Monday, June 24, 2013

It’s Déjà Vu All Over Again: 1994

The volatility in the stock market AND bond market over the past few days has everyone concerned.  Forget that the US market is still up over 10% for the year. We all tend to get very myopic in our vision when the stock market starts to waiver.  Especially when bonds, which are supposed to protect us in down markets, are also losing money.  It can make the thought of just selling everything and going to cash seem appealing.  But as history reveals, that can be a very costly mistake.

Wednesday, June 12, 2013

The 4% Safe Withdrawal Rate Misconception

There has been much discussion lately on the reliability of the suggested 4% withdrawal rate.  It has long been held that withdrawing 4% from your retirement assets per year was a “safe” withdrawal rate.  “Safe” means if the retiree starts taking 4% out of their portfolio when they retire and increase that amount by inflation each year then that income will last them the rest of their life.  4% became a rule-of-thumb even though it actually has strong academic backing.  Recently, however, online articles and general advisor talk have suggested that given the current low rate environment or due to big market collapses like 2008 and 2009 a 4% withdrawal rate is no longer feasible.