Great video. I think this risk based guardrails approach is a true gamechanger. The fact that Income Lab uses historical data sets dating back to the 1800's to test the guardrails gives an incredible piece of mind and def should make it easier to sleep at night when the market heads south. Using Right Capital AND income lab is the perfect combo IMHO.
Good sales pitch for "Income Lab" software. By the way: in 2006 Ben Stein and Phil DeMuth published a book about retirement where they proposed a dynamic spending system not unlike the guard-rail system. They also showed that in the past their system would have coped with all of the market crashes. And best of all, there system is based on a 5.6% spending-rate. It as available for around 10 bucks. History keeps repeating itself...
good video. It seems to do roth conversions with 10 percent drops in the market instead of 20 percent, since the market only drops 20% once every 6 years. I read on bogleheads, a guy was saying "why wait for the market to drop 20 percent, if you wait four years, the market goes up 10 percent a year for 4 years, that's 40 percent gains, if it drops 20 percent, you did roth conversion with market gain of 20 percent, should have done the roth conversions four years ago instead, the sooner the better"
So thankful for my pension. If the market goes down we can survive on our pensions and SS. When it's a good year draw enough for a year and eventually build a few years of expenses to help with the bad years.
I also retired at the same time as case 2. I just lived on my cash savings and pension. I was not worried because I knew it would eventually recover and I would be fine. I only retired early because I knew I could live on my pension and savings if I had to. The trips abroad would just wait until I recovered. I am very grateful for that pension. It gives me peace of mind.
Is this about half full vs. half empty as at the end, you have the same amount of money? And why would keep running success score every month or even ever again after the initial acceptable score?
I keep enough in physical assets so I can reposture if the market changes and have emergency liquidity for routine expenses. I actively manage my own but I have my own CFP as a benefit of my LTCS policy.
Good move, Kevin. So much of financial planning, in general, leans way too conservative. Guardrails clearly seem the way to go nowadays. Thanks for emphasizing this newer way of looking at things.
Interesting content. I am 56 and started seriously planning for retirement way later than I should have. However, I’m debt free and have been hammering down on investing for my future. Maxing my Roth IRA every year, maxing my HSA every year and dumping as much as I can into my brokerage account. I’m single with no dependents. Plan to work until I’m at least 70. Based on my calculations, I should have approximately $2m by then depending on market performance. Enjoyed the video.
Very informative.....I am also a CFP like yourself. Would you share with me what kind of software you use for doing Monte Carlo simulation??? thank you!!!
I am surprised to know from your example that the effect of a market downturn only translates to a few hundred dollars of monthly spending for a short time or no cut at all (assuming not bailing out at the bottom of market and eventually portfolios recovered). May you model 2008 or other period of time that market recovered slowly? Or prolonged downturn? Do people just need to spend less 0:01 for a few years and everything will be the same?
Great question. We’re able to go back 100 years and see very clearly how much you’d have to cut in spending in various downturns - including 2008. The model takes real market data and your real spending needs and then models what would happen to spending and how many cuts you’d need to make during that drawdown.
Year 2008: My retirement funds were invested in Large cap fund like S&P 500 and small cap funds, lost about 40% but small cap recovered the very next year in one year and large cap in one and a half years. And my balance was back to pre crash level plus what I invested in that year at a much smaller cost. But mass muni funds with fidelity took 4 years to recover which I completely moved to savings account in 2012 as I needed money to buy a house.
I have been watching your videos for a few weeks. We are about a years away from planned retirement. I have a list of questions for my financial person.
my question is, why buy bonds when they can fall as much or more than the stock market? I know that this was an anomaly in the past but is it going forward?
When you remove inflation from the real annual returns, then bonds are terrible. Then again, you want to have some lower risk than stock so bonds would be it. Its still has risk as you pointed out. I don't think they are worth the trouble except if you feared the stock market.
In spite of the click-baity title, sound advice. Since the video assumes viewers know what a “Monte Carlo Simulation” is, could have titled something like “Are you sure you want to rely on the Monte Carlo score for your retirement plan?” or similar.
Useful video - guardrails and better interpretation of the success factor score helps. I in fact retired Jan 2022 and went through the 16+% drop in the 60/40 portfolio in my first year. Luckily had cash to shield the portfolio from sequence of returns risk and the portfolio is above the starting balance now 3 years later. To your point, the success factor on my plan went from 99% at retirement start, to 80s at the lows of 2022, and now is back to 99%.
I am retiring next year but the thought of retirement gives me weakness. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. It’s so difficult for people who are retired and have no savings or loved ones to fall back on.:;
Great video Kevin. I'm wondering if there is software like income labs for regular people rather than financial planners. Most that I can find only fun Monte Carlo scenario and none incorporate the financial guard rails and dynamic spending method. Do you know of one for regular folks?
I do not understand the meaning of "market is 10% down x% of the time." Down from what. Are you counting years; does it mean down from the prior year-end close? Do you mean down from an all-time high?
Why do people hire a planner and then disregard their advice? I’ve watched this hundreds of times and in every single case, it’s regretted later! If you’re emotional about money, turn it over to a professional and leave it in their hands.
My best friend had a few hundred thousand invested with a big name financial institution and it would go up or down 50k but he saw nothing beyond that and 10 years later it’s almost the same…during this current BULL market! I’m sure they made their money on them. Told them it’s how it works. Acted like they had bigger vlidnts to manage and with him complaining they didn’t give him much attention. He left them a year ago and finally made a profit.
My story starts back in 2007 and ends in 2014. The Obama years. I had a Roth IRA (not a 401k). One year I lost over half of my money. Most years I lost money but different amounts during this time. The financial firm I used were making changes to the portfolio and charging us for this. It didn’t help. It lost money still. Finally to help save my business I had to cash it in and I was sooo heavily penalized I probably lost another 1/3 of it. It didn’t matter. A bad Bear market with bad management doomed it. If you are currently making money hand over fist in Biden’s current Bull market well then good for you! Sometimes you lose 65% of your investment in a very short time. I started a Roth 401k a year ago and made 10%. I could have made more but I went conservative because of my past experiences. My new financial advisor talks as if you can only make money in the financial business. She’s not young either. Sorry, but it’s a gamble/financial advisors can make mistakes or get greedy. And there advice may be only positive because all they know is this current Bull market. Good luck!
Because a lot of people suck. Most people, not all, that become planners are losers and some are criminals. Why would you roll the dice and become a statistic?
It calculates Social Security into it - it’s not simply portfolio income. But yes, it often front loads withdraws at a a higher withdraw rate and then more emphasis on Social Security.
A 'probability' (of success) does not provide a decision point/ change (positive or negative) relative to a dynamic withdraw approach. I would be concerned with an estimated 8.3% withdraw rate. There significant SORR risk present given the combination of asset level, allocation, and location.
4% rule still works, high yield etfs nowadays make this easy. The asset mix has changed. If you have to have every penny in the market, your living above your means.
Boldin provides consumer subscriptions to their financial planning engine. I’ve been using it a few months now and am pretty impressed, although I impress easily…😂
People retiring with just a big 401k need more options. You need 1-2 years in cash so if the market drops you can still live and possibly buy stocks on sale. Then have some employment income, a couple side hustles, social security, and real estate income at least to age 70-75 you are good. Having no to low debt sure helps too. The more buckets the better. Not risking my entire future on the US Stock Market.
Start of video, I'm thinking "Wait these are "cooked" numbers - retiring one week before lockdown?" Watched the whole thing and I'm thinking: "Who am I to say this scenario - or similar - will not repeat in my "golden years" 2040-2060?
If Phil and Claire had stayed the course they would be doing great, especially as their spending would have dropped during covid. Basing a thirty year retirement plan on a snapshot of the market and then panicking is not wise.
Personally they should have had min of 1 yr expenses in cash or equivalent. I will say 2-3 yrs to be safe. Then don't look and crunch numbers every week. Adjust your spending. Maybe they were not prepared to retired or didn't listen to what their advisor was telling them.
Ugh i hate when i have to actually pay attention to your videos and cant just have them on in the background! Jk, great content, i wish boldin had guardrails as an option. I know ficalc does and ill check that periodically, but it doesn’t allow to break the totla down for roth, 401k, brokerage like boldin does.
The big failure, anyone investing in bonds when interest rates are near zero, needs to lose their nest egg. Any one advising them to do this needs to lose their accreditation. Thinking your gonna make nice steady linear returns is crazy. You allocate some cash for the rainy day when you can pick up some bargins and get some quick doubles then go to cash again. Cash lowers the beta of a portfolio. Rule 72,sez if you can double some money, thats a 10% return over 7years or a 5% return over 14yrs. Cash is not trash but lets one sleep well at night.
I wish there was software to predict the chances of me getting in a car accident on any given day that was better than flipping a coin. There, I summed up your video.
Vontae Davis, Calvin Johnson, Barry Sanders, Jim Brown, Aaron Donald and Andrew Luck, football players who retired early. I’m gonna do my best working man copy of them and retire early from the workforce….
Great video. I think this risk based guardrails approach is a true gamechanger. The fact that Income Lab uses historical data sets dating back to the 1800's to test the guardrails gives an incredible piece of mind and def should make it easier to sleep at night when the market heads south. Using Right Capital AND income lab is the perfect combo IMHO.
Good sales pitch for "Income Lab" software. By the way: in 2006 Ben Stein and Phil DeMuth published a book about retirement where they proposed a dynamic spending system not unlike the guard-rail system. They also showed that in the past their system would have coped with all of the market crashes. And best of all, there system is based on a 5.6% spending-rate. It as available for around 10 bucks. History keeps repeating itself...
good video. It seems to do roth conversions with 10 percent drops in the market instead of 20 percent, since the market only drops 20% once every 6 years. I read on bogleheads, a guy was saying "why wait for the market to drop 20 percent, if you wait four years, the market goes up 10 percent a year for 4 years, that's 40 percent gains, if it drops 20 percent, you did roth conversion with market gain of 20 percent, should have done the roth conversions four years ago instead, the sooner the better"
Allocate 1 or 2 years expenses and invest in ladder CDs in case market goes down.
Thanks for making these videos. I learn something from each one.
My pleasure.
So thankful for my pension. If the market goes down we can survive on our pensions and SS. When it's a good year draw enough for a year and eventually build a few years of expenses to help with the bad years.
I also retired at the same time as case 2. I just lived on my cash savings and pension. I was not worried because I knew it would eventually recover and I would be fine. I only retired early because I knew I could live on my pension and savings if I had to. The trips abroad would just wait until I recovered. I am very grateful for that pension. It gives me peace of mind.
Is this about half full vs. half empty as at the end, you have the same amount of money? And why would keep running success score every month or even ever again after the initial acceptable score?
I keep enough in physical assets so I can reposture if the market changes and have emergency liquidity for routine expenses. I actively manage my own but I have my own CFP as a benefit of my LTCS policy.
In light of the current economic conditions and escalating living costs, can you share your insights on how to sustain profitability🇨🇦?
Good move, Kevin. So much of financial planning, in general, leans way too conservative. Guardrails clearly seem the way to go nowadays. Thanks for emphasizing this newer way of looking at things.
Interesting content. I am 56 and started seriously planning for retirement way later than I should have. However, I’m debt free and have been hammering down on investing for my future. Maxing my Roth IRA every year, maxing my HSA every year and dumping as much as I can into my brokerage account. I’m single with no dependents. Plan to work until I’m at least 70. Based on my calculations, I should have approximately $2m by then depending on market performance. Enjoyed the video.
Very informative.....I am also a CFP like yourself. Would you share with me what kind of software you use for doing Monte Carlo simulation??? thank you!!!
I am surprised to know from your example that the effect of a market downturn only translates to a few hundred dollars of monthly spending for a short time or no cut at all (assuming not bailing out at the bottom of market and eventually portfolios recovered).
May you model 2008 or other period of time that market recovered slowly? Or prolonged downturn? Do people just need to spend less 0:01 for a few years and everything will be the same?
Great question. We’re able to go back 100 years and see very clearly how much you’d have to cut in spending in various downturns - including 2008. The model takes real market data and your real spending needs and then models what would happen to spending and how many cuts you’d need to make during that drawdown.
Year 2008: My retirement funds were invested in Large cap fund like S&P 500 and small cap funds, lost about 40% but small cap recovered the very next year in one year and large cap in one and a half years. And my balance was back to pre crash level plus what I invested in that year at a much smaller cost. But mass muni funds with fidelity took 4 years to recover which I completely moved to savings account in 2012 as I needed money to buy a house.
The guardrail concept is interesting but why didn’t you use the same time period in both examples?
I just wanted to wanted to illustrate two back to back drawdowns. The outcome would have been identical.
I have been watching your videos for a few weeks. We are about a years away from planned retirement. I have a list of questions for my financial person.
my question is, why buy bonds when they can fall as much or more than the stock market? I know that this was an anomaly in the past but is it going forward?
When you remove inflation from the real annual returns, then bonds are terrible. Then again, you want to have some lower risk than stock so bonds would be it. Its still has risk as you pointed out. I don't think they are worth the trouble except if you feared the stock market.
In spite of the click-baity title, sound advice. Since the video assumes viewers know what a “Monte Carlo Simulation” is, could have titled something like “Are you sure you want to rely on the Monte Carlo score for your retirement plan?” or similar.
Useful video - guardrails and better interpretation of the success factor score helps. I in fact retired Jan 2022 and went through the 16+% drop in the 60/40 portfolio in my first year. Luckily had cash to shield the portfolio from sequence of returns risk and the portfolio is above the starting balance now 3 years later. To your point, the success factor on my plan went from 99% at retirement start, to 80s at the lows of 2022, and now is back to 99%.
I am retiring next year but the thought of retirement gives me weakness. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. It’s so difficult for people who are retired and have no savings or loved ones to fall back on.:;
Great video Kevin. I'm wondering if there is software like income labs for regular people rather than financial planners. Most that I can find only fun Monte Carlo scenario and none incorporate the financial guard rails and dynamic spending method. Do you know of one for regular folks?
Nothing that I know of. I think there’s a hole in the market.
Ficalc is the only thing kind of close that I've seen but it has some other serious flaws.
Where's is the calculator for guard rail strategy? Thx
It’s only available to advisors.
I do not understand the meaning of "market is 10% down x% of the time." Down from what. Are you counting years; does it mean down from the prior year-end close? Do you mean down from an all-time high?
Why do people hire a planner and then disregard their advice? I’ve watched this hundreds of times and in every single case, it’s regretted later! If you’re emotional about money, turn it over to a professional and leave it in their hands.
People are afraid of being swindled. Of losing or signing a contract and losing everything. Trust
My best friend had a few hundred thousand invested with a big name financial institution and it would go up or down 50k but he saw nothing beyond that and 10 years later it’s almost the same…during this current BULL market! I’m sure they made their money on them. Told them it’s how it works. Acted like they had bigger vlidnts to manage and with him complaining they didn’t give him much attention. He left them a year ago and finally made a profit.
My story starts back in 2007 and ends in 2014. The Obama years. I had a Roth IRA (not a 401k). One year I lost over half of my money. Most years I lost money but different amounts during this time. The financial firm I used were making changes to the portfolio and charging us for this. It didn’t help. It lost money still. Finally to help save my business I had to cash it in and I was sooo heavily penalized I probably lost another 1/3 of it. It didn’t matter. A bad Bear market with bad management doomed it. If you are currently making money hand over fist in Biden’s current Bull market well then good for you! Sometimes you lose 65% of your investment in a very short time. I started a Roth 401k a year ago and made 10%. I could have made more but I went conservative because of my past experiences. My new financial advisor talks as if you can only make money in the financial business. She’s not young either. Sorry, but it’s a gamble/financial advisors can make mistakes or get greedy. And there advice may be only positive because all they know is this current Bull market. Good luck!
Because a lot of people suck. Most people, not all, that become planners are losers and some are criminals. Why would you roll the dice and become a statistic?
The problem is finding a good professional. Some financial planners have the ethics of a car salesman...
In one of the examples the scenario was coming down to a (annualized) withdrawal rate of about 8% of assets. That seems pretty high?
It calculates Social Security into it - it’s not simply portfolio income. But yes, it often front loads withdraws at a a higher withdraw rate and then more emphasis on Social Security.
Brilliant. Thank You.
FYI both stocks and bonds were down similar to 2022 were 1931 & 1969
A 'probability' (of success) does not provide a decision point/ change (positive or negative) relative to a dynamic withdraw approach. I would be concerned with an estimated 8.3% withdraw rate. There significant SORR risk present given the combination of asset level, allocation, and location.
The whole point of the software is avoiding the SORR.
Very good comparison and clearly shows that Monte Carlo score is about as useful as the 4% “rule”. I wish Income Lab was available to consumers.
Why isn't "Income Lab" available to the Public Consumer? Why does the company only sell their Income Lab software to Financial Advisors?
4% rule still works, high yield etfs nowadays make this easy. The asset mix has changed. If you have to have every penny in the market, your living above your means.
@@gg80108 4% was never intended to be a “rule” for consumers to follow. It was an academic study.
Boldin provides consumer subscriptions to their financial planning engine. I’ve been using it a few months now and am pretty impressed, although I impress easily…😂
People retiring with just a big 401k need more options. You need 1-2 years in cash so if the market drops you can still live and possibly buy stocks on sale. Then have some employment income, a couple side hustles, social security, and real estate income at least to age 70-75 you are good. Having no to low debt sure helps too. The more buckets the better. Not risking my entire future on the US Stock Market.
Start of video, I'm thinking "Wait these are "cooked" numbers - retiring one week before lockdown?"
Watched the whole thing and I'm thinking: "Who am I to say this scenario - or similar - will not repeat in my "golden years" 2040-2060?
If Phil and Claire had stayed the course they would be doing great, especially as their spending would have dropped during covid.
Basing a thirty year retirement plan on a snapshot of the market and then panicking is not wise.
Personally they should have had min of 1 yr expenses in cash or equivalent. I will say 2-3 yrs to be safe. Then don't look and crunch numbers every week. Adjust your spending. Maybe they were not prepared to retired or didn't listen to what their advisor was telling them.
Nerves take over. I’ve seen it over and over.
Thanks!
Ugh i hate when i have to actually pay attention to your videos and cant just have them on in the background! Jk, great content, i wish boldin had guardrails as an option. I know ficalc does and ill check that periodically, but it doesn’t allow to break the totla down for roth, 401k, brokerage like boldin does.
*total
Consumption of beets up a whopping 37 %. ->. Roland Hedley
The big failure, anyone investing in bonds when interest rates are near zero, needs to lose their nest egg. Any one advising them to do this needs to lose their accreditation. Thinking your gonna make nice steady linear returns is crazy. You allocate some cash for the rainy day when you can pick up some bargins and get some quick doubles then go to cash again. Cash lowers the beta of a portfolio. Rule 72,sez if you can double some money, thats a 10% return over 7years or a 5% return over 14yrs. Cash is not trash but lets one sleep well at night.
I like this
If you have a financial advisor you are being screwed
Makes total sense.
I wish there was software to predict the chances of me getting in a car accident on any given day that was better than flipping a coin.
There, I summed up your video.
Vontae Davis, Calvin Johnson, Barry Sanders, Jim Brown, Aaron Donald and Andrew Luck, football players who retired early. I’m gonna do my best working man copy of them and retire early from the workforce….
Buy Bitcoin!!! Save yourselves!!!❤❤❤
Yeah right