The tricky thing about life expectancy is the longer you live the longer you are expected to live. For example if you make it to 80 and are a man in the US you don't have a negative life expectancy. Best to retire with a withdrawal rate that lasts infinite (i.e. 3%)
That's a good point. It sucks because you're trying to balance doing what you love vs. working more and saving more so you don't run out without knowing how long that means. The safest way is to just have a strategy that ensures you never run out of money.
I remember reading something (maybe the trinity study) but it said after a market crash, ironically a safe withdrawal rate is something like 6% (as the market is likely to rebound). Retiring in a "hot market" (which is when most people hit their number, obviously this doesn't usually happen after a 30% crash or they already would have been retired) you need a smaller withdrawal rate as the chances of a incoming bad market is higher exposing you to sequence of returns risk. From what I can tell they only way to ensure never running out is 3% withdrawal rate. Of course the vast majority return on SS alone, you just have lifestyle realities there
After a market crash wouldn't you be selling assets at all-time low? You'd want to sell as little as possible during those times, right? Then it's good times ahead when the market recovers and increasing the rate makes sense. You can never run out of money by always taking X% every year regardless of portfolio value. You'll always have principle leftover. That seems like the most reasonable approach, then adjust for X over time - and budget well! Joe P.
@@Nanalyze Yes you would be selling at lows. But they found the "safe withdrawal rate" is actually higher due to the historical likelihood of outperformance likely to come due to market rebounds. And yes, taking a fixed % you can never run out. Like the frog that jumps halfway to the wall never makes it mathematically speaking. You may just have budgeting shortfalls, which is a form of "portfolio failure" just less devastating than ruin. That's why at 3% and adjust up for inflation (3% rule) has shown 100% success rates in MC sims seems the best (safest) if one has the ability to accumulate enough to achieve 3% rates. BTW not trying to be argumentative, your videos are great
@@knpstrr You are not being argumentative, you're provoking a very good discussion. :) Maybe the way forward is to forecast forwards at inflation adjusted market growth (6.6%) and then save or withdraw accordingly from a buffer account. You may be able to go higher because of market rebounds but not sure - still - about increasing during downturns. Would have to do some scenario testing there to be sure. Certainly could go lower at 3%wihdrawal rate, but then do you always stay there? When do you increase and decrease? Goes back to what you were saying. This is very thought provoking and maybe everyone just needs to start doing their own spreadsheets and running their own math. At the very least they'll be well prepared for conversing with an advisor or they'll achieve confidence in being able to navigate themselves. It's all pretty accessible stuff thanks to the simple formulas we're using. Great banter, thank you! Joe P.
Hi, maybe you could do a piece on the insurer Chubb Limited that got some media attention lately since Warren Buffett buffed the share price by buying some stake in the company ;) Could be suitable for your Quantigence strategy, I think, due to its international revenues, although I don't know the exact numbers there. Also got over 25 years track record of increasing dividends. Maybe also interesting to talk about the fact it's a Swiss company and not based in the US for tax reasons.
Chubb is in our Quantigence strategy having increased dividends for 31 years in a row. I'll pass this over to a researcher to look at the tax question as I'm not sure. Joe P.
A guy backtested 26 years including 2 crashes of 3-4 years each taking 5% per annum. Year 1998 - now. 100% sp5000 went to Zero. VWIAX gained 151%. and there was minimum return on bonds for 7 years. Salient point is No bonds. No future . VWIAX has 61.79% bonds. interesting option for a fire and forget retirement.
There's a reason the old "100 minus your age" rule is so popular. We choose to substitute fixed income streams with growing income streams. Of course, we lose the diversification effect that bonds bring to the table. We'll be doing a piece on bonds soon because so many people ask about them.
Love this video and a different way of thinking about the 4% rule that, in my opinion, holds many people back. It's impactful to see the "ending" amount after 8% withdrawals still being quite good, meaning your initial baseline is still exceeded. Good stuff and very important...it makes the beginning of the video make so much sense... Thanks for the exceptional content - it makes a big difference for countless investors...
Thank you for taking the time to share some very kind words. I personally loved this video because it addresses two very important worries that we all have - 1) not having enough money throughout life and 2) not getting the most out of life. It's a fine line between accomplishing both but it can be done. Thank you for letting us know you appreciate our work! Joe P.
What about national bank debt crisis, aged population pyramid, AGI and bad crops in climate change. I think active management according new challenging times will be the key
All good things to be aware of for sure! Navigating them manually? Tough. You have a 95% chance of not underperforming the market by choosing passive management. As the Trinity Study correctly emphasized, the worst outcome is running out of money. Portfolios are like bars of soap - the more you handle them, the smaller they get. Trying to resolve the external problems you mentioned with active management is tough to do for professionals, let along Joe Retail. By holding the entire market you can just roll with the punches.
People say money can not buy happiness! But all the wealthy people I know who have net worth of over $20 million that are retire are quite happy in life!
These days in a world of superficiality it's tough to say who is really happy, but having $20 million in retirement is certainly going to help minimize discomfort :)
ER;RE ALL DOOMED, !!. no one has 500K saved up LOL . better get a house mate and a room mate ( no one will be able to buy a home or rent a home on their own anymore. LOL. 401 K joke will make you look for a job ( again).
Hey Joe , great video !!! I've been investing since 2012 ( age 20 ) and was blessed with choosing to invest in the US stock market so far. But what if , due to the unseen govt debt and incredibly high PE's , the stock market stays flat over the next 10 years ? As a solution would you consider investing in emerging markets ? China or indonesia ? Keep it up with the great content !!
Great question. The most topical way we approach global investing is to start at a holistic level. Look at an Index like MSCI ACWI IMI (nearly all stocks in the world, all sizes) and look at the country weights. USA is around 62%. That means you ought to have 38% in other countries. You mention China and Indo. The former is probably best approached with an ETF, same as the latter which is very immature but has promise from what I've seen. Still, the allocation (based on the aforementioned benchmark) is quite low. Our own allocations involve some Asia funds which have China exposure (not sure about Indo). We'll keep it up, thank you for the encouragement! Joe P.
I spent 38 years working as a veterinarian and even though I didn't make as much as other professions, I have no regrets. I turned 65 in 2020 and was off work for some health reasons and because of covid etc. I decided to retire. Early in 2020 I sold all my stocks because of my concerns about covid and reinvested 100% into the market in April 2020 because of what I read about the fed put. I have about 1/2 of my investments in dividend paying stocks and with my government disbursements (CPP and OAS) and a small pension from the federal government I have more than enough for my living expenses.
That is great to hear! You had a truly impactful career that's helped many creatures who have loved their owners unconditionally. I worked in finance for a decade and frankly I was embarrassed at how many people in the industry thought they were God's gift to the world yet what we were REALLY doing wasn't life changing. Teachers, doctors, inventors, explorers, researchers, scientists, these are the people who should be glorified, yet who does society idolize instead? Those who pretend to be other people (actors) and people who play games (athletes). Okay, end of rant. Really glad to hear you are financially sorted and - especially - that you have no regrets. Well played sir. Joe P.
@@Nanalyze thankyou for your kind words. I also did an MBA on a part time basis after I graduated as I have always had an interest in business but continued to work as a veterinarian. My opinion is any education is an investment in yourself.
One other income option is a reverse mortgage. There are different types of reverse mortgages. There is one that is monthly. The other type is one that you can turn off and on. It is one that you can use during events like market downturns, preserving your capital. BTW I would love to see a video on the overseas locations to retire to
That's one income avenue that needs to be scrutinized closely. There are plenty of firms out there preying on the elderly. One needs to research these options extensively and consider the high fees and what you're actually committing to. Nothing like losing a big chunk of income AND being kicked out of your house because you lived longer than you thought. :) Whether income is paid monthly or quarterly shouldn't matter, people just need to be better at budgeting. An overseas locations piece could be interesting only because I've been to nearly all the places you might consider retiring in. Don't want to stray too far off the path with our content but will mull this over ;) Joe P.
One of the examples we reviewed from the 2011 study did look at increasing the amount by inflation every year. In fact, that's the one that makes it very clear you shouldn't go above 4% if you want to keep a high percentage probability of not running out of money. Still think the 4% variable rule might be the best way forward. Joe P.
Subscribe to our channel for more content on investing in disruptive technology:
ua-cam.com/users/nanalyze ❤
So helpful.. Best channel on UA-cam
Thank you for the kind words!
The tricky thing about life expectancy is the longer you live the longer you are expected to live. For example if you make it to 80 and are a man in the US you don't have a negative life expectancy. Best to retire with a withdrawal rate that lasts infinite (i.e. 3%)
That's a good point. It sucks because you're trying to balance doing what you love vs. working more and saving more so you don't run out without knowing how long that means. The safest way is to just have a strategy that ensures you never run out of money.
I remember reading something (maybe the trinity study) but it said after a market crash, ironically a safe withdrawal rate is something like 6% (as the market is likely to rebound). Retiring in a "hot market" (which is when most people hit their number, obviously this doesn't usually happen after a 30% crash or they already would have been retired) you need a smaller withdrawal rate as the chances of a incoming bad market is higher exposing you to sequence of returns risk.
From what I can tell they only way to ensure never running out is 3% withdrawal rate. Of course the vast majority return on SS alone, you just have lifestyle realities there
After a market crash wouldn't you be selling assets at all-time low? You'd want to sell as little as possible during those times, right? Then it's good times ahead when the market recovers and increasing the rate makes sense. You can never run out of money by always taking X% every year regardless of portfolio value. You'll always have principle leftover. That seems like the most reasonable approach, then adjust for X over time - and budget well! Joe P.
@@Nanalyze Yes you would be selling at lows. But they found the "safe withdrawal rate" is actually higher due to the historical likelihood of outperformance likely to come due to market rebounds.
And yes, taking a fixed % you can never run out. Like the frog that jumps halfway to the wall never makes it mathematically speaking. You may just have budgeting shortfalls, which is a form of "portfolio failure" just less devastating than ruin.
That's why at 3% and adjust up for inflation (3% rule) has shown 100% success rates in MC sims seems the best (safest) if one has the ability to accumulate enough to achieve 3% rates.
BTW not trying to be argumentative, your videos are great
@@knpstrr You are not being argumentative, you're provoking a very good discussion. :) Maybe the way forward is to forecast forwards at inflation adjusted market growth (6.6%) and then save or withdraw accordingly from a buffer account. You may be able to go higher because of market rebounds but not sure - still - about increasing during downturns. Would have to do some scenario testing there to be sure. Certainly could go lower at 3%wihdrawal rate, but then do you always stay there? When do you increase and decrease? Goes back to what you were saying.
This is very thought provoking and maybe everyone just needs to start doing their own spreadsheets and running their own math. At the very least they'll be well prepared for conversing with an advisor or they'll achieve confidence in being able to navigate themselves. It's all pretty accessible stuff thanks to the simple formulas we're using. Great banter, thank you! Joe P.
Outstanding topic. Thanks for the work
That's what I like to hear, thank you! Joe P.
Very informative, good job.
Glad you enjoyed the piece!
Great content! It’s all about time and what you want to do with it. We can’t wait to be at that point.
Glad to hear you found this useful. You'll be there soon enough!
Watched multiple times, thank you 🎩
Love to hear that. Your financial support makes this possible! :) Joe P.
@@Nanalyze 🫶😅
Great talk! 🙏✌️
Thank you for the positive feedback!
Midwest it’s a pleasure as always.
@@ajames Party On with my 'Ol Pal Doug Gary 🥳🥳🥳🥳
Hi, maybe you could do a piece on the insurer Chubb Limited that got some media attention lately since Warren Buffett buffed the share price by buying some stake in the company ;) Could be suitable for your Quantigence strategy, I think, due to its international revenues, although I don't know the exact numbers there. Also got over 25 years track record of increasing dividends. Maybe also interesting to talk about the fact it's a Swiss company and not based in the US for tax reasons.
Chubb is in our Quantigence strategy having increased dividends for 31 years in a row. I'll pass this over to a researcher to look at the tax question as I'm not sure. Joe P.
A guy backtested 26 years including 2 crashes of 3-4 years each taking 5% per annum. Year 1998 - now. 100% sp5000 went to Zero. VWIAX gained 151%. and there was minimum return on bonds for 7 years. Salient point is No bonds. No future . VWIAX has 61.79% bonds. interesting option for a fire and forget retirement.
There's a reason the old "100 minus your age" rule is so popular. We choose to substitute fixed income streams with growing income streams. Of course, we lose the diversification effect that bonds bring to the table. We'll be doing a piece on bonds soon because so many people ask about them.
U are on 14.07 talked about "trim"...for what? how to use it? U mean take it back to market for create new income?
Spend it or purchase shares of something that's more underweight in your DGI portfolio.
Love this video and a different way of thinking about the 4% rule that, in my opinion, holds many people back. It's impactful to see the "ending" amount after 8% withdrawals still being quite good, meaning your initial baseline is still exceeded. Good stuff and very important...it makes the beginning of the video make so much sense...
Thanks for the exceptional content - it makes a big difference for countless investors...
Thank you for taking the time to share some very kind words. I personally loved this video because it addresses two very important worries that we all have - 1) not having enough money throughout life and 2) not getting the most out of life. It's a fine line between accomplishing both but it can be done. Thank you for letting us know you appreciate our work! Joe P.
What about national bank debt crisis, aged population pyramid, AGI and bad crops in climate change. I think active management according new challenging times will be the key
All good things to be aware of for sure! Navigating them manually? Tough.
You have a 95% chance of not underperforming the market by choosing passive management. As the Trinity Study correctly emphasized, the worst outcome is running out of money. Portfolios are like bars of soap - the more you handle them, the smaller they get. Trying to resolve the external problems you mentioned with active management is tough to do for professionals, let along Joe Retail. By holding the entire market you can just roll with the punches.
Who is SRL GLOBAL? link?
www.portfoliovisualizer.com/
People say money can not buy happiness! But all the wealthy people I know who have net worth of over $20 million that are retire are quite happy in life!
These days in a world of superficiality it's tough to say who is really happy, but having $20 million in retirement is certainly going to help minimize discomfort :)
ER;RE ALL DOOMED, !!. no one has 500K saved up LOL . better get a house mate and a room mate ( no one will be able to buy a home or rent a home on their own anymore. LOL. 401 K joke will make you look for a job ( again).
Everyone will have a different situation. Geographical arbitrage expands your options a whole lot.
he kinda look like ace ventura. lol
Ace Ventura meets Jersey Shore
Hey Joe , great video !!! I've been investing since 2012 ( age 20 ) and was blessed with choosing to invest in the US stock market so far.
But what if , due to the unseen govt debt and incredibly high PE's , the stock market stays flat over the next 10 years ?
As a solution would you consider investing in emerging markets ? China or indonesia ?
Keep it up with the great content !!
Great question. The most topical way we approach global investing is to start at a holistic level. Look at an Index like MSCI ACWI IMI (nearly all stocks in the world, all sizes) and look at the country weights. USA is around 62%. That means you ought to have 38% in other countries. You mention China and Indo. The former is probably best approached with an ETF, same as the latter which is very immature but has promise from what I've seen. Still, the allocation (based on the aforementioned benchmark) is quite low. Our own allocations involve some Asia funds which have China exposure (not sure about Indo). We'll keep it up, thank you for the encouragement! Joe P.
I spent 38 years working as a veterinarian and even though I didn't make as much as other professions, I have no regrets. I turned 65 in 2020 and was off work for some health reasons and because of covid etc. I decided to retire. Early in 2020 I sold all my stocks because of my concerns about covid and reinvested 100% into the market in April 2020 because of what I read about the fed put. I have about 1/2 of my investments in dividend paying stocks and with my government disbursements (CPP and OAS) and a small pension from the federal government I have more than enough for my living expenses.
That is great to hear! You had a truly impactful career that's helped many creatures who have loved their owners unconditionally. I worked in finance for a decade and frankly I was embarrassed at how many people in the industry thought they were God's gift to the world yet what we were REALLY doing wasn't life changing. Teachers, doctors, inventors, explorers, researchers, scientists, these are the people who should be glorified, yet who does society idolize instead? Those who pretend to be other people (actors) and people who play games (athletes). Okay, end of rant. Really glad to hear you are financially sorted and - especially - that you have no regrets. Well played sir. Joe P.
@@Nanalyze thankyou for your kind words. I also did an MBA on a part time basis after I graduated as I have always had an interest in business but continued to work as a veterinarian. My opinion is any education is an investment in yourself.
One other income option is a reverse mortgage. There are different types of reverse mortgages. There is one that is monthly. The other type is one that you can turn off and on. It is one that you can use during events like market downturns, preserving your capital. BTW I would love to see a video on the overseas locations to retire to
That's one income avenue that needs to be scrutinized closely. There are plenty of firms out there preying on the elderly. One needs to research these options extensively and consider the high fees and what you're actually committing to. Nothing like losing a big chunk of income AND being kicked out of your house because you lived longer than you thought. :) Whether income is paid monthly or quarterly shouldn't matter, people just need to be better at budgeting.
An overseas locations piece could be interesting only because I've been to nearly all the places you might consider retiring in. Don't want to stray too far off the path with our content but will mull this over ;) Joe P.
Better save all your money in gold and sliver.
Diversifying across asset classes is important.
Very good idea because the normal 4 percent rule forgets about inflation
One of the examples we reviewed from the 2011 study did look at increasing the amount by inflation every year. In fact, that's the one that makes it very clear you shouldn't go above 4% if you want to keep a high percentage probability of not running out of money. Still think the 4% variable rule might be the best way forward. Joe P.