Go to http://public.com/graham and use code GRAHAM and you’ll receive a randomized free stock worth up to $1000 once you open an account! Here is how you can QUIT YOUR JOB with Passive Income - Enjoy! Add me on Instagram: GPStephan
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The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://the-real-estate-agent-academy.teachable.com/p/the-youtube-creator-academy/?product_id=1010756&coupon_code=100OFF - $100 OFF WITH CODE 100OFF
THE 4% RULE:
All of this begins in 1994, when the 4% rule was first “invented,” and used as a method of calculation to make sure you NEVER run out of money in retirement.
However, just a few days ago, the Creator, Bill Bengen, went on record to say that “current market conditions may require an even more conservative approach, and that the combination of 8.5% inflation with high stock and bond market valuations makes it difficult to forecast whether the standard playbook will work for recent retirees.”
On top of that, many investment analysts are also calling for LOWER STOCK MARKET RETURNS in the near future - which, could very well effect how much money you make…and, spend.
MorningStar recently came on record saying that: “if inflation, which is at a 30-year-high, remains at or near today’s level for an extended period, even a reduction to 3.3% could prove optimistic.”
They also suggested that, if you want to spend MORE than that - it’s a good idea to be flexible. You can opt to work longer, delay when you start taking social security, or save more so that you can spend a smaller percentage.
Other advisers recommend CHANGING your spending every year in response to the market, meaning - you’ll spend more when times are good, and spend less when Netflix sees slowing subscriber growth. This way, you preserve your wealth as best as possible - and never spend more than the market can sustain.
And really, all of this should be used as purely a rule of thumb, and by understanding the math behind what this is and what it does…you’ll be able to better budget how much you’ll need to save and invest. Just take how much money you’ll need in retirement…multiply that by 20 to 33…and that’s approximately how much you’ll need, depending how long of a retirement you’d like to have.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*This is a paid endorsement for Public.com. Offer valid for U.S. residents 18+ and subject to account approval. This is not a recommendation. You can lose money with any investment. Open To The Public Investing is a member of FINRA & SIPC. Regulatory and firm fees apply. See Public.com/disclosures/
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
Trade Bitcoin, Doge, and other crypto with zero fees on FTX. Use my referral code GRAHAM and get up to $100 FOR FREE: https://ftx.us/partners/graham
NEW BANKROLL COFFEE NOW FOR SALE: http://www.bankrollcoffee.com
GET MY WEEKLY EMAIL MARKET RECAP NEWSLETTER: http://grahamstephan.com/newsletter
THE NEW PODCAST: https://www.youtube.com/channel/UCMSYZVlQmyG8_2MkIKzg0kw
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://the-real-estate-agent-academy.teachable.com/p/the-youtube-creator-academy/?product_id=1010756&coupon_code=100OFF - $100 OFF WITH CODE 100OFF
THE 4% RULE:
All of this begins in 1994, when the 4% rule was first “invented,” and used as a method of calculation to make sure you NEVER run out of money in retirement.
However, just a few days ago, the Creator, Bill Bengen, went on record to say that “current market conditions may require an even more conservative approach, and that the combination of 8.5% inflation with high stock and bond market valuations makes it difficult to forecast whether the standard playbook will work for recent retirees.”
On top of that, many investment analysts are also calling for LOWER STOCK MARKET RETURNS in the near future - which, could very well effect how much money you make…and, spend.
MorningStar recently came on record saying that: “if inflation, which is at a 30-year-high, remains at or near today’s level for an extended period, even a reduction to 3.3% could prove optimistic.”
They also suggested that, if you want to spend MORE than that - it’s a good idea to be flexible. You can opt to work longer, delay when you start taking social security, or save more so that you can spend a smaller percentage.
Other advisers recommend CHANGING your spending every year in response to the market, meaning - you’ll spend more when times are good, and spend less when Netflix sees slowing subscriber growth. This way, you preserve your wealth as best as possible - and never spend more than the market can sustain.
And really, all of this should be used as purely a rule of thumb, and by understanding the math behind what this is and what it does…you’ll be able to better budget how much you’ll need to save and invest. Just take how much money you’ll need in retirement…multiply that by 20 to 33…and that’s approximately how much you’ll need, depending how long of a retirement you’d like to have.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*This is a paid endorsement for Public.com. Offer valid for U.S. residents 18+ and subject to account approval. This is not a recommendation. You can lose money with any investment. Open To The Public Investing is a member of FINRA & SIPC. Regulatory and firm fees apply. See Public.com/disclosures/
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
All right, so we have some pretty big changes for anyone, who's, investing their money, building wealth and working towards financial independence, and that would be the end of the four percent rule and why it no longer works according to the person who invented it, see for nearly 30 years, the 4 rule was seen as the holy grail of making sure you have enough money invested to never have to work another day in your entire life. Ever again. That was until the other day when the inventor himself said that it no longer applies, and he warned that changes need to be made. Of course you might be wondering, but graham, why should i even care in the first place? I just came here for the funny memes and the free stuff down below in the description when i sign up for public using the code, graham because that could be worth all the way up to a thousand dollars.
And that is a great question that i asked myself but to be completely honest, the math behind this video is probably going to be the most important calculation you'll ever learn throughout your entire life, because it's going to tell you exactly how much money you'll need, how Much money you could spend and what you'll have to do if you never want to work another day, if you don't want to, although before we start, i would love to thank the sponsor of today's video, the like button, which just needs to be smashed by you. All right, no, but seriously our sponsor is public.com. So thank you so much more on them later and now. Let's begin all right, so here's why the four percent rule was such a big deal.
It was invented back in 1994 and used as a method of calculation to make sure you never run out of money or basically, if you want to have endless amounts of passive income forever. This tells you how to do that to figure this out. The inventor back tested every single year of stock market returns, and then he simulated what your money would have been worth had you retired in each year and then lived off your investments for a 30-year time frame. The goal was that, if you did this right, you would never run out of money, and in order for this to be a success, a few things had to happen.
One you didn't spend too much money. In the event, your investments didn't pan out as expected, or you decided it was a good idea to invest in netflix and two. They want to make sure you didn't spend too little money to the point where you have to leave it all to your grandkids to blow it on fire, festival, tickets and safe moon. So, in order to calculate the right amount of money that you need invested, so you never have to work another day in your entire life.
Ever again, they looked at every single retirement year in modern history and then calculated how much would have been left over assuming the worst possible case scenario, which would be retiring at the peak of the market and then watching your investments just get decimated each and every Year as they get lower and lower and lower and lower, that was bad and if you're confused, don't worry, this chart should explain everything perfectly. Even though i'm the one explaining the chart anyways, you could see in the left, if you're 100 in the stock market and spend three percent of it a year known as the safe withdrawal rate, your money is going to last you indefinitely with a 100 success rate Of not running out that's because the market on average returns six to ten percent a year, adjusted for inflation so effectively by you only spending three percent that gives you a three to seven percent buffer for your money to continue growing without you having to do a Single thing, but on the other hand, if you're a hundred percent in the stock market and spend five percent a year over forty years, you only have a seventy six percent chance of not running out of money. So that leaves you with a one in four chance of becoming completely broken, then having to rely on your lovely viewers and subscribers to hit the like button for the almighty youtube algorithm. This guideline is also referred to as the trinity study and from all the back testing and research. The four percent role was born. This means, if you want to live off an income of 40 000 a year for the rest of your life, you'll need one million dollars invested and you'll have a 94 chance of that lasting you for the next 60 years without running out. But now, according to the inventor of the 4 rule himself, he says that no longer applies and changes have to be made. Just a few days ago, bill bengan went on record to say that current market conditions may require an even more conservative approach and that the combination of eight and a half percent inflation with high stock and bond market valuations makes it difficult to forecast whether the standard Playbook will work for recent retirees.
The issue today is that there's not a backlog of history that deals with prolonged to eight and a half percent inflation during a time where interest rates are coming off, record lows and stock valuations are dropping from record highs. After all, if you adjust your spending to simply keep up with inflation, you would need to spend an extra eight and a half percent a year just to keep up at the same pace that products and services are increasing, so obviously that might not be sustainable. On top of that, many investment analysts are calling for lower investment returns in the future, which could very well affect how much money you make and consequently how much money you spent. For example, credit swiss and several other investment analysts say that young people stand to make dismal returns on their investments.
They explained that, unlike other generations, who have benefited from a relatively uninterrupted economy, gen z is forecast to take out a market with higher unemployment, lower earnings and higher taxes to pay off the pandemic related deaths. So here's what they found throughout the last 120 years, the real returns of the stock market, which is just a really fancy way of saying after taxes and after inflation comes to an average of five percent a year on stocks and 3.6 on bonds from there. They look at the current spread between the completely risk-free return of buying a treasury bill, which is estimated to be negative: half a percent after taxes and inflation and the premium of three and a half percent for the risk of investing in the stock market. That gives us an annualized net return of just three percent a year in the stock market. According to this calculation, and it's even lower at two percent, if they hold a portfolio of 30 bonds, lpl financial also published similar findings when they looked at the returns of bull markets in their first second and third year, and they found that the first year's returns Were almost always the largest at a rate of anywhere from 20 to 65 from the market bottom and with the exception of 1987, the second year within a bull market has typically been a lot smaller, usually between a 10 to 25 return. But throughout that second year, they've also found that it's prone to a pullback, usually at a rate of about 10, even charlie munger agreed who's, one of the investors that i respect the most. He says that nobody's gotten by with the kind of money printing now for a very extended period of time, without some kind of trouble we're very near the edge of playing with fire. His warning is that the stock market may see lower than average growth over the next decade, simply because we've already seen such a huge return and when it comes to the decade by decade, data.
It's rather surprising. If we consider that 2012 through 2021 had an average annualized return at 12.62 percent, we could extrapolate that, based on past performance, the next 10 years might not be so good. So, given all of this data, we have to ask ourselves: what is the solution? Well, one option is all thanks to the sponsor of today's video public.com for those not aware they're, an investment platform that allows you to buy into stocks funds and a multitude of cryptocurrencies to build a modern, diverse portfolio and, on top of being a convenient mobile, app They've also launched a desktop version that offers an enhanced portfolio overview with customized ways to track and analyze your positions over time. They also incorporate an optional social aspect into the entire experience where you can make a profile, follow other investors to see what they're, buying or selling and read their comments and current events plus i just went, live the other day to talk about index funds and how You could use them in conjunction with everything we're talking about in this video.
I'm planning to do a lot more of these in the future, so you have the option to follow my profile and i'll. Keep you posted on the next session, not to mention public.com, recently added several new cryptocurrency options to diversify your portfolio, including apecoin, and they recently announced their acquisition to the platform otis, which allows you to purchase fractionalized, alternative and cultural assets. That means users of public.com will eventually have all of these features at their disposal to build a portfolio that they're proud of it's just a really great app it's free to download. They have a very simple easy to use interface. They allow for fractional investing and as a thank you for signing up and giving them a try. They want to invest in you by giving you a free stock worth between three dollars and a thousand dollars just for signing up and making a deposit with the link down below in the description using the code. Graham, so, thank you guys so much now with that said, let's get back to the video all right. So in terms of the solution to the four percent rule, the creator himself says it depends.
Prior to the pandemic, bill bengan went on record to say that the four percent rule was treated too simplistically and that it took into account the worst possible case scenario. First, because of that, he said that, historically, when times are good, the average safe withdrawal rate has turned out to be about seven percent and at points it's reached as high as 13. Of course, you would only know if this works after the fact in hindsight, at which point it's probably too late. So in early 2022 he changed the four percent rule to the five percent rule, meaning you could spend an extra one percent every single year.
Until eventually you hit the uh, the big like button in the sky, but with inflation running as high as it is. Not everyone agrees and morningstar recently came on record to say that if inflation, which is at a 30-year high, remains at or near today's level for an extended period, even a reduction to 3.3 percent could prove optimistic. They also suggested that, if you want to spend more than that, it's a good idea to be flexible. No, not that flexible, this flexible, you could always work a little bit longer.
You could delay social security or you could save a lot more money so that that way you could spend more money. Other advisors recommend that you change your spending every single year in response to the market, meaning you'll spend more when times are good and you'll spend less when netflix sees slowing subscriber growth. This way, you could preserve your wealth as best as possible, and you never spend more than the market can sustain, although in terms of what i think about this as a youtube connoisseur, who has an obsessive fascination with personal finance, here's what i found the most surprising When you look at the rolling returns of the s, p 500, going all the way back to the good old year of 1872, it was found that a 20 year holding period has never once produced a negative result, adjusted for inflation and the worst result ever realized Was a half a percent return over 20 years, however, that was during a time in the 1960s right before runaway inflation, which realistically might not happen, is bad. Hopefully, but of course, during any other time, you would see an average return of six percent in a best-case return of 13 a year now, another chart found that over a 30-year rolling period, the worst case scenario was an 8 annual return before inflation and the best Case was nearly 15 and a third chart shows the average dating all the way back to 1909 coming in at 10 with dividends, reinvested now, of course, as you can see, we're, certainly in the middle of what looks to be a very prosperous run. But that comes with the chance that in the future, things may not look as good. So, given all this information, if you're looking at a 30-year retirement - and you want to be 100 sure that you're not gon na run out of money, given all the data that we have available spending three and a half to four and a half percent of your Money every single year should be okay as long as you're good with being flexible and cutting back when needed. But let's be real for most of us watching none of this matters as long as you're, okay being flexible with your spending, it doesn't mean that you have to spend four percent every year. Otherwise, you failed personal finance 101, and it doesn't mean that you can't scale back to two and a half percent a year if there's nothing to spend money on and you decide to cancel your bellaton membership instead.
The metric we should use is that it's okay to spend three to four and a half percent of your portfolio annually as long as you're, okay, cutting back in the event the market goes down, inflation remains high and you don't make as much as they say. You will on wall street bets, for example. If the market goes down 10, then maybe that's a sign that hey you shouldn't, be flying first class to go and see me box, michael reeves, in tampa florida on may 14th link down below in the description. Yes, it is real, may 14th.
So as long as you have some flexibility in your spending, you should be okay plus. This does not take into account that realistically you'll have some sort of paid work throughout retirement, which means you could spend more money as long as you have a recurring, consistent income, and really all of this should just be used as a rule of thumb and by Understanding the math behind this and how it works you'll be able to better budget how much money you'll need and how much money you could spend. So with that said, you guys thank you so much for watching also make sure to add me on instagram and on my second channel. The gram stefan show and don't forget that you could get all the way up to a hundred dollars worth of free crypto.
When you use my link down below in the description and sign up for ftx us using the code, graham super easy to do, let me know how much you get. Thank you so much for watching and until next time.
Shoutout to boomers for benefitting from the systems they set up and then burning it all down on their way out.
image still thinking retirement will be a feasible choice
Let’s just not be broke after buying some of this dip. Geez it’s been rough hoping for better days for the market soon
The only rule I follow is The Stephan Rule… Smashing the like button for the YouTube algorithm.
Graham, I got a raise today. Unasked for too. Let's get it.
Great video! I did a sensitivity analysis on this exact concept a couple of months ago and made a video about it. When inflation outpaces stock market returns, the effect on “FIRE” portfolios is compounded.
Been preaching this for years…
Come through Graham! Thanks as always, you’re definitely making an impact.
🤭 Come for the funny memes, leave with a boatload of money! My kind of channel! 🏆
I'm going to stick with my dividends
Hi Graham, up guys what's it's here graham
Really important topic..!
Great Video as always Graham!
I subscribed because of michael reeves. now i'm unsubscribing. why? third clickbait in a row. bye.
Why do I see same video and repeated contents every year? YouTubers…
TLDR = The fat cats have stolen the value of everyones retirements with their money printer.
Im going to use the reinvest those dividends method
Something about tapping into the principal is unsettling. It might take much longer, but trying to get a portfolio that produces enough to live off of via dividends and rental income alone would let me sleep so much easier knowing I don't need to use the principal at all.
I think it might make sense to approach withdrawal rate and how much a person needs to be financially independent with a different way of thinking rather than different calculations.🙂
Still liking videos because of the Starbucks video. Also if you win the fight I'll like 10 videos on your other channel!
What website do you recommend to track what you will be worth in how ever long
Graham why don't you teach people how to make money off Youtube cause 90% of your cashflow to fund your investments come from your Youtube channel
Doing my part to sponsor the like button 😆
I follow the 100% rule of always smashing the like button.
When will interest rates go up in a high interest savings account lol?
Rough timing for those that just retired. Sequence of returns risk is real.
Hey man, spoke to Jack about getting a list of guests together for the podcast! I through some good ideas when I was out there to him! And also send some second channel ideas over!
Your vids are great Graham! But still, I think you should try to reduce the clickbait a bit.
What kind of bonds should I invest in and how do I look for them
Can’t believe the housing bubble didn’t just burst or that the stock market didn’t just peak or bottom. Is this guy on his meds today?
Keep up this amazing informative investing content. Your videos have helped me reach over six figures in stocks by age 23. Thank you!
Bro i want your thoughts on Andrew Tate
great video I watched all 12 min 🙂