What Happens When You Sell a Stock? What to Know Before Filing Your Taxes
Before you hit the trade button for a potential profit, read this to understand what it could mean for your tax bill.
Before you hit the trade button for a potential profit, read this to understand what it could mean for your tax bill.
If youâve been thinking about moving your investments to a new broker, Ally Invest needs to be on your shortlist. Part of the Ally Bank family, itâs one of the top investment brokerages available, especially when you look at all the services they have for just about every area of your financial life. About Ally […]
The post Ally Invest Review â Affordable Online Stock Trading Platform appeared first on Good Financial Cents®.
Investment opportunities are different ways to put your money to work, and they can include any number of things, such as buying assets and waiting for them to appreciate, or investing in real estate or a business opportunity. There are varying degrees of risks and potential rewards with each option, but if youâre looking to […]
The post Investment Opportunities in 2023 appeared first on SoFi.
If you have financial goals, you need a financial plan. Here’s how to make one.
The post Why you need a financial plan appeared first on Discover Bank – Banking Topics Blog.
This week we saw a 1000+ point drop in the Dow Jones Industrial Average, the largest 1-day point drop in DOW history. Should it affect your investing decisions?
The post Why Stock Market Swings Shouldn’t Affect Your Long Term Investing Plans appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.
“Jesse, your career change…it’s a huge risk, right?” But how do I define risk? How does that definition apply to this question? Is my career change a huge risk? Is it risky at all?
One of the fundamental ideas I try to promote here at Get Rich Slowly is your savings ought to be invested for long-term growth. You ought to use the magic of compounding to create a wealth snowball.
Naturally, you want put your money into an investment that offers a reasonable return and acceptable risk. But which investment is best? I believe — as do most financial experts — that you’re most likely to achieve high returns by investing in the stock market.
But why do so many people favor the stock market? How much does the stock market actually return? Is it really better than investing in real estate? Or Bitcoin? Let’s take a look.
In Stocks for the Long Run, Jeremy Siegel analyzed the historical performance of several types of investments. Siegelâs research showed that for the period between 1926 and 2006 (when he wrote the book):
My own calculations â and those of Consumer Reports magazine â show that real estate does worse than gold over the long term. (I come up with a real return of just under one percent.) Yes, you can make money with real estate investing, but it’s far more complicated than just buying a home and expecting its value to soar. (It’s important to note that returns on real estate are a contentious subject. This recent academic paper analyzing the rate of return on “almost everything” found that housing actually outperforms the stock market by a slight margin.)
Siegel found that stocks have been returning a long-term average of about seven percent for 200 years. If
youâd purchased one dollar of stocks in 1802, it would have grown to more than $750,000 in 2006. If youâd instead put a dollar into bonds, youâd have just $1,083. And if youâd put that money in gold? Well, itâd be worth almost two bucks â after inflation.
The new milestones financial planning service built into WiseBanyan is another useful tool from the free automated financial advisory service.
The post WiseBanyan Milestones Tool Helps You Invest For Future Goals appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.
Betterment is a low cost, set it and forget it investing service. Transfer funds, choose your asset allocation and invest! Betterment will do the rest!
The post Betterment.com Review: Easy Investing For Busy People appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.
Last week, I wrote about the problem with retirement spending: How much should you spend during retirement? If you spend too much, you run the risk of depleting your savings. But if you spend too little, you’re sacrificing the opportunity to make the most of your money, to “drink life to the lees”.
One of the guiding principles in retirement planning is that there’s a “safe withdrawal rate”, a pace at which you can access your investments so that your nest egg will last for thirty years (or longer).
For simplicity’s sake, a lot of folks talk about the “four-percent rule”: Generally speaking, it’s safe to withdraw 4% from your investment portfolio every year without risk of running out of money. (This “rule” manifests itself here at Get Rich Slowly when I say that you’ve reached Financial Independence once you’ve saved 25x your annual spending — 33x your annual spending if you want to be cautious.)
Today, I want to take a closer look at the four-percent rule for safe withdrawals — then explore why the theory behind it doesn’t always mesh well with the reality of our daily lives.
Last August, William Bengen (who first proposed the 4% rule in a 1994 article), participated in an “ask me anything” discussion at the financial independence subreddit.
Here’s the top question and answer from that thread (with additional formatting for readability):
Question
Is the 4% rule still relevant in today’s economy? What safe withdrawal rate would you recommend for someone planning for longer than 30 years of retirement?Answer
The “4% rule” is actually the “4.5% rule” — I modified it some years ago on the basis of new research.The 4.5% is the percentage you could “safely” withdraw from a tax-advantaged portfolio (like an IRA, Roth IRA, or 401(k)) the first year of retirement, with the expectation you would live for 30 years in retirement. After the first year, you “throw away” the 4.5% rule and just increase the dollar amount of your withdrawals each year by the prior year’s inflation rate. Example: $100,000 in an IRA at retirement. First year withdrawal $4,500. Inflation first year is 10%, so second-year withdrawal would be $4,950.
Now, on to your specific question. I find that the state of the “economy” had little bearing on safe withdrawal rates. Two things count:
- If you encounter a major bear market early in retirement, and/or
- If you experience high inflation during retirement.
Both factors drive the safe withdrawal rate down.
My research is based on data about investments and inflation going back to 1926. I test the withdrawal rates for retirement dates beginning on the first day of each quarter, beginning with January 1, 1926. The average safe withdrawal rate for all those 200+ retirees is, believe it or not, 7%!
However, if you experience a major bear market early in retirement, as in 1937 or 2000, that drops to 5.25%. Add in heavy inflation, as occurred in the 1970’s, and it takes you down to 4.5%. So far, I have not seen any indication that the 4.5% rule will be violated. Both the 2000 and 2007 retirees, who experienced big bear markets early in retirement, appear to be doing OK with 4.5%. However, if we were to encounter a decade or more of high inflation, that might change things.
In my opinion, inflation is the retiree’s worst enemy. As your “time horizon” increases beyond 30 years, as you might expect, the safe withdrawal rate decreases. For example for 35 years, I calculated 4.3%; for 40 years, 4.2%; and for 45 years, 4.1%. I have a chart listing all these in a book I wrote in 2006…
If you plan to live forever, 4% should do it.
That’s some helpful information, and it comes directly from a man who has been researching this subject for 25 years. Obviously, it’s no guarantee that a four-percent withdrawal rate will hold up in the future, but it’s enough for me to continue suggesting that you’re financially independent once your savings reaches 25 times your annual spending.
But here’s the catch — and the reason I’m writing this article: From my experience, spending in early retirement is not a level thing. It fluctuates from year to year. Sometimes it fluctuates wildly.