Federal Reserve policy and more trouble in Ukraine lead the checklist of investor woes last week. Fed members asserted that the Board will act rapidly and decisively to quell inflation, beginning with the next meeting in May. Economic reports last week contained no surprises and indicated that the economy was still relatively robust despite inflation and the war. Weekly jobless claims fell much more than expected to 166,000, the lowest since 1968. While information on service sector activity came in somewhat below expectations, it is still expanding. For the week, stocks pulled back a bit while longer-term bond yields rose to three-year highs. Bond interest is creeping up to a level that might entice investors, but they still should avoid longer-dated issues.
No wonder investors are befuddled by the to and fro of the market. Headline writers must get some sort of pleasure out of scary, but misleading descriptions of market action. One that stood out last Friday said: NASDAQ Index suffers worst weekly loss since March 11
. Lest you wonder if this awful loss arose in March of 2000 or 2008, or 2020, it was actually 2022 – the worst weekly loss in a mere four weeks.
First, here are some definitions of “the die is cast:” the future is determined; events will proceed in an irreversible manner; the point of no return is passed. So it is with the amount of money retirees spend after the first couple of years of retirement. Based upon my years working with retirees, once your level of retirement spending is set, there’s little chance of reducing it in the future. Withdraw too much, and you’re setting yourself up for financial problems later on. In one instance, a couple was spending far too much and they committed to cutting their spending way down. After a year of what they felt was a painful curtailment of their lifestyle, it turned out that they reduced expenses for the year by just $50. The die had been cast for them. For whatever reason, it’s almost impossible to cut back until the money runs out and then, previously affluent retirees may risk being consigned to public housing and SNAP benefits, formerly called food stamps. Here are very general rules of thumb for the annual amount of your total retirement savings that you can prudently withdraw, assuming you diversify your savings between stocks and bonds:
In your 60s: 4% to 5%
In your 70s: 6%
In your 80s: 7%
Withdraw much more than that and you’re gambling on your financial wellbeing.
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