pots” might then be used for eg. help with the house and garden. I can see how it might fail if you failed to account for the planned maintenance savings pots that you plan for during your working life. Am I missing something?
The trick is to model your post retirement expense (e.g. replacement cars, new roof, medical expense, etc) and average it out till age 100 and make sure 4% rule can sustain it. If I’m broke at 100, I’m content with the life I had. But 4% is the basis of all this. Trying to predict the dynamic withdraw rate year to year across decades ahead is going to be prone to failure.
@Azul, this thought stream in this video was all over the place. The 4% wasn't ever a you must always, it was a you could. Bengen adjusted his 5% from 2020 to 4.7% today. His higher withdrawal rate, even for himself, seems to contradict the tone that 4% is somehow bad. I'm not sure how a higher withdrawal rate from an original 4% is a bad thing, when it means you can withdraw more and 4% was too conservative. It's not like Bengen flipped saying he's doing 2% withdrawal rate for himself. The best part of this conversation is around your 13:50min point. Chance of success is simply misleading. Anything above the median chance of success means you are fully covering your retirement expenses from your plan, so there is no justification to shoot for a 90%+ chance of success unless you want to leave behind a larger nest egg when you die. You are right about 80% chance of success actually means 20% you may have to adapt (which sounds very much like Kitces), but I don't think you've ever explained that point of view. The % chance you may have to adapt is how the industry ought to be explaining rather than the misleading vomit chance of success. Trying to get close to 0% you will have to adapt cost benefit in terms of time, energy, and all the other intangibles is precisely right. On a different note: the whole flying business class is over done. I'm finding it harder and harder to justify the upgrade cost to business class, given the crappy lounges, uncomfortable, supposed lay flat beds with tiny foot wells, crappy meals, and terrible amenities. A long-haul I returned from yesterday didn't even come with slippers, meal options were nixed because their heater went caput, all business class priority baggage caim out after everyone else's luggage, over crowded lounges with measly snacks, etc, etc. Given the corporate cost savings trends, my withdrawal rate is going to be lower, since it's just not worth spending more on things like business class or other "luxury" conveniences.
I don't know why so many channels have such a problem with Bengen's 4% rule, it's a guideline as a simple answer to building a sustainable retirement plan. I think Azul get's the usefulness of it, but I don't think it was ever intended to be a hard and fast rule you should never break. I don't think it's any different than your work life, the equation is simple, income minus expenses and both are always going to be dynamic and changing. I agree that if you're overwhelmed by the prospect of predicting your finances in retirement, find a good advisor and build a flexible plan.
It always seemed a little off to me. Fidelity, Schwabb etc scare you that you must invest at least 15% every year for 30 years, but only spend 4% for 20 (when the historical returns of S&P are 10%.). Otherwise it is cat food for dinner tonight. Its almost like investment firms are incentivized to gather and keep as much AUM as possible in order to garner higher fees. Hmmmmmmmm.
Good video. 4% is a guide not a rule. It depends on your situation and savings. I will leave most of our investments in equities and withdraw what we need for expenses. Thankfully our pension kicks in in 5 years and that should cover most of our expenses. Starting next year, I will sell my long term stocks and start moving them into index funds. As we won’t have much income, we will pay $0 taxes up to 90k in capital gains. We will do this until we decide to take our pension.
Funny thing is that those who would most benefit from a back of the envelope calculation may not even know how to do it. When I was in my 20s thru 40s, such a back of the envelope calculation might have been useful. When your 10 years out? God, no!
The 4% rule is just something that sounds scientific but only give financial advisors an easy way to come up with a withdrawal strategy. It’s not a coincidence that the 4% rule lines up with average dividend payments (4%) but without the financial advisors of picking stocks.
I'm age 66 and retired. I'm only drawing monthly dividends from 2/3rds of my investments, but the remaining 1/3rd is reinvested into growth funds. I don't want to pull principle until RMW at age 73.
Need to start a corollary *retired* financial advisor RU-vid channel with someone. Or at least interview retired FA's to get their perspective on theory vs. practice.
What I don’t understand is if you are getting a 5% return, taking out 4% allows you to never tap into your principle. So why do people say you eventually use up your savings?
You don't ALWAYS get a 5% return. The markets fluctuate. Sometimes you make $ and sometimes you lose $, but in the worst-case scenario, your $ should last 30 years under 4% rule.
I have one at my work it’s a pension which is actually an annuity and I like it. I think Azul looks down on them as he thinks the market will give a higher return on your principal
Perhaps you might consider even a cursory search before putting your foot in your mouth. For example, which college pension are you talking about? Bill Bengen never worked in a college or university entitling him to receive a college pension.
What if you forgone a year’s withdrawals and only spend what your portfolio performance was after it performed. So if one year it goes up 12% and the next year it’s flat you only withdraw 6/10(4%)/2
This is my favorite channel. Despite the dip in crypto. I still thank you for the level headed financial advice I started crypto investment with $7,500 and since following you for few weeks now, l've got 25k In my portfolio. Thank you so much mrs Elizabeth Slone
Wow. I'm a bit perplexed seeing her been mentioned here also Didn't know she has been good to so many people too this is wonderful, i'm in my fifth trade with her and it has been super.
The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a financial professional but is very advisable you make use of a professional.
I hate this guy. He gets to the point at 12:45 after wasting a lot of time. Answer 5% is what Bill Bagan uses. Listen to the rest if you wish to waste some of your “1000 weeks”!! Real retirees in this commentary have more useful info and faster to read.
