Back in our February 2018 commentary (“Just Keep Swimming”), we briefly discussed the risks of market downturns for people nearly or recently retired. The main danger we identified was called sequence of returns risk. As some of our readers approach retirement, they may wonder: what is this risk and how should they protect from it?
Our financial lives can be complicated. Between monthly bills, medical costs, bank accounts, credit and debit cards, investment accounts, and taxes, for better or worse each of us accumulates hundreds of financial relationships over the course of our lives.
A spate of recent think-pieces, news segments, and even a forthcoming documentary film have popularized an internet subculture called the “FIRE” movement (which stands for “Financial Independence, Retire Early”). In a nutshell, FIRE is about achieving financial independence earlier in life via extreme frugality and accelerated retirement savings. Its adherents (typically Millennials) report saving as much as 50-70% of their gross income each year, in a bid to accelerate the point at which their investment portfolio can support their modest annual income needs, freeing them from traditional work obligations.
Last week brought news that the average 30-year mortgage rate increased to 4.61%, the highest level since 2011. This should not be particularly surprising–mortgage rates are highly correlated to the benchmark 10-year U.S. Treasury bond yield, which has more than doubled from its record low nearly two years ago:
As 2017 comes to a close, investors have much to be thankful for. At the time of this writing, US stocks are up more than 20%, international and emerging markets stocks up even more in the 25% to 30% range, and bond funds are also in positive territory with low to mid-single digits returns year-to-date.
Earlier this month, Congressional Republicans unveiled the details of their much-anticipated tax reform plan. Ostensibly, their goal is to simplify the tax code by eliminating a host of loopholes, broaden the tax base, and lower average tax rates for both individuals and corporations. The premise is reasonable enough—the execution is where it gets tricky.