Christine Benz Interview--4% Rule & the Bucket Strategy for Retirement
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- čas přidán 6. 08. 2024
- Christine Benz Interview--4% Rule & the Bucket Strategy for Retirement⛱
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0:00 Christine Benz
0:50 Inflation
3:15 4% Rule & Low Yields
8:10 Dynamic Spending Rules
10:55 Bill Bengen
12:37 Bucket Strategy
17:15 Bucket Strategy & 4% Rule
20:15 Bucket Strategy & Rebalancing
22:45 Bucket Strategy & Low Yields
In this interview with Christine Benz, Director of Personal Finance at Morningstar, we cover several timely topics including inflation, stimulus, the 4% rule and the bucket strategy of retirement spending.
#morningstar #bucketstrategy #4percentrule
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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![How to Invest in Retirement using the 4% Rule [Video #3]](http://i.ytimg.com/vi/jb5oLsdt7kg/mqdefault.jpg)
![How to Invest in Retirement using the 4% Rule [Video #3]](/img/tr.png)
“Where is the inflation?” Well that question did not age well 😂
Haha I was gonna comment the same thing 😂
these inflation comments from a year ago did not age well - LOL
Thank you both. I am 49 and just started my first adventure into the market. My husband has our retirement funds covered so this account is our Cash bucket. Rob I am so glad you didn't retire. I am learning so much 😃
I appreciate that you used a scenario where the retiree has a pension. My husband and I are fortunate enough to both have pensions, and assumed we could be a little more aggressive with stock/bond ratio, but hadn’t heard any advisors speak to that before this video. Also, we liked that you suggested pulling from bucket 3 in a good market. Thanks!
Great interview Rob. Answered a lot of questions.
Awesome video Rob. I'm so glad you posted this and asked those questions for I had the very same ones and that provided a lot of clarity for me. Keep up the great work.
Rob, if one assumes we are heading into a deflationary time given the disruption of technology, global safe haven purchases of treasuries and FED suppression of nominal rates, might a contrarian play be to buy at least some long- dated treasuries?
Christine out of the hundreds of gurus out there, you are consistently the best out there. I have learned so much over the years from you. Thanks to you and Rob, Safe Healthy and Happy New Year
One of my philosophies in investing, and other areas, is to go with the simpler approach unless there's a compelling reason to do something else. The bucket strategy, when put through various reasonable and plausible scenarios, can get very complicated and difficult to manage. I also don't see any obvious benefit it has over simple annual re-balancing to a preferred equity/bond/cash split. And I certainly wouldn't want to be trying to make judgment calls on juggling these buckets when I'm in my 80's or 90's.
Best talk I’ve seen in this yet.
Interesting to watch this in November 2021.
Love it! Excellent.
This play list really helpful. I just retired and sold my home. I have two buckets, plus a pension. Wish I had someone to tell me what to do. LOL..... I'll keep watching.
Very good...again!!
I liked the paper from Center for Retirement Research at Boston College "CAN RETIREES BASE WEALTH WITHDRAWALS ON THE IRS’ REQUIRED MINIMUM DISTRIBUTIONS?" By Wei Sun and Anthony Webb, October 2012. The idea that I can bake in my withdraws and future RMDs into a single process has a large appeal. The process is relatively simple and easy to understand.
Would a fee free equity income annuity be a guardrail to help the area of time before 72 rmd’s?
You control your ads. Please reduce them. Lately, the vids are becoming hard to watch with so many interruptions.
Case in point, this video is 7 ad breaks for a 27 minute video. Would you continue watching with ads popping up in a video you watch once every 4 minutes?
Thank you for your consideration.
I recommend getting CZcams premium so you can watch ad free. It makes it so much nicer to watch all content on CZcams
I have CZcams premium so I don’t see ads in any video. I actually forget that CZcams has ads until I see comments like this. You should consider getting premium. Makes CZcams a much more enjoyable experience.
Thanks Rob for sharing the interview. I'm a fan of both you and Christine. I appreciate the consumer advocate-focused bias that Christine brings, unlike most of the financial advice industry that has a self-interested agenda. Like you, I've not been able to successfully translate the theoretical construct of the bucket system to practical implementation in retirement. The system seems to inherently rely on some variety of market timing. My question (Your question) back to you - have you found/can you describe a simple system/approach to implement a guardrail drawdown strategy?
Plan A is to have enough wealth to live off of 2%. Then you don't need to worry about a drawdown strategy. Of course, not everybody can do this. I believe that a floor/ceiling of 4/6% is probably a good approach. In other words, follow the 4 or 4.5% rule, but never take out more than 6% or less than 4% (unless you just don't need the money). I have not, however, back tested this approach. Kitces recommended it, but I don't think he's back tested it either.
@@rob_berger Too late for me for Plan A! Is there some variable/decision rule in the Kitces approach that would trigger when to use 4 and when to use 6, like portfolio returns for the past year/years, etc?
@@rob_berger a starting 2% withdrawal rate makes sense especially if you retire during a secular bull market .
If the market drops by 50% your income will not be in affected you will now be withdrawing 4% wich will be the same income you were receiving before the 50% crash.
@@CalKidWilly His idea was to follow the 4% rule, but with the added step of calculating the percentage of each annual withdrawal compared to your portfolio. If the withdrawal exceeded 6% of your portfolio, you would limit it to whatever 6% represented. If the withdrawal resulted in taking out less than 4%, you could increase it to 4% if you wanted.
@@rob_berger Thanks for the reply Rob. That approach seems tough to run a Monte Carlo analysis on and have any accuracy in a forecast model/plan. I'll look further at Kitce's explanation.
Excellent interview. I have to share I am confused by the bucket strategy. At times fixed securities such as bonds are discussed as if they are held outside of retirement accounts (as a source of funds to replenish cash accounts). At other times, fixed securities are discussed as if they are held within retirement accounts (i.e. when they are discussed in terms of rebalancing the portfolio if the performance of equities leads to a shift in asset allocation). Is the idea that the fixed securities are held both inside and outside of retirement accounts?
The financial planners who host the IRA and Retirement podcast from Colorado, suggest having after-tax, pre-tax, and tax-deferred account portions earmarked for all three buckets. That complicates things a bit but gives tax flexibility as you withdraw or balance the buckets.
They’re all in your tax advantaged accounts if that’s all you have, cash bucket = money market or settlement fund, balanced or equity bucket is the other funds in your accounts.
If you use a bucket strategy couldn’t you be a bit more aggressive in your equities to make up for the low yields of the buckets?
Watching this a year after it was posted. The inflation question. Wow. 😳
Thanks
@Rober Berger at 11:05 Christine mentions and interview between Bill Bengen and Ben Carlson. I've been looking all over for it and spent way too much time. Would you happen to know what she is referring to, or where to find that interview?
Now that yields are much greater-would you expand your bond allocation or buckets 1 and 2?
Seems to me (unless your last name is either Gates or Buffett) that the complete liquidation of bucket #3, would have to eventually occur (??)
I'm interested in how you would overlay the bucket strategy with tax diversification ( I suppose ideally bucket 1 is coming from an easily accessible taxable account and bucket 3 is ideally Roth... I suppose each would have some mix of each for each one in reality.
Travis, check out my more recent video on the bucket strategy. I've concluded it's just not a useful approach in retirement. A simple asset allocation with periodic rebalancing is the better approach, IMO.
@@rob_berger I think Christine did a great job of explaining the bucket strategy and the advantages of using it. I saw your other video and you presented a reasonable argument against the bucket strategy, but you did not convince me. I urge your viewers to look carefully at the options before throwing out the bucket strategy.
Perhaps inflations should be used in reverse, high inflation, cut you spending to non-discretionary only. Additionally, after seeing the 70's inflation (supply shock) and the 2022 inflation (also supply shock), supply side inflation appears to be more important than the so-called monetary inflation addressed by Milton Freedman. We have been trying to shock inflation up with monetary methods for 2 decades and only supply shock kicked it into existence.
Her real life example with the professor and explaining the three Bucket system was excellent and unfortunately too many people make it much harder than that
12 to 15 years of income between bucket 1 and 2 will not only mitigate sequence risk but it will also supply with enough dry powder to value average your equity position at a constant 7 to 8% .
This strategy of value averaging your equity bucket helps me sleep at night especially during volatile times like we are currently in.
This is also a form of a rising equit glide path.
That means holding a lot of your portfolio outside of stocks, which go up most of the time. You will miss a lot of gains.
this guy is IN LOVE with Michael Kitces
"Where is the inflation?" Well....this is November 2021 let me tell you about inflation...
hmmmmm, where is inflation????
I can remember getting 10 pct in a bank CD account. I feel sorry for anyone retiring now.
I would HARDLY say, that money that is not needed for 10yrs, should be invested entirely in equities. I would make it, more like; 20yr money, in equities only. Since 1900, from 1929-1954, and from 1966-1982; S&P 500 gross-returns, were ZERO, not including dividends. That's 41 yrs, out of 121. CALL ME PARANOID, but; JUST SAYIN'.
And that is why you focus on dividend paying stocks. So when retired, you get that dividend stream to supplement any other income streams like SS or pensions, withdrawals from IRAs. And you can be patient for any growth stocks or positions you may have in your portfolio.
My wife left me but I enjoyed this video.
Which "bucket" did she take with her? If you're like me..the only bucket that I have left, is the one that I PUKED in, when the judge told me how much support that I had to pay her!
Hi rob, great video just wondering if your opinion of the bucket strategy has shifted at all with the higher yield in the fixed asset category and even the annuity space where you can get a fixed annuity at almost 6% to funnel and feed one and two I think at the time of this video, the bond market and annuity market or weren’t paying anything, so I understood your hesitancy towards the strategy. Just wondering what your thoughts are thank you.
"Is this gonna trigger inflation?"
Ummmmmm..... how about YES?
Watching this 3 years later….prescient
Nice timing, retire in a few years to the lowest interest bonds I could have hoped for:( Inflation is here now a few months later over 5% eh. We new it would come based on the old policies of the current administration.
15:30 minutes of the video: "1 bucket of "very liquid reserves"" LIke what? Geez, how about some details for god's sakes. Not sure how a liquid bucket is going to cover retirement waiting for a 10 year recovery in the stock market as used as the example.
It is not meant to cover 10 years and on average the stock market has recovered every time in 1-3 years. A cash bucket is where you put your yearly budget for 2-3 years, so say you lived on 50K per year, this bucket would have 100K - 150K in it and be invested in a high end savings account. The idea being that you do not want to sell stocks when the market is down but give ti time to recover. "If" the market stayed down for 5-10 years as you assert the only way to handle that would be to cut expenses, live from dividends and wait for a recovery or possibly work a side job. Also note she says there are 3 buckets, the second one covering another 5-7 year span and this would be invested in high quality dividend paying stocks and ETFs/Funds. So you are taking these dividends and rolling them to your cash account each year along with any capital gain you made in these investments. There is really no way to plan for every situation and the market being down 10 years would be highly unusual. You may also have multiple years where the market is up like the past 10 years which has been fantastic. I get the fear of running out of money. Here is a tool I found that helps you determine if you will run out of money in retirement. engaging-data.com/will-money-last-retire-early/
Yes, Chrstine has a tendency to rarely give any concrete examples and uses her catch phrases and lingo, without explaining what she means. I kind of stoped listening to her.
HYSA or money market funds
Everything she predicted was wrong.