How much money should I withdraw annually from my portfolio when I retire?

I get that question a lot from friends and family. (Occupational hazard.) It’s also one of the most hotly debated issues in financial planning. Why? First, it’s important; we all hope to live happily in retirement. Second, every person’s situation is unique, so there’s no standard set of spending assumptions for retirement planning. Third, market returns may be mean-reverting over long time periods, but a person’s retirement happens over a specific time period, parts of which may deviate significantly from longer-term average returns that are used to forecast future asset values.

Let’s start with why the question is so critical. Ideally, you’ve been saving for four to five decades to build your nest egg. Now that you’ve stopped working, you want to use that hard-earned money for daily expenses, health care and the things you wanted to do while you were working — like taking a month-long African safari. But you also want to make sure your money lasts until you or your spouse dies, whichever comes later. Often, you want it to last even longer: Many people hope to pass along some of their assets to their children, grandchildren and other loved ones.

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Now, if we all had the same assets, spent roughly the same amount each year and died at the same age, figuring out how to budget for retirement would be a relatively simple process. Of course, we don’t. So the retirement planning equation involves many variables, such as: At what age do you want to retire? Do you have a pension or expect to receive Social Security? What are your fixed expenses and how much will they increase with inflation? Do you have a family history of longevity? Do you want to pass money down to subsequent generations?

This is a just a sample of typical retirement planning questions, but it makes the point: We all have different starting assumptions, needs and desires. Yet, many people of different means often get the same answer when they ask how much money to withdraw annually from a retirement portfolio: Usethe 4% rule.

Originally articulated in a 1998 paperbythreeprofessorsatTrinityCollege in Texas (a paper now known as the TrinityStudy), the rule recommends that you withdraw 4% of your retirement savings in your first year of retirement. Every following year, withdraw the same amount plus an adjustment for inflation. Historically, retirees who follow that schedule have had a high chance that their portfolio will last at least 30 years. In the original study, the success rate varied slightly depending on the ratio of stocks to bonds in a portfolio, with a 50-50 stock to bond ratio producing a 95% success rate. (Subsequent studies have examined how to add a variable component to the formula based on previous year portfolio returns with the goal of increasing the success rate to 100%.)

The 4% rule is a simple one and easy to remember, which I think is one reason why it’s become so popular in my business — it’s a little like a doctor telling a patient to take two aspirin and call in the morning. Another is its high estimated success rates; again, like doctors, financial planners first want to do no harm.

But in the years since the rule was introduced, skeptics have raised a number of objections to it. Some say that it’s too conservative and that it will cause those who follow it to live less well than they would like to, particularly in their early retirement years when people are more likely to travel and spend more. Others say it’s too aggressive: What happens if we’re in an extended period of stock market stagnation or decline — like, say, the last decade? Shouldn’t you then be withdrawing less than 4% when 10-year government bonds are paying less than 2%? Put simply, should your withdrawal rate remain constant when your returns don’t?

Nobody wants to be a member of the unlucky 5% of retirees who follow the 4% rule but still run out of money. In my next post I’ll look at some of the ways economists and financial planners have suggested amending the rule to prevent that from happening.

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It’s not difficult to figure out how the job market works. The most secure, best-paying positions are the one’s with the least amount of applicants because either too few people are qualified, or nobody wants to take them. As anyone with an established career knows, there are times when you have to weigh salary versus general happiness, as the two don’t always coexist. To some, making $90,000 in exchange for putting in long, arduous hours in a terrible work environment is worth it; others are content with $45,000 and a mostly stress-free 40-hour work week. The following jobs have more characteristics pertaining to the former than the latter, which is why they probably aren’t worth the (relatively) high pay. Note: Salaries from payscale.com are for workers with 10 to 19 years of experience in the profession. Salaries from simplyhired.com are averages from all workers, regardless of experience.

1. Gastroenterologist, $122,339-$397,317

Being a Gastroenterologist comes without the usual glamour that’s associated with being a doctor, as, well, the job requires examination of the digestive system, specifically the intestines, stomach, esophagus, gallbladder, pancreas and liver. Dealing with the problems associated with those areas can be messy and quite unpleasant for the patient, with whom the gastroenterologist becomes intimately acquainted.

2. Surgeon, $96,204-$364,895

Routinely ranked as one of the most stressful jobs in existence, surgeons are afforded minimal margin for error during their unpredictable, tedious hours of work. In addition to the possibility of witnessing death and even facing lawsuits, they have to deal with hostile patients and family members, and sometimes embittered hospital staff workers who offer little help. Because they spend roughly 80 hours per week in the hospital, their social lives and family lives leave a lot to be desired, negating a lot of the benefits that come with the high pay.
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3. Stockbroker, $32,549-$241,902

The unpredictability of the stock market and the economy make this job one of the most unstable. Responsible for their clients’ money and their own salaries, stockbrokers are expected to take full advantage when the market is strong and weather the storm when it’s weak. Both decisiveness and patience are needed for success, two qualities most people aren’t fortunate enough to possess at the same time — especially during times of crisis.

4. Divorce Attorney, $61,069-$186,850 (general lawyer salary)

Divorce is never a pleasant experience, particularly for the divorce attorney, who’s tasked with enduring and settling the sometimes bitter fight between two parties. In many cases, rationality is tossed out the window in these disputes, leaving the lawyers with unreasonable and uncooperative clients. Finding satisfactory alimony and custody agreements can be like pulling teeth, and time in court is always a possibility.

5. Commercial Airline Pilot, $30,410-$120,805

Before the industry took a nosedive, international captains were making upwards of $300,000. Today, captains still command a hefty sum in the low end of the six-figure range, which is justified by their extremely random schedules that include strict time constraints, different routes, layovers and poor weather that can add unneeded stress to a routine flight. As with those in the medical profession, pilots’ margin for error is minimal, as one mistake can end the lives of hundreds of people.

6. Coal Mine Worker, $75,328 (payscale.com industry average for 10-19 years experience)

The jobs from this point down aren’t necessarily high-paying compared to the previously listed jobs, but for those who aren’t college graduates, the salaries are very appealing. That explains why people enter the coal mining industry, even though the work is accompanied with constant danger. Extracting coal from dark, oxygen-deprived mines that have barely been explored is risky business, as evidenced by the months-long drama surrounding the Chilean mining accident in 2010, a rare mining fiasco that ended well.
7. Long-Haul Trucker, $29,229-$72,956

Fortunately for truckers, the Federal Motor Carrier Safety Administration (FMCSA) regulates their hours of service, so they can’t drive more than 11 cumulative hours during a 14-hour period. Even still, they have strict deadlines to meet amid the typical hindrances that may arise, such as traffic, an accident, engine trouble and trouble with the load. Most people struggle with their 1.5-hour daily commutes, but imagine doing it for half a day, dealing with the numerous lousy drivers who disregard the truck’s presence on the road.

8. Embalmer, $33,935-$61,475

When the surgeon or gastroenterologist can’t do any more, the embalmer likely enters the picture. With a fraction of the pay of the aforementioned professions and more of the disgustingness, they prepare the body for the funeral and burial by removing its blood and adding embalming fluid for preservation, performing additional tasks such as waxing and shaping to make it appear lifelike. Mistakes and sloppy work can ruin a family member’s lasting image of their loved one — and nobody wants to be responsible for that.
9. Hostage Negotiator, $55,000

Much like divorce attorneys, hostage negotiators deal with irrational people on a regular basis, and the success or failure of their tasks hinges completely on whether or not they’re able to reason with those irrational people. Given that hostage takers’ personalities vary, negotiators must formulate strategies for dealing with each one, handling them in a way that won’t worsen the situation. Of course, if they fail, loss of life is a possibility, which is way more responsibility than most people are willing to volunteer.

10. Bomb Squad Officer, $54,000

Not only is the loss of life a possible outcome of failing to properly defuse a bomb, but, if you’re a bomb squad officer, the loss of your life is a possibility. A nerve-wrecking job that’s certainly not good for your blood pressure, no amount of pay, let alone $54,000, is enough for these gutsy individuals.

Source: BusinessInsurance

None of us really want to consider our very own passing, and that is most likely why those who ought to make a will usually do not get around to it. Wills online supplies a straightforward solution to going through what’s going to happen with your things when you die.

You can’t say everyone is convinced that online wills happen to be an effective way of to make your own last choices crystal clear to the individuals you leave after you die because not all wills are identical.

It is easy to ease the process of making a will while there are actually different types of wills from which to choose. Wills online recognise that not sll circumstances are the same and which means you will find four different kinds of wills that you could look at. Among the issues with a lot of wills that are written on the internet is they are definitely not authored by professionals. When using wills online you will find that no matter what will you choose it is compiled by a legal expert in that particular niche.

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Generally there will come a period when the majority of us must take into account what will come to pass once we arrive at the end of your life. For those who have youngsters then you’ll definitely prefer to be sure that they may get money, house and also belongings you leave behind. When you have a will, especially one that’s written by an expert, it will be less of a challenge to your kids to get the things which you’d like them to get.

If you determine that it the right time to consider making a will it may be beneficial to assemble every piece of information you will require, including your account particulars, money and property its possible you have, as well as finally every specific bequests you wish to put together from your belongings. An expert will writer is going to take the details which you provide and also develop a will which, once authorized, provides for a legitimate document on your final wishes.

No person wishes to contemplate their family battling over cash as well as real estate after they have passed away. In the event you make sure you get a will composed with wills online you can rest assured that your hopes are going to be carried out whenever you die. If you undertake to give almost everything to charitable organization which is completely your decision but you have to leave behind a authorized as well as written report of your respective wishes.

You might not appreciate it, but it’s smart to move on with making a will as quickly as possible. No person is aware when they’re going to pass away. You’ll feel much happier when you know just where your personal property is going as soon as the occasion occurs.

The “Bargain Stock Monitor” is one of three market statistics used as performance expectation analyzers for portfolios that are designed and managed using the Market Cycle Investment Management (MCIM) methodology.

It is derived from the month end Investment Grade Value Stock Index (IGVSI) “watchlist” screening program, which identifies IGVSI companies that are trading at least 15% below their 52-week highs.

The “15% down” break-point allows you to keep your eye on “Bull Pen” items. (You really need to be familiar with the selection rules to get the most from the BS Monitor – chuckle – and from the Watch List program.)

The fewer IGVSI equities at bargain prices, the stronger the stock market and the more “smart cash” you should be accumulating in the equity asset allocation “bucket” of your investment portfolio. As the list of bargain stocks grows (indicating market weakness), portfolio “smart cash” should be finding its way back into undervalued securities.

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The 2011 monitor documents the rally that began in March 2009. At year end 2010, barely 2% of the entire IGVSI universe were at bargain price levels — only 7 stocks. April’s “6″ tied for “lowest-month-end-number-ever” honors, and clearly showed the continuation of a bubbling out of control rally.

The April 30 number demanded continued “Buy Side” patience — May & June have showed you why!

Finally, a buying opportunity in IGVSI equities! In spite of some serious month end bargain hunting (or, possibly, window dressing), the month end “monitor” showed the weakest market conditions in ten months — but still not a big-deal market correction.

The number of IGVSI bargain stocks doubled in May and re-doubled in June.

Those of you who heeded earlier “bubble” warnings (on the IGVSI website) and took your profits, should have repositioned some of your “smart cash” over the past six weeks or so. As for me, I’m rubbing my hands together in excitement, hoping that the market weakness will continue for another few months — in the long run, corrections are a good thing.

If you did not take your profits by the April peak, one of these things happened: (a) You were greedy, and continued to ignore MCIM profit taking guidelines; (b) You didn’t have profits because you failed to make new equity purchases during the last correction; (c) You didn’t want to be burdened with those short-term capital gains that will surely disappear — yet again; (e) You thought that the rally would last forever.

If you locate yourself in the previous paragraph, you should still have unrealized profits that you should be taking — have you figured out yet that “total realized return” is a much better number to focus on than the unrealized variety?

On the “income” side of your portfolio, you should notice significant value gains after the third month of an income CEF rally — particularly in the municipal variety — there have been profit-taking opportunities there as well.

Caring for our pets can sometimes stretch budgets, we love our pets and are willing to do anything for them. Yahoo! Finance’s Farnoosh Torabi has rounded up some ways to save money on the care and feeding of our fluffy friends–from buying less food, choosing adoption, and learning some do-it-yourself grooming techniques.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100…

If they paid their bill the way we pay our taxes, it would go something like this…

The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7..

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

So, that’s what they decided to do..

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20″. Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).

The sixth now paid $2 instead of $3 (33% saving).

The seventh now paid $5 instead of $7 (28% saving).

The eighth now paid $9 instead of $12 (25% saving).

The ninth now paid $14 instead of $18 (22% saving).

The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” declared the sixth man. He pointed to the tenth man,”but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!”

“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

Wouldn’t it be great to get out of credit card debt once and for all? To put an end to the ever increasing tensions that worsen insomnia and inspire fights between family members? To cut away the burdens that enslave your household budget? To be able to answer the phone without worrying that it’ll be another bill collector interrupting dinner? It honestly might be easier than you think.

1 – Make Sure You Earn More Money Than You Pay Out

Sounds simple? You’d think so – without a strict budget that ensures you won’t increase your burdens each week, how could you ever expect to get out of credit card debt – but you’d be surprised how many American heads of household start out attempting a vaguely formulated program of debt relief without ever marking down just what the family could spend.

2 – Discern Which Financial Burdens Are Acceptable And Which Are Not

This determination, too, generally seems easier said than done because of a few different issues. To take one instance that often bedevils folks trying to get out of credit card debt, it’s so ingrained among many families that the very first thing that they should do is get rid of their mortgage debt. Obviously, for home owners that have the capacity, protecting the sanctity of the family residence should be of paramount importance. At the same point, though, overly prioritizing the home loan – which will almost always have the lowest fixed Annual Percentage Rate imaginable as well as allowing tax deductions for qualified citizens – just because of the way in which you were raised does avoid the sad but unfortunate truth that your mother and father didn’t have to worry about thousands of dollars of high interest unsecured lines of credit. Auto loans are a smaller (in every way) version of the same scenario.

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3 – Among The Unpleasant Debts, Choose The Very Worst To Focus On

In the same way that a number of United States residents still tend to over value the importance of paying off their home mortgage over trying to get out of credit card debt – especially surprising given all of the information we know now about the dangers of compound interest – debt relief professionals are continually amazed at how many heads of household decide that the best way for them to go would be an essentially equivalent schedule of repayment for all of the accounts. While some consumer finance analysts do believe that the most effective approach toward remuneration lies in tackling the smallest loans, it’s hard to argue for all but the hardest to motivate borrowers to go any other direction besides eliminating the highest interest rates or worst terms.

4 – Leave Well Enough Alone

In the same vein, we wish to emphasize that all Americans who wish to get out of credit card debt should keep in mind that they should not eliminate all of their unsecured accounts completely: and, regardless of the completely understandable temptations, never close every single one of your accounts. Even though your Fair Isaacs credit score will certainly be improved as the credit reporting agencies note that the balances have been satisfied, some variables which will positively influence the numbers include the capacity of your credit as well as the length of time in which you’ve held your oldest unsecured account.

Author Bio
Cole Collins is a free lance writer in the field of personal finance for help with Debt Relief and can be contacted on aedwards8989 AT gmail DOT com

What works in investing? I don’t mean that question the obvious way-that it’s a place where people buy and sell stocks through brokers. What I mean is how you think stock prices are really set. What is your mental model of how prices are decided?

A flawed mental model can lead to some interesting conclusions. For example, in the early days of email, a friend of a mine believed that if you reduced the font size in an email message, then the message would become smaller and therefore easier to send. It was a flawed mental model, or rather, was the fax mental model being applied to email.

I believe one of the fundamental reasons why so many people have trouble investing in the stock markets is that they have severely flawed mental models of what determines a stock price. While there are many mental models of how the stock markets work, some are more common than others.

This is the most widespread one: ‘There are people who know when a stock’s price is about to rise. If one of them tells me, then I can make money.’ This is the ‘tip’ model of the stock markets. It isn’t so much a mental model as the lack of one. Unfortunately, this is a very common one. There seem to be a lot of people who believe that someone out there knows which way things will move and everything depends on somehow getting to know these secrets.

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A little broader than the ‘tip’ model is the ‘operator’ model. Under the operator model, people believe that there are people (“operators”) who manipulate stocks and what one needs is to figure out what the operators are doing and then somehow, manage to ride the stock while the operator is pushing it. This model is actually realistic. Outside the big, high volume tickers, many, many stocks are routinely manipulated by the so-called ‘operators’, at least in the short-term.

However, this model is useful only for the operators themselves. To succeed, operators need greater and greater fools to buy into the stock they are operating on. Basically, if you are not an operator yourself, you are under considerable risk of giving away your money to an operator. For a surprisingly large number of people-many of them regular investors-the markets are primarily driven by conspiracy. There are secret cabals of operators who decide practically everything and then they just make it happen.

There is, of course, yet another model. This one is about researching companies, figuring out their businesses, projecting what could possibly happen in the future and then deciding which stocks to buy, which not to buy and when to sell the ones you have bought. However, compared to the ‘tip’ model and the ‘operator’ model, such a small number of people believe in it that perhaps it’s just a fringe idea. What do you think?