How the hell are we supposed to retire?

THATmanMANNY said:
I know and get all that but who the hell wants to move to the armpits of america to die out and most likely be away from all family that can help you.
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We cosmopolitan, East/West coast types have an interesting perception of the rest of our country. Having spent the last 12 years traveling to the armpits, belly-buttons, space-between-the-toes parts of America, for work, sports, etc., I'm slowly coming to the realization that we're living in ass-crack.
 
mfennell said:
I know your just kidding but the life expectancy in the US is actually 77, down from 78.8 pre-COVID (lots of dead old people). If you make it to 65, your life expectancy is 85 or so.
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A little tongue and cheek but I have yet to have a family member make it to 75. But the sentiment is the same as my wife's uncle's are about to retire in their mid to late 70s.

I think a lot of people think @rick81721 is the norm but he's becoming more and more the exception.
 
THATmanMANNY said:
I've already told my 7 year old she is going to community college.
It's insane what HS has come down to. I applied to 3 colleges. It seems the norm to apply to 8 now! (from what I hear)
I don't know if I will be employed here for another 10 years but Columbia U is free IF she gets in!
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When I graduated HS I didn't apply, I was just gonna go to work my wife registered me, when I graduated from CCM I was done again but she registered me for Rutgers.

I am now mature enough to register with Georgia Tech for my masters
 
Captain Brainstorm said:
We cosmopolitan, East/West coast types have an interesting perception of the rest of our country. Having spent the last 12 years traveling to the armpits, belly-buttons, space-between-the-toes parts of America, for work, sports, etc., I'm slowly coming to the realization that we're living in ass-crack.
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It is actually really funny how people act with wherever they live is the best place ever and look down on other areas.

I haven't traveled around the country as much as other people but I've seen enough of this country to realize there's a lot of nice areas that people easily dismiss. Lots of midwestern/southern cities and towns are very nice, modern and don't have a lot of the downsides we have here in the congested expensive areas.

Usually it's apparent someone haven't seen the country when they complain that you can only get good Pizza/Bagels here so therefore you should never leave NJ.
 
Santapez said:
It is actually really funny how people act with wherever they live is the best place ever and look down on other areas.

I haven't traveled around the country as much as other people but I've seen enough of this country to realize there's a lot of nice areas that people easily dismiss. Lots of midwestern/southern cities and towns are very nice, modern and don't have a lot of the downsides we have here in the congested expensive areas.

Usually it's apparent someone haven't seen the country when they complain that you can only get good Pizza/Bagels here so therefore you should never leave NJ.
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Yep same with states. There are beautiful areas and absolute dump areas in every state. Well maybe not Hawaii!
 
Captain Brainstorm said:
We cosmopolitan, East/West coast types have an interesting perception of the rest of our country. Having spent the last 12 years traveling to the armpits, belly-buttons, space-between-the-toes parts of America, for work, sports, etc., I'm slowly coming to the realization that we're living in ass-crack.
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I dunno. I've been to some bumfuck places because my job used to involve running disruptive radio transmission equipment you can't set up in downtown Red Bank without a visit from the FCC ("oh shit, GPS doesn't work? Sorry guys!"). It's just fine in the sense that everyone is nice to my straight, very white self but when they get comfortable, I start seeing a side of people that makes me long for this ass-crack area. I prefer to minimize my exposure to homophobe/racists who I seem to encounter far more in those places.

Also, the pizza sucks. Always. It's like a law.
 
...and once you retire?

There is a 4% rule about drawing down your retirement savings. The theory is that if a historical 7% yield, and a historical 3% inflation continue, we can draw 4% from the retirement assets without drawing down assets. Take more than 4% and you have to estimate life expectancy, and whether your money last longer than your heart. But this rule has always been sold as a 4% withdrawal or a 4% spend. That is not quite right.

Mathematically, the 4% is the 7% minus the 3%. The 4% rule is not a spending nor a withdrawal rule, it is a asset reduction rule. Put another way, you could get to 96% from 100% by withdrawing 4%, but you could also get there by a market decline. The S&P 500 is down 9% year to date. Assuming a portfolio that looks like the S&P 500, the market has already taken this year's and next year's 4%. Ouch. But markets traditionally bounce back. So work another two years, or only take 4% in good markets.

Then there is inflation. Lots of ways to massage the number, but 7% inflation today is a good proxy. And it reduces the 4% rule to zero % (7% yield minus 7% inflation...) Some inflation bounces back, like with gasoline prices. Other prices like minimum wage or CEO pay, never go down. Once up, they stay up. The once-up, stay-up inflation is not a one time cost like a 4% withdrawal or a market decline, but instead a new baseline cost. If the Federal Reserve somehow manages to get inflation to return to 2%, those higher once-up, stay-up costs are still increasing the costs you were hoping to cover with the 4%.

I am not a fan of the 4% rule.
 
i don't really agree with it either. It is an attempt to maintain your retirement balance relative to the cost of living (or whatever measure of inflation they are using)

is that really important? here is a thought. can your investments + social security (and pension for some) throw off more money then you would normally spend?
in other words, you are cash flow positive. The argument is that "normally spend" is going up.
We don't want to change the behaviour to which we've become accustomed to, at least not too much.
But we can. Fishing off the party boat in Clearwater, rather than the charter out of Cabo.... you know, giving up the little things ;)

Spending the principal, sure at some point. Don't want to spoil the kids too much.
 
Fire Lord Jim said:
...and once you retire?

There is a 4% rule about drawing down your retirement savings. The theory is that if a historical 7% yield, and a historical 3% inflation continue, we can draw 4% from the retirement assets without drawing down assets. Take more than 4% and you have to estimate life expectancy, and whether your money last longer than your heart. But this rule has always been sold as a 4% withdrawal or a 4% spend. That is not quite right.

Mathematically, the 4% is the 7% minus the 3%. The 4% rule is not a spending nor a withdrawal rule, it is a asset reduction rule. Put another way, you could get to 96% from 100% by withdrawing 4%, but you could also get there by a market decline. The S&P 500 is down 9% year to date. Assuming a portfolio that looks like the S&P 500, the market has already taken this year's and next year's 4%. Ouch. But markets traditionally bounce back. So work another two years, or only take 4% in good markets.

Then there is inflation. Lots of ways to massage the number, but 7% inflation today is a good proxy. And it reduces the 4% rule to zero % (7% yield minus 7% inflation...) Some inflation bounces back, like with gasoline prices. Other prices like minimum wage or CEO pay, never go down. Once up, they stay up. The once-up, stay-up inflation is not a one time cost like a 4% withdrawal or a market decline, but instead a new baseline cost. If the Federal Reserve somehow manages to get inflation to return to 2%, those higher once-up, stay-up costs are still increasing the costs you were hoping to cover with the 4%.

I am not a fan of the 4% rule.
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Of course with pretax trad IRA, once you hit 72 this goes out the window and you have to make withdrawals every year, and within a few years you are well over 4%.
 
cassinonorth said:
Uh. The Trinity Study is not for unlimited funds forever. It's based on draw down over 30 years.

If you're going to be retired for more than 30 years people typically take 3-3.5% withdrawal. And it's all percentages. You also sure as hell don't retire with 100% stocks to start withdrawing 4%.
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And there's a few things to note with the Trinity Study:
-Changes in portfolio at the beginning of retirement are the most important. If there's a major setback early you can make decisions like going back to work for a time to boost the savings.
-It was the likelihood of not going completely broke after 30 years, 4% withdrawal was nearly 90+ successful. It's to make sure you don't outlive your nest neg, not that you pass it on
 
JDurk said:
North Cape May as well. This just sold for $420k in '21. New owners already tore it down. My brother/SIL/parents have a house nearby. He gets cold calls from NY realtors asking if he's interested in selling.
www.realtor.com

1207 Franklin Ave, North Cape May, NJ 08204 | realtor.com®

View detailed information about property 1207 Franklin Ave, North Cape May, NJ 08204 including listing details, property photos, school and neighborhood data, and much more.
www.realtor.com www.realtor.com
View attachment 178294
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Current construction status of the house in North Cape May in my previous post.
20220226_143047.jpg
 
In 2019, Bayer acquired Monsanto, turning the S&P 500 into the 499, leaving a gap. Was company number 501 bumped up and into the S&P 500 to replace Monsanto? I don't know, but I doubt it. Twitter was added to the index; I doubt it was number 501.

Less than three years later, Twitter is leaving the S&P 500, and some other company will be added. A bunch of index funds will be buying that new addition, not because it is a good entry point, but because Elon Musk is taking a different company private.

We invest in index funds to try to match the market instead of trying to beat the market. But what is "the market"? If you own a 500 index fund, the market is those 500 stocks, in a weighting determined by Dow corporation. You no longer do stock selection, and your fund manager no longer does stock selection (reducing fees) but instead you are aping Dow's stock selection. The hope is we all aim for average. Even if you pick a total market return fund, there still is that weighting selection someone else is doing. We get both oil and tech, but we are not deciding how much oil and how much tech.

I have heard many finance professionals make statements such as "we can't beat the market". But the market is an average, by definition. It's the ECON 101 guns vs butter trade-off. In the ideal world, half would beat the average, half not. In a world of index investing, everyone is average. The lure of index investing is that the financial advisor making the stock selection charges a fee and yet is no smarter than you. So you can increase your return by his fee that you saved. But...

You could do the stock selection yourself. If you decided to put a portion of your funds in a 500 fund, and another portion in an international fund, you just did stock selection. Choosing those portions was selection. At the other extreme, you could own individual stocks, no funds, and have zero fees. Vanguard and Fidelity have some zero or near zero fee funds.

Where is this leading? Dow will announce the addition of a stock to the S&P 500 following the removal of Twitter. Dow will also determine what weight in the 500 that stock will take. Index funds around the world will be buying up that stock—not because it is a good time to buy it—but because Dow selected it. All of that concentrated buying is artificial demand, on an artificial timeline, and, ECON 101 again, drives up the price. Note that the value of the company has not increased, only its price. After this artificial demand is satisfied, we would expect the price to revert to its value, and each index fund to have lost value on its purchase. "The market" is artificially reduced.

I'm not a fan of index investing, to the extent buys and sells are not based upon economics.
 
Fire Lord Jim said:
In 2019, Bayer acquired Monsanto, turning the S&P 500 into the 499, leaving a gap. Was company number 501 bumped up and into the S&P 500 to replace Monsanto? I don't know, but I doubt it. Twitter was added to the index; I doubt it was number 501.

Less than three years later, Twitter is leaving the S&P 500, and some other company will be added. A bunch of index funds will be buying that new addition, not because it is a good entry point, but because Elon Musk is taking a different company private.

We invest in index funds to try to match the market instead of trying to beat the market. But what is "the market"? If you own a 500 index fund, the market is those 500 stocks, in a weighting determined by Dow corporation. You no longer do stock selection, and your fund manager no longer does stock selection (reducing fees) but instead you are aping Dow's stock selection. The hope is we all aim for average. Even if you pick a total market return fund, there still is that weighting selection someone else is doing. We get both oil and tech, but we are not deciding how much oil and how much tech.

I have heard many finance professionals make statements such as "we can't beat the market". But the market is an average, by definition. It's the ECON 101 guns vs butter trade-off. In the ideal world, half would beat the average, half not. In a world of index investing, everyone is average. The lure of index investing is that the financial advisor making the stock selection charges a fee and yet is no smarter than you. So you can increase your return by his fee that you saved. But...

You could do the stock selection yourself. If you decided to put a portion of your funds in a 500 fund, and another portion in an international fund, you just did stock selection. Choosing those portions was selection. At the other extreme, you could own individual stocks, no funds, and have zero fees. Vanguard and Fidelity have some zero or near zero fee funds.

Where is this leading? Dow will announce the addition of a stock to the S&P 500 following the removal of Twitter. Dow will also determine what weight in the 500 that stock will take. Index funds around the world will be buying up that stock—not because it is a good time to buy it—but because Dow selected it. All of that concentrated buying is artificial demand, on an artificial timeline, and, ECON 101 again, drives up the price. Note that the value of the company has not increased, only its price. After this artificial demand is satisfied, we would expect the price to revert to its value, and each index fund to have lost value on its purchase. "The market" is artificially reduced.

I'm not a fan of index investing, to the extent buys and sells are not based upon economics.
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I agree with most of what you're saying here, but I've realized within the last 5 years that getting "average" returns is well above average. the total market returns are better than 90% of stock pickers and actively managed funds. I'm not saying that you can't beat the market. People do of course, but usually only for 1-5 years, and then it tends to decline. What I've realized, for my interest, is that the most important thing about investing in the market is staying in the market. It's way easier for me to do that being invested in the Total Stock Market (VTI for example). I tend to get way too cute and creative when investing in single companies, and buying and selling is why most people never meet "average" returns. Of course, others may have a better temperament than I.
 
Fire Lord Jim said:
If you own a 500 index fund, the market is those 500 stocks, in a weighting determined by Dow corporation.
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Fire Lord Jim said:
Where is this leading? Dow will announce the addition of a stock to the S&P 500 following the removal of Twitter. Dow will also determine what weight in the 500 that stock will take.
Click to expand...

This is not a correct statement. The weighting is determined by market capitalization of each individual stock. The top 10 stocks control a large % of its weight.
 
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