Search results for: 4% rule

AS SOON AS THE BALL dropped, ushering in the new year, I got my ball rolling, making contributions to three tax-favored accounts. Why did I do this in January? I like my investments to have all year to grow.
I go through the same routine every year, and it’s always a chore. I invariably forget what to do and, in any case, the steps involved often change.
The first account I contributed to was my Roth IRA.

THERE ARE TWO GREAT debates in retirement planning: whether the famous 4% rule is valid—and how much income folks need, relative to their final salary, to retire in comfort.
I find both subjects frustrating, in part because there’s so little consensus. I also find much of the advice way too complicated for the average American.
I participate in NewRetirement’s Facebook group and occasionally give my views on both topics. I recently expressed the opinion that the goal in retirement should be to replace 100% of the base income you earned immediately before retirement.

INSPIRED BY THE TV series The Queen’s Gambit, many people suddenly want to master the game of chess. But I’m more interested in mastering the practical world of retirement gambits—and that means matching wits with Congress and the IRS.
During my working career, I saved money in taxable brokerage accounts, IRAs and 401(k)s, but never focused on Roth accounts. At age 55, having left my last employer, I had two things that compelled me to begin—time and reduced income.

IF YOU DESIGNATE beneficiaries for your retirement accounts, that’s usually a surefire way to pass those assets directly to your desired heirs without going through probate—but not always.
Because those beneficiary designations are so important, you should verify your choices every year in case there’s a change due to, say, marriage, birth, divorce or death. Especially marriage and divorce. Which brings me to a crucial issue: When dealing with IRA and 401(k) beneficiary designations,

THE 4% RULE HAS almost mythic status in the financial planning world. Originally suggested by Bill Bengen in a 1994 article, the rule provides a simple way for retirees to figure out how much they can withdraw from their portfolio without running out of money. In a recent article, Bengen updated his rule.
The rule defines the maximum amount retirees should withdraw from their portfolio in the first year of retirement. Got a $500,000 nest egg?

I GREW UP IN a small apartment. Truth be told, I was never enthusiastic about maintaining a house, but I did so for 45 years. Eight years after I retired in 2010, the house and its stairs became too much for my wife and me.
We considered moving to a smaller one-story house and briefly flirted with a continuing care community. We even looked at one community and found it too expensive, especially having to hand over a partially refundable $900,000 upfront fee,

SOCIAL SECURITY IS the most important source of income for many retirees. Yet there’s also a lot of confusion, especially when it comes to how benefits are reduced if you continue working and how benefits are taxed. In fact, I’ve heard many folks confuse and conflate these two separate issues.
Want a refresher? Here’s a look at both topics:
Working while collecting. If you start Social Security benefits before you reach your full retirement age (FRA),

I’D LIKE TO DESCRIBE—and recommend to you—what I’ll call the John Cleese approach to financial planning. It is, in my view, the simplest and most effective way to think about saving for retirement or any other goal.
John Cleese, the English actor and comedian, is largely retired. But in an interview, he described his approach to getting work done. When he had a weekly TV show, Cleese said, he didn’t worry about being unproductive some days.

WITH THE ELECTION just a month away, many investors are worried about what lies ahead. Does it make sense to lighten up on stocks now, in advance of the election? I see at least four reasons not to sell:

Despite the polls, we can’t be sure what the result will be.
As we saw in 2016, nobody knows how the market will react to that result.
Even if the market reacts negatively, the effect may be temporary.

EVERY SO OFTEN, I’m asked about my biggest investment mistakes—and I really don’t have much to say. Yes, like many others, I dabbled in individual stocks and actively managed mutual funds early in my investing career. Yes, like everybody who’s truly diversified, there are always parts of my portfolio that are generating disappointing short-term results. But such things don’t cause me any regrets.
Instead, as I look back, my big financial regrets fall into four buckets:
Pound foolish.

DOES WEALTH BRING advantages? Yes—but it can also invite some unique challenges. Consider country music singer Kane Brown.
Shortly after moving into a new home, he went for a walk. He told his wife he’d be back in half an hour. But seven hours later, after getting lost, he ended up calling for help. What was unique about this episode is that, the entire time he was lost, Brown was on his own property.

BACK IN AUGUST, Adam Grossman wrote a thought-provoking article about regret. He offered six strategies to minimize the chances you’ll end up kicking yourself for a choice you made. That got me thinking about the financial decision I most regret.
I bought a timeshare.
I know this admission will generate strong reactions in the personal finance community. I’d like to claim the ignorance of youth, but I was in my early 50s. I’d like to blame my wife,

AS I PLAN MY retirement, I have the advantage of a strong background in finance. I worked for 35 years in the investment field, primarily managing mutual funds. Early on, I obtained the Chartered Financial Analyst designation, which helped immensely.
Six years ago, when I was age 55, I embarked on a journey to comprehend the myriad rules and strategies surrounding retirement. I studied to become an RICP—a Retirement Income Certified Professional. While the CFA was useful for investment management,

MY WIFE AND I BOUGHT our first home in the mid-1980s. We were thrilled to get an 8% mortgage, though we had to pay three points—an upfront fee equal to 3% of the loan amount—to get that rate. Many of our friends had bought a few years earlier and were paying 14%, a common occurrence back then, according to Freddie Mac data.
We kept our eyes open for opportunities to refinance our high rate.

LAST WEEK, I LEARNED the disappointing news that our next-door neighbors—possibly the nicest people in the world—have put their house on the market.
While I’m sorry to see them go, I understand their decision. With a growing family, they’re looking for more room. During the pandemic, in fact, many people are making changes of one sort or another. Will they be happy with their choices?
That brings me to a new project, developed by author Daniel Pink,