Sequence of Returns Risk: Are You Financially Safe?
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- Опубликовано: 9 июн 2024
- Retiring with $1.8 million should secure your financial future, right? Not necessarily! In today's video, we explore the critical impact of the sequence of returns risk on your retirement portfolio. You'll see real-life examples of two retirees who started with the same amount but ended up with drastically different outcomes. 🔍
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Chapters of this Video:
00:00 - Introduction
00:14 - Understanding Sequence of Returns Risk
00:22 - Real-Life Portfolio Examples
01:10 - The Role of Market Conditions
01:34 - Assumptions and Common Misconceptions
02:18 - Example Scenarios: Good Year vs. Bad Year
03:05 - Case Study: Retiring in 2001 vs. 2003
04:47 - Long-Term Effects on Portfolio Performance
05:07 - Risk of Running Out of Money
05:19 - Case Study: Retiring in 2007 vs. 2008
06:11 - Impact of the Great Financial Crisis
06:34 - Comparing Portfolio Values in 2024
07:00 - How to Mitigate Sequence of Returns Risk
08:07 - Tip 1
08:25 - Tip 2
09:56 - Tip 3
10:47 - Conclusion and Next Steps
📈 Key Highlights:
📊 Understand why one retiree runs out of money while the other thrives.
📅 See the shocking difference one year can make on your retirement savings.
📌 Learn the importance of market conditions at the beginning of your retirement.
🚨 Three Essential Tips to Mitigate Sequence of Returns Risk:
📉 Balance Your Risk: Diversify your portfolio with bonds to cushion against market downturns.
💸 Dynamic Spending: Adjust your spending based on market performance to preserve your portfolio.
💵 Consider Annuities: Secure a fixed income, though it comes with trade-offs.
🔎 In This Video:
📈 Analysis of two real portfolios starting with $1.8 million.
📉 The impact of retiring during a good market year vs. a bad market year.
💡 How early losses can erode your retirement funds and what you can do about it.
Whether you’re planning to retire early or just want to ensure your financial independence, this video is packed with actionable advice to help you make informed decisions. Don't miss out on these crucial insights! 💡
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Check out our recommended video next to continue your journey towards financial independence. See you in the next video! 🚀
#financialeducation #financialindependence #FIREmovement
Learn about the sequence of returns risk in the FIRE movement and why your investments may run out early. Find out how to protect your financial independence in retirement!
Discover the secret to financial independence and learn how to avoid running out of money in retirement! Watch as two people retire with 1.8 million dollars each, spending the same amount yearly, yet experiencing different outcomes. Don't miss out on understanding sequence of returns risk in this eye-opening video!
*Disclaimer: Bob is not a financial advisor. Please contact a professional financial advisor prior to making any decisions. Some of the links and other products that appear on this video are from companies in which Bob Sharpe earns an affiliate commission or referral bonus. Bob Sharpe is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.
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I did an annuity that will cover my couch potato living for those down years, i.e. my basic living needs. Every other investment is just cream on top for enjoying life.
When I first started investing, red days scared me, I had fear of losing money short term, this channel has opened my eyes to seeing red as red sale tags, long term mindset, and my returns have bettered for it
To be fair I think this is why having some strong dividend etfs or stocks can really help out, over just pure growth stocks. A 40/60 or 60/40 split, to balance growth and income.
This is such a great video! Not only is it very informative, it is very realistic and something most people never think about. Thanks!
Glad you enjoyed it!
Historically, running out of money with the 4% rule has had a less than 4% chance of occurring.
Smart to have a couple years of cash in living expenses, a paid off primary residence, and a low percentage of fixed expenses relative to total expenses in your budget. Otherwise, keep your foot on the gas pedal and enjoy life. 😊
Truth!
This topic was excellent. I don't see anyone else bringing such interesting insights on YT. TY Bob, keep posting such awesome vids.
Thanks, will do!
Awesome info thank you Bob
Very welcome!
Nice video Bob, thanks.
Glad you enjoyed it!
thank you gov'ner. I got to $1.8 mill by being thrifty and hardworking, while juggling the stress of job and family.
but it I suddenly lose my mind & all goes outta window in retirement
It looked like you only did the 4% rule for the first year and then increased it by rate of inflation (3%) each year. If I were to do a 4% withdrawal, I would look at the amount of money I have at the beginning of the year and times that by 4% to see what I could withdraw that year. This may give me more, or less money to spend year over year. Yes, I may not keep up with inflation, but at least it should take me longer to run out of money.
Yes typically with the 4% rule you apply it to your initial portfolio balance and then adjust for inflation. But what you're doing is Dynamic Spending - this is something I personally aim to do with my FIRE Portfolio (not direct financial advice).
Right now I've been dcaing into Voo 34%/SCHG 16.5%/QQQM 16.5%/SCHD 33%. Hoping overtime I not only have market beating returns, but am able to grow my portfolio faster, and hit fire a lot sooner.
Same, but less in each, and some more in other etf’s
I am 70% BIL etf and 30% in SPYI neo etf
Only 2 i hold
I think as you approach retirement you need to start focusing on dividend etfs. Im all for growth early on. But im hoping once i look to retire early in 20 years or so to keep my networth for the remainder of life and hopefully pass on to family members. I watch genex on youtube. I like his style of investing. But hey im new to investing my views may change by then. Ive only just learned to live within my means thanks to people like bob etc. unfortunately i have to correct some bad financial decisions i made earlier. Untill then my investing will be the minimum but thanks bob for keeping the videos going. It helps to keep me focused on my goals
Super informative video and I never considered this aspect. I have a scenario that I think might make a good video for you. Hypothetically say I have a IRA worth $100k and a Roth IRA worth $10k. You can only invest $7000/yr (max contribution) into ONE account for 20-30 years. Does is make sense to invest in the standard IRA since it has such a larger value and will gain so much more interest accumulation? Example 7% interest on $100k will grow MUCH faster than 7% interest on $10k with equal contributions.
Hey man I use to watch u years ago, how did that nio stock turn out, I sold and lost 10 bucks each share. Best decision I made considering where it’s at now.
Most annuities are pretty terrible. They don't go up. They have a limited life.
It's a bit extreme. But one strategy I've looked at that's similar to dynamic spending is. Maintain 3x your annual expenses in a high interest savings or other easy to access safe place that gains at least some interest. That's 3 years. It's pretty rare to have 3 years that are down. But in those years your living off of that savings and not touching your portfolio until it starts recovering. Then periodically you are doing a very simple calculation. Did it go up since the last time I took money out? Yes. OK. Now take out SOME money to help refill your savings closer to 3x. Your not filling it to 3x necessary. Sure if all it takes is a small amount. But your taking out your expenses for that period of time since your last check. Plus a little extra to move back towards a 3x savings. So if the market has really terrible years. Like 2 in a row. You didn't touch your portfolio.
Hello Bob I'm subscriber and I'm a big fan of the $5 a dollar a day technic. Maybe you can or anyone can help me here.
I just started my 401k with Vanguard, but I want to buy some small stocks on the side and I was reading the small print on their website and it says only citizens of the USA can invest. I'm a resident only right now. Probably I'll become a citizen by the end of the year. Thanks
Is anybody gonna talk about GME stock?
If you like gambling, GME might be for you.
What about investing and living off dividens?
Which fund would you be looking at? Invest enough to generate a large salary on only the dividend payments, correct?
@@BobSharpe well it could be a portion of your profolio. SCHD is a great one and good in down turns.
@@BobSharpe Invest enough (through periodic deposits and dividend reinvestment) to build reliable dividend income that covers the expenses needed so that the principle doesn't need to be sold off. I like to maintain a diverse portfolio (yes, including growth, bonds, and short term) but some of my favorite funds in this space are SCHD, DIVO, JEPI, JEPQ, PFFA, RDVI, CSQ, and USA -- but that's just a few, and everyone's goals and tolerances are different.
@user-iw1cq4ft9t guessing American? Not sure on tax implications, but check out the S&P200 asx. On average a 4 to 5% dividend return..... and that's in AUD.
That's the smarter choice. Taking out the traditional 4% from a strictly growth stocks portfolio when the markets are down 20% or 30% or more will cripple future earnings (the earlier the worse, as demonstrated in the video charts). Basically, the worst thing you can do is retire during a crash so a high dividend portfolio would help protect against this.
If you had a portfolio of dividend paying stock then you would be good.
Which stocks specifically would you include? I can run that into the model, but likely could still face challenges