Retirement Funds

[ushdadude]

Yes

IRA Contribution Limits
Your total IRA contributions, whether you have one type of IRA or both, are capped at $6,000 for 2021. However, if you're age 50 or older, you're permitted an additional $1,000 in catch-up contributions, for a total of $7,000 for the year.

This contribution limit applies to all your IRAs combined, so if you have both a traditional IRA and a Roth IRA, your total contributions for all accounts combined can't total more than $6,000 (or $7,000 for those age 50 and up). You get to decide how to allocate the contribution, however. If you wanted to put $50 in a traditional IRA and the remaining $5,950 in a Roth IRA, you could. Or you could put the maximum amount in just one IRA.

would this trigger pro-rata rules though?

[avromie7]

Def not how I read the OP. If you have an account with $3m, earning a constant 4% annually, and you withdraw $10k the first month, increasing that amount by 3% every 12 payments, you'll run out of money at the beginning of the 30th year. There is a concept out there of only using the earnings and leaving the principal untouched, and that was what I assumed he was referring to. $3m*4%=$120k/yr=$10k/mth.

I think the numbers generally used assume a 7% return with 3% kept in the pot to fight inflation and the other 4% can be taken out without ever decreasing the buying power of your draw.

[farmbochur]

Plug in your time horizon, asset allocation, and risk tolerance into the trinity study to determine an inflation adjusted safe withdrawal rate.

For example, a 4% withdrawal rate over a 40 year time horizon for a portfolio of 75% stocks and 25% bonds has a 92% chance of success (ie not running out of money).

Big caveat: Trinity study is based on historical returns. Past results do not guarantee future results.

https://www.rbcwm-usa.com/resources/file-687839.pdf

[AsherO]

Plug in your time horizon, asset allocation, and risk tolerance into the trinity study to determine an inflation adjusted safe withdrawal rate.

For example, a 4% withdrawal rate over a 40 year time horizon for a portfolio of 75% stocks and 25% bonds has a 92% chance of success (ie not running out of money).

Big caveat: Trinity study is based on historical returns. Past results do not guarantee future results.

https://www.rbcwm-usa.com/resources/file-687839.pdf

This is really interesting. The market is likely to continue averaging 7% annualized (or whatever the precise number you're using for any given index) growth over the long term. The issue is that if you're withdrawing constantly then bigger than expected dips hit you harder because you're reducing the size of your investment and thus reducing its ability to catch up when the market turns around.

[farmbochur]

This is really interesting. The market is likely to continue averaging 7% annualized (or whatever the precise number you're using for any given index) growth over the long term. The issue is that if you're withdrawing constantly then bigger than expected dips hit you harder because you're reducing the size of your investment and thus reducing its ability to catch up when the market turns around.

The bigger risk is actually if the market takes dips earlier in retirement rather than later. This is called sequence of returns risk and is something that WL agents will often pitch on. IMO, a well crafted plan on withdrawal rate and asset allocation is a more efficient way to address the risk.

[ushdadude]

The bigger risk is actually if the market takes dips earlier in retirement rather than later. This is called sequence of returns risk and is something that WL agents will often pitch on. IMO, a well crafted plan on withdrawal rate and asset allocation is a more efficient way to address the risk.

That's where bond tenting comes into play

[ExGingi]

This is really interesting. The market is likely to continue averaging 7% annualized (or whatever the precise number you're using for any given index) growth over the long term.

What is your definition of the long term (remember Keynes' famous quote "in the long run we're all dead")?

I suggest you look into https://www.advisorperspectives.com/articles/2020/07/20/the-remarkable-accuracy-of-cape-as-a-predictor-of-returns-1 or if you go to https://www.hussmanfunds.com/category/comment/ you can find plenty of articles where he harps on the concept of starting point matters for future returns.

As @farmbochur rightfully pointed out, the sequence of returns matters. There are also different allocations at different stages in life.

[farmbochur]

I suggest you look into https://www.advisorperspectives.com/articles/2020/07/20/the-remarkable-accuracy-of-cape-as-a-predictor-of-returns-1

I view the reliability of CAPE as a predictor of returns as reinforcement of the notion that investment in equity shares represents something real & tangible: a claim on future earnings of a company.

Too many people seem to dismiss investing as gambling & speculation rather than a reasonable means to build wealth.

[CountValentine]

Too many people seem to dismiss investing as gambling & speculation rather than a reasonable means to build wealth.

Extremely hard for the average Joe to understand.

[ushdadude]

I view the reliability of CAPE as a predictor of returns as reinforcement of the notion that investment in equity shares represents something real & tangible: a claim on future earnings of a company.

Too many people seem to dismiss investing as gambling & speculation rather than a reasonable means to build wealth.

. Because too many people confuse gambling and speculation with investing

[farmbochur]

. Because too many people confuse gambling and speculation with investing

Can't remember if it was a Berkshire earnings call or a lecture, but I recall Warren Buffett saying that we'd all be better investors if stocks were priced just once a quarter / year / decade.

[ExGingi]

Can't remember if it was a Berkshire earnings call or a lecture, but I recall Warren Buffett saying that we'd all be better investors if stocks were priced just once a quarter / year / decade.

100000%

I believe the Rebbe discouraged people from investing in stocks, one of the reasons being lack of מנוחת הנפש. It's an unnatural thing for someone who isn't a trader by profession to be able to be aware of day-to-day, let alone minute-to-minute price fluctuations.

[ExGingi]

I view the reliability of CAPE as a predictor of returns as reinforcement of the notion that investment in equity shares represents something real & tangible: a claim on future earnings of a company.

That cannot be stressed enough. One cannot dismiss bond investing too, and not only for the coupon but for appreciation and capital gains.

[ushdadude]

100000%

I believe the Rebbe discouraged people from investing in stocks, one of the reasons being lack of מנוחת הנפש. It's an unnatural thing for someone who isn't a trader by profession to be able to be aware of day-to-day, let alone minute-to-minute price fluctuations.

Would index fund be included? (Seriously asking)

[AsherO]

The bigger risk is actually if the market takes dips earlier in retirement rather than later. This is called sequence of returns risk and is something that WL agents will often pitch on. IMO, a well crafted plan on withdrawal rate and asset allocation is a more efficient way to address the risk.

If it recovers quickly then an early dip wouldn’t necessarily matter much. Highly hypothetical because markets that dip significantly don’t tend to recover quickly...

[AsherO]

What is your definition of the long term (remember Keynes' famous quote "in the long run we're all dead")?

I suggest you look into https://www.advisorperspectives.com/articles/2020/07/20/the-remarkable-accuracy-of-cape-as-a-predictor-of-returns-1 or if you go to https://www.hussmanfunds.com/category/comment/ you can find plenty of articles where he harps on the concept of starting point matters for future returns.

As @farmbochur rightfully pointed out, the sequence of returns matters. There are also different allocations at different stages in life.

Much of this “different allocation” stuff is pre-retirement, specifically when you have a long time until you’ll be taking money out. But here we’re talking about post-retirement.

[AsherO]

Would index fund be included? (Seriously asking)

Do people day-trade index funds? I don’t think they’re as much a disruption to “מנוחת הנפש”.

[ExGingi]

Do people day-trade index funds? I don’t think they’re as much a disruption to “מנוחת הנפש”.

Have you never seen volatility in indexes?

Compare that to any other (tangible) asset class you know of.

The way I understand it, the issue is with the frequent price fluctuations (and the inevitable awareness thereof).

[yesitsme]

Everyone I know it is the best decision they ever made. One neighbor retired a couple years ago at the age of 53. My other neighbor just retired last week at the age of 51. Trying to get the neighbor across the street to retire and he is 55. Best advice I can give is retire as early as you can.

It excels the aging with lighting speed

[Yehuda57]

I believe the Rebbe discouraged people from investing in stocks, one of the reasons being lack of מנוחת הנפש.

Source(s)?