How current economic changes impact retirement safe withdrawal rates

#85: Recently I’ve really started to notice the impact of inflation on daily spending. Have you?

At first, it was just 1-2 things. Then it was a handful. Now it seems like everything is noticeably more expensive. (Assuming it’s even in stock in the first place.)

Gas. Groceries. Takeout. Toiletries. Utilities. Car maintenance. Healthcare/supplies. Pre-school. Appliances.

Everything seems to cost more and you just can’t buy as much with the same budget anymore.

This got me wondering about how recent macroeconomic changes over the last 6 months might impact retirement safe withdrawal rates and asset allocations.

The macro changes I’m referring to are: Inflation at a 40-year high. Stock valuations doubling since their pandemic lows. Interest rates that are scheduled to increase a minimum of 3 times this year.

In these times, what should investors and retirees be doing to defend their portfolio values and retirement security?

This week, I asked my friend Karsten Jeske (aka “Big ERN”) to help us make sense of all that is going on right now in terms of macro trends…and what it all means for safe withdrawal rates and asset allocation. We had a wide-ranging, nearly 2-hour(!) discussion full of insights and tips that you won’t want to miss.

We discuss:

• Major recent macroeconomic changes that (early) retirees may want to factor into their retirement planning
• What new safe withdrawal rate % retirees should consider right now
• Whether investors should potentially update their asset allocation given current macro trends
• Whether he believes asset prices are overvalued right now
• Alternative assets (like cryptocurrencies) and their merits / concerns
• How much cash he believes is advisable to hold right now

Do you plan to make changes to your asset allocation or safe withdrawal rate in light of recent macroeconomic changes? Let me know by leaving a comment!

Don't miss an episode, hit that subscribe button...

If you liked this episode,  subscribe so you don’t miss any upcoming episodes!

• Apple Podcasts
• Overcast
• Spotify

I need your help, please leave a listener review :)

If you liked this episode, would you leave a quick review on Apple Podcasts? It’d mean the world to me and your review also helps others find my podcast, too!

Links mentioned in this episode:

• Karsten's Safe Withdrawal Rate Series
• Karsten's Google Sheet DIY Withdrawal Rate Toolbox
• Karsten's post on Preferred Stocks
• The shockingly un-simple math behind safe withdrawal rates (HYW035)
• How to use a bond tent to reduce sequence of returns risk (HYW068)
• Does the “yield shield” protect against sequence risk? (HYW069)
• Is rental real estate a safer type of “yield shield”? (HYW070)
• Schedule a 1:1 consult with me
• HYW Facebook community

 Intro/Outro: Old Bossa by Twin Musicom.