How Bad Luck Will Destroy Your Retirement Plan

In the previous episode  (https://youtu.be/S34U7tDqr4w) we discussed how Dave Ramsey made the HUGE mistake in mixing average market returns with volatility. It is true the market has returned over 10% a year since 1926.  However, the mistake Dave makes is assuming that means one can take a distribution of anything less than 10% and NEVER TOUCH PRINCIPAL.  This is a horrendous mistake to make. And for those who follow that advice they could easily find themselves out of money before they are out of time.  In this episode I bring back the Vanguard report that shows the volatility of the market going back nearly 100 years.  What Vanguard shows us is that while the average return has been a bit over 10% only 6% has the market actually given us a return in ANY given year of between 8 and 12%!   This means the VAST, VAST majority of times the market gives us numbers way above, or way below, average.    What this means is you simply can not use an average rate of return to provide a withdrawal rate percentage for your retirement distribution anywhere near what Dave states.  Need proof? I bring on a "sequence of return risk" chart that compares two retirees, each has the EXACT same average return, of 10.36, from 1989-2008.  The problem comes from WHEN they received those returns. From 1989-2008 the retiree did great. Had millions left in the portfolio after taking out over a million as income.  Just flipping the sequence of returns though, from 1-20 to 20-1 and EVERYTHING changes.   Retiree B ran out of money in year 18. No fault of his own, other than the bad luck of retiring in 2008 when the markets fell.  That's an anamoly, you say?  Same thing would happen if he retired in 2000, 2001, 2002.  Or how about 1973, 1974? Just bad luck.  Which you can not control, no matter your investment prowess. Bad markets in the beginning of retirement can doom you.  You need a plan of action which I discuss in the video.  2 years of cash. 3-5(7) of bonds, anything you won't need after 5-7 yrs put in stocks and never touch them until you can take gains to replenish your bonds and cash.  For more info like this visit www.heritagewealthplanning.com facebook.com/heritagewealthplanning And The Josh Scandlen Podcast.  https://advisors.vanguard.com/iwe/pdf/FAIVAMR.pdf https://pension-consultants.com/what-do-i-do-now-part-2/