OT: Lets talk about stocks (Part 3)

[Hope Of Glory]

I have stopped looking at years till retirement as a horizon. My outlook is basically indefinite.

Lets say you are 30 now and plan on retiring at 55, do you plan to pull out every investment you have at 55 and move to cash? Probably not, you’re going to keep your investments for another 30-35 years.

But that’s all based off the 4% rule, which works for me but others may not like

Yup, that's a good point. Not all your investment need to be in bonds by the time you retire. But a portion needs to be. The proportion stocks/bonds depends on everyone's risk tolerance and spending habits.

The 4% rule is also based on getting nothing from the government. But in Quebec, if you paid the max your entire life, I think you get about 20k a year, which will turn to 30k a year (in 2025 dollars) at some point since they've increased the contribution to the pension funds. So say you want 60k$ a year in retirement, you may actually "only" need 1M$ and not 1.5M$ as the 4% rule would indicate. Don't know why but this literally just dawned on me today haha.

 

[MXD]

Mortgages are 6.5% in the USofA right now?

 

[DAChampion]

Mortgages are 6.5% in the USofA right now?

It varies, but yes, typical is 6.5-7.0% locked for thirty years.

Maybe 1 point lower for 15-year mortgages.

 

[Hope Of Glory]

We put a bid on a house last night.

Might be the right idea, might not be. Part of me is thinking that prices will fall by 30% soon, and mortgage rates will fall from 6.5 to 4.5% due to the recession.

But these things are hard to predict, and our family needs a bit more living space now. The house we bid on is already down 30% from its Zillow peak so that might help by cushioning the blow.

Historically housing always goes up. But access could change as we become more of a predatory rentier society. I think what a lot of people on wall Street want is for nobody to own anything anymore, and for people to pay 50%+ of their incomes on rent.

We converted our old home in a different state into an investment rental property. I'm hoping this helps us in the long term.

If it makes sense financially, go ahead. You can't time that stuff.

I distinctly remember when the market sharply dropped in 2020 and 2022, the reigning sentiment at the bottom was that this was going to drop another 50%. And then we had some insane rallies.

So if you can comfortably afford it, don't worry about the market and things you can't control.

 

[MXD]

Also... I PROBABLY already know this, but what's the 4% some of you are talking about?

 

[MXD]

It varies, but yes, typical is 6.5-7.0% locked for thirty years.

Maybe 1 point lower for 15-year mortgages.

Oh. That's ... completely different here. I knew rates tended were locked in the US, I just thought the FED rate was significantly lower than it is.

 

[Hope Of Glory]

Also... I PROBABLY already know this, but what's the 4% some of you are talking about?

The rule of thumb is you can take out about 4% of your portfolio each year without your portfokio shrinking.

Meaning if you have 1M$, you can take out about 40K$ each year and still have 1M$ in your portfolio at the end of the year.

Again, this is just a rule of thumb and varies from people to people, based on the type of portfolio they have. But this can give you a rough idea of what you need to put aside for retirement.

 

[DAChampion]

Oh. That's ... completely different here. I knew rates tended were locked in the US, I just thought the FED rate was significantly lower than it is.

They tend to track.

Last year, fed rates dropped by 1% but mortgage rates stayed the same. That would not normally be the case, but we're in a period of volatility.

Meanwhile, interest rates on new cars are high as well, and much more variable. I should have bought a new car in 2019 when they were cheap. Car payments of $1000/month are getting more common.

 

[Hope Of Glory]

It varies, but yes, typical is 6.5-7.0% locked for thirty years.

Maybe 1 point lower for 15-year mortgages.

So the interest% stays the same for the whole duration of the mortgage?

Damn, that's rough.

 

[MXD]

The rule of thumb is you can take out about 4% of your portfolio each year without your portfokio shrinking.

Meaning if you have 1M$, you can take out about 40K$ each year and still have 1M$ in your portfolio at the end of the year.

Again, this is just a rule of thumb and varies from people to people, based on the type of portfolio they have. But this can give you a rough idea of what you need to put aside for retirement.

Fair enough.

 

[Frank Drebin]

Also... I PROBABLY already know this, but what's the 4% some of you are talking about?

as @Hope Of Glory said it’s a backtested rule that if you have 100% of your portfolio in us equities something like 99.5% of the time if you pull out 4% of your initial amount and then index that to inflation your initial portfolio will still be there after 35 or 40 years.

Basically you can plan to live off 4% of your portfolio forever

I’ve been counting retirement numbers for 15 years lol it’s a passion of mine

 

[DAChampion]

So the interest% stays the same for the whole duration of the mortgage?

Damn, that's rough.

Sort of.

If interest rates drop, people can refinance their mortgages. That's very common.

 

[MXD]

Anyways : I'd really like to know how my new car is gonna cost... I don't quite think the fall is over, but if my car ends up costing me 10K more than expected, I'd have a significantly bigger amount to invest.

 

[MXD]

Yup as @Hope Of Glory said it’s a backtested rule that if you have 100% of your portfolio in us equities something like 99.5% of the time if you pull out 4% of your initial amount and then index that to inflation your initial portfolio will still be there after 35 or 40 years.

Basically you can plan to live off 4% of your portfolio forever

I’ve been counting retirement numbers for 15 years lol it’s a passion of mine

My employment situation is a bit different, so I'm planning with different numbers, but it does make sense for most scenarios. Thanks.

 

[Frank Drebin]

Yup, that's a good point. Not all your investment need to be in bonds by the time you retire. But a portion needs to be. The proportion stocks/bonds depends on everyone's risk tolerance and spending habits.

The 4% rule is also based on getting nothing from the government. But in Quebec, if you paid the max your entire life, I think you get about 20k a year, which will turn to 30k a year (in 2025 dollars) at some point since they've increased the contribution to the pension funds. So say you want 60k$ a year in retirement, you may actually "only" need 1M$ and not 1.5M$ as the 4% rule would indicate. Don't know why but this literally just dawned on me today haha.

Yup
I plan on retiring at 55
I need to put aside some money in order to “bridge” my wife and my income till we start drawing our cpp (qpp) and oas. Between the two of us i estimate it to be $40-45,000 in todays dollars


Costs go way down in retirement too
Say you have 80k income in retirement for a couple.

No cpp/ei premiums (7.5%)
Can pretty much split income at 40k each which is a very low rate

 

[Frank Drebin]

My employment situation is a bit different, so I'm planning with different numbers, but it does make sense for most scenarios. Thanks.

with db pensions you can afford more risk. I don’t know if you have, i have a modest one that I’m very thankful for

 

[MXD]

with db pensions you can afford more risk. I don’t know if you have, i have a modest one that I’m very thankful for

db pension?
(Again, I'm quite certain I know what it is, just not familiar with English acronyms...)

 

[waffledave]

how many years will it take to recover this crash ??

The crash is one thing. The entire global economy is going to change over the next 10 years, and that's going to impact everything. Even if the US reverses course on tariffs, the damage is done. They aren't seen as a reliable partner anymore. At this point, nobody alive today should expect the US to ever regain the power, money and global influence it had even just 6 months ago. Only down from here.

 

[Hope Of Glory]

Sort of.

If interest rates drop, people can refinance their mortgages. That's very common.

Ah this makes more sense. Still a huge commitment, here we can lock in a rate (or use variable) for 1-5 years usually and then renegotiate after that.

 

[sampollock]

I think even in the extreme, unlikely case of a global depression we won’t come close to the timelines seen in the 30s. Money was way harder to get access to back then

so you figure the TSX and DOW rebound less than a year?

 

[Hope Of Glory]

Yup
I plan on retiring at 55
I need to put aside some money in order to “bridge” my wife and my income till we start drawing our cpp (qpp) and oas. Between the two of us i estimate it to be $40-45,000 in todays dollars


Costs go way down in retirement too
Say you have 80k income in retirement for a couple.

No cpp/ei premiums (7.5%)
Can pretty much split income at 40k each which is a very low rate

You're right, people usually overestimate their expenses when retired. It goes way down, especially if your hone is paid off. Also important to point out to people that they'll usually spend a lot less at 80+ than early in their retirement. So you can pull out a bit more at the begining if needed.

 

[Frank Drebin]

so you figure the TSX and DOW rebound less than a year?

I have no idea what’s going to happen
I don’t think we’re going to see a 10+ year recovery timeline but who knows

 

[Frank Drebin]

db pension?
(Again, I'm quite certain I know what it is, just not familiar with English acronyms...)

Your employers pension plan pays you a defined benefit ($ amount, typically a percentage of your working income)for life
The other type of pension is dc defined contribution where is usually a match from the employer and you’re completely at the mercy of the market

 

[Habs]

Oh I’ll buy in. But I think we have further to fall first.

When the avalanche comes, get out of the way.

yes I'm not buying in yet either

 

[Gustave]

(mod)

This will be a total game changer in world order. Damage cannot be undone at this point. He went too far and ruptured USA’s standing as a trustworthy economic partner. (mod)