Speaking as a now out-on-my-own 46 yr. young woman preparing for retirement, I think many women don't take care of their financial futures because they're so darn busy giving up so much for those around them that they don't have the TIME to study the necessary investing information to provide for themselves. It, like everything else, takes a back seat in their lives as they busily scurry around for their kids, parents, careers, etc. Heck, most can't find time to get the laundry done much less be able to sit down and LEARN and STUDY to be able to compare P/E ratios, or the annual returns of various mutual funds. Let's face it: it takes time and attention to develop and then ride herd on a good portfolio! Even by using shortcuts (like DRIPS), you still need to shop for the best rates to renew CDs periodically or contemplate new "products" (i.e. I Bonds, Roth IRAs, etc.) as they become available. I've worked with 2 Financial Planners during the past 3 years and both of them have failed miserably in helping me...I initially turned to them because I was so busy trying to run my business I hoped they could take care of my financial future for me. I soon learned that as with most other areas of life each of us has to play the role of the Little Red Hen and do it all ourselves or it doesn't get done right!
You've paid three financial advisors. Here, I'll give you excellent financial advice free. First, get rid off all consumer debt. Second, save 20% of your gross monthly salary until you have a year of living expenses in a money market fund. Third, continue saving 20% of your gross salary but now you put in into your index fund.One of the best strategies a person can use for getting rich slowly is to dollar-cost average into an index fund. Use a S&P500 index fund or a Total Market index fund. This simple strategy will beat 90% of managed money over every 10 year rolling period and beat 95% over every 20 year rolling period.When you are getting near to retirement i.e. when you can live on an annual withdrawal rate of 5%, you carve your nest egg like this:20% MMF80% Index fundWhen you retire, you sell 5% of the value of your stocks once a year and put in it your money market account. You divide the total of the money market by 48 and that's your monthly draw for the year. You repeat the process in a year.That's it!! And...nobody on this board will critisize this excellent and simple retirement strategy.
Sounds like great advice. What is the rational for using 1/48th of the MMF as a monthly withdrawal each year? Thanks, gopete
BOTH women and MEN retire poor because they do not take the time to prepare and educate themselves financially. Your immediate goal should be to improve your financial skills. Read, attend financial seminars, join or start an investment group whose main purpose is to educate its members. Involve your children so that they become financially astute. Remember that most finacial planners & advisors & brokers are primarily sales persons. They have something to sell and want you to buy their products. You must take the time to evaluate and investigate what they are recommending to you. You must take control of your financial health.
Your annual withdrawal rate should be 4%. Not 5%. From a portfolio of:20% MMF80% Vanguard Total Market Index Fund (Admiral shares have a TER=0.15%)You SELL 5% of your stock fund's value once a year and add it to the MMF. (0.05*0.8=0.04 or 4%)The rational for using 1/48 of the MMF's value for your monthly draw is this: since you're keeping 4 years (48 months) of living expenses in your MMF, using 1/48 at the begining of the year will smooth out your annual income. It will not jump around so much. In my case, I keep 6 years (72 months) of living expenses in cash so when I do my monthly income calculations for the year, I divide my cash by 72.
I wish retirement planning was that easy. Having a 4% withdrawal rate is like factoring a 100 year flood during retirement. It can be over conservative. Not very many people are going to be able save 25x income.you could have withdrawn 10% of income from $1million w/ a 3.5% raise for inflation each year from 1975-1995 and die w/ 50million in the bank. see link http://netirement.com/MoreInfo/D6Chart.aspach It is the order of returns that matter most not your average. Hope for the good years to come early than you can withstand a bad patch. As a retiree you can't just set your plan and forget it you have see what the market is giving you and make adjustment. A 4% withdrawal rate for many will leave their grandchildren very rich. Most reirees could withdraw 50% more say 6% and still be ok as long as they don't happen to retire the day before the market falls off a cliff.As for finding an advisor go to one that doesn't have anything to sell you ex.insurance products, annuities, mutual funds. A fee-only planner they do not work on commission. Do not confuse fee-only w/ fee-based, fee-based planners work on commission also. To locate a truly fee-only planner in you area go to their site http://napfa.org/planner.htm Demand that they use either indexes or individual stocks no mutual so you can lower cost and taxes.Great discussion I welcome your repliesFool OnTom Greeves, Fee-Only Certified Financial Plannera.k.a SpyontheWisehttp://www.windsorwealth.com/
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