Published: 2023-01-11
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Predictions from this Video
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Prediction
Topic
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For individuals retiring before age 65, a 3% withdrawal rate is recommended over the traditional 4% rule.
"if you're young and you want to retire before the age of 65 then most likely the four percent rule is not going to work and it's probably better to spend three percent instead"
Pending
US stocks may only return 4% above risk-free treasuries, lower than the historical 6%.
"they mentioned that the US could be the ultimate survivorship bias with high returns being the exception and not the norm because of that they mentioned that stocks could only return four percent above risk-free treasuries instead of the historical six percent that we've all gotten used to"
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A 2.7% withdrawal rate is suggested as the safest option for current retirees to ensure long-term financial security, assuming lower-than-historical US market returns.
"Ben argues that the 2.7 withdrawal rate is going to be the safest for people retiring today to give them the highest chances of living a long life without running out of money"
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Future investment returns are forecasted to be 4% for stocks, 1.3% for bonds, and 1.5% for inflation, a significant decrease from historical averages.
"historically they mentioned that we've seen a 10 return in stocks 5.3 percent in bonds and 2.8 percent for inflation but going forward they're forecasting a four percent return for stocks one point three percent for bonds and 1 point five percent for inflation"
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Charles Schwab suggests a 3.4% withdrawal rate for a 30-year retirement, with a lower rate needed for longer durations.
"Charles Schwab also says something similar believing that a 3.4 withdrawal rate would be sufficient for 30 years with less if you need the money to last longer"
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Even a 3.3% withdrawal rate might be too optimistic if inflation remains high for an extended period.
"if inflation which is at a 30-year High remains at or near today's level for an extended period even of reduction to 3.3 percent could prove optimistic"
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The worst-case realized return for the SP 500 over a 30-year period was 4.3% after inflation, observed during the 1960s stagflation.
"the worst case was a return of 4.3 percent after inflation which was even during the stagflation era of the 1960s"
Pending
For a standard 30-year retirement, a 4% withdrawal rate would have been acceptable with a diversified portfolio of domestic, international stocks, and bonds, based on historical data.
"if you're looking at a standard 30-year retirement and you want to be sure you're not going to run out of money based on all the past performance and data behind us then yes spending four percent would have been okay if you're Diversified across International stocks domestic stocks and bonds"
Pending
To sustain retirement for longer than 30 years, reducing spending to 3% is likely necessary, depending on the desired retirement duration.
"if you want to retire for longer than 30 years then most likely you'll have to reduce your spending to three percent depending on how long you want to live off your Investments"
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Ben Felix recommends a 2.7% withdrawal rate, while 3.5% is suggested for a 35-year retirement.
"for some people this might mean spending 2.7 percent like Ben Felix recommends her three and a half percent if you want to retire for 35 years"
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A variable spending strategy suggests adjusting expenses between 2.5% and 4.5% annually.
"your spending will never exceed four and a half percent but it'll never go below two and a half percent"
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Adding international diversification to a portfolio can increase the safe withdrawal rate from 2.6% to 2.8%.
"by adding International diversification to the portfolio the withdrawal rate can increase from 2.6 to 2.8 percent"
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The speaker personally follows a 3% withdrawal rule, with the flexibility to reduce spending further if necessary.
"I personally follow the three percent rule knowing that I could easily cut back if needed without overextending myself in the worst case scenario"
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It is predicted that spending in retirement will decrease by 10% for each subsequent decade.
"spending declines by 10 for each decade in retirement"
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It's advisable to plan for lower investment returns, which ensures preparedness for worst-case scenarios and potentially more funds for best-case outcomes.
"it's reasonable to plan for lower returns because worst case scenario you came prepared in best case scenario you'll have more money left over in the future if you decide to spend it"
Pending
A 3% withdrawal rate is suggested as a conservative approach for long-term retirement planning, particularly in uncertain economic times. A promotion for a free stock on Public.com is also mentioned.
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