{"id":401728,"date":"2022-01-31T19:52:00","date_gmt":"2022-01-31T16:52:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/retirement-weekly-here-are-the-odds-youll-outlive-your-money\/"},"modified":"2022-01-31T19:52:00","modified_gmt":"2022-01-31T16:52:00","slug":"retirement-weekly-here-are-the-odds-youll-outlive-your-money","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/retirement-weekly-here-are-the-odds-youll-outlive-your-money\/","title":{"rendered":"#Retirement Weekly: Here are the odds you\u2019ll outlive your money"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a408c6f51407\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a408c6f51407\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/retirement-weekly-here-are-the-odds-youll-outlive-your-money\/#Theres_good_news_and_bad_news\" >There\u2019s good news and bad news<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/retirement-weekly-here-are-the-odds-youll-outlive-your-money\/#Mark_Hulbert\" >Mark Hulbert<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Retirement Weekly: Here are the odds you\u2019ll outlive your money<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Theres_good_news_and_bad_news\"><\/span>\n  There\u2019s good news and bad news<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\" role=\"region\" aria-label=\"article body\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000578364\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000578364\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       Ready for today\u2019s retirement investing pop quiz?<\/p>\n<p> What year was the worst possible time in U.S. history to retire, from an investment point of view? To put this question another way: What year\u2019s U.S. retirees had the greatest difficulty sustaining their retirement standard of living, relative to any other year\u2019s retirees of the last two centuries?<\/p>\n<div class=\"paywall\">\n       If you\u2019re like almost everyone else, your first guess is the summer of 1929, just prior to that year\u2019s stock market crash. Close runners up include early 2000, just prior to the bursting of the Internet bubble, 1987 prior to that year\u2019s stock market crash, or October 2007 before the Great Financial Crisis.<\/p>\n<p>Each of these guesses is wrong, however.<\/p>\n<p>The correct answer, according to <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/ssrn.com\/abstract=4001986\" class=\"icon none\">just-completed research from Edward McQuarrie<\/a>, an emeritus professor at Santa Clara University\u2019s Leavey School of Business, is 1965. That\u2019s because, beginning in that year, both the stock and bond markets embarked on a sustained period of negative inflation-adjusted returns. In the years after 1929, 1987, 2000, and 2007, in contrast, a balanced stock-bond portfolio performed much better, either because interest rates declined and bonds performed well, or the stock market quickly recovered from its losses, or both.<\/p>\n<p>McQuarrie arrived at this 1965 worst-retirement-start date when measuring the probabilities that a retiree would outlive his or her money. He analyzed a much larger data set than most previous studies, which have largely focused on just the U.S. markets since the 1920s. McQuarrie, in contrast, analyzed U.S. data back to 1793 and global markets back to 1864.<\/p>\n<p>He came up with both good and bad <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>. The bad: The odds of running out of money in retirement are significantly greater than prior studies had concluded. That\u2019s because those prior studies based their return assumptions on U.S. history since the mid-1920s. Other countries\u2019 markets, as well as the U.S. markets prior to the mid-1920s, frequently performed less well.<\/p>\n<p>The good news: Retirees and near-retirees have several portfolio fixes available to them that dramatically reduce the odds that a stock-bond portfolio will run out of money for they pass. Here\u2019s a summary of these fixes that McQuarrie identified:<\/p>\n<p><strong>Invest in a total bond market index fund instead of long-maturity bonds<\/strong><\/p>\n<p>This seems like a minor fix, but actually has a big impact, according to McQuarrie. By investing in a total bond market index fund, you significantly reduce the average duration of the bonds you own. A balanced portfolio containing such a fund and equities did a better job dealing with \u201cthe diverse challenges a retiree might face\u201d than a portfolio of equities and long-term bonds.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>To illustrate the reduction in duration that comes with shifting from a long-term bond fund to a total bond market index fund, consider that the Vanguard Long Term Bond ETF<br \/>\n        BLV,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/208144347\/composite\" class=\"negative\">-0.31%<\/bg-quote><br \/>\n       has an average duration currently of 16.5 years, while the Vanguard Total Bond Market ETF<br \/>\n        BND,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/203732548\/composite\" class=\"negative\">-0.10%<\/bg-quote><br \/>\n       has an average duration of 6.9 years, less than half as long.<\/p>\n<p>It\u2019s helpful to remember why retirees should want to mix equities with bonds. It is not because bonds outperform stocks, but because an equity-bond portfolio is less vulnerable to an equity bear market\u2014especially if that bear market were to begin right at the onset of retirement. McQuarrie\u2019s argument is that inter<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>te-term bonds hardly ever do a poorer job than long bonds of reducing the risk of a retiree\u2019s portfolio, and sometimes do far better.<\/p>\n<p>This was certainly the case for those who retired in 1965, for example. In the stagflation era that ensued for the subsequent 15 years, long bonds were crushed. Intermediate-term bonds were \u201cconsiderably more successful in coping with stagflation\u201d than long bonds.<\/p>\n<p>Note that McQuarrie\u2019s recommendation to favor a total bond index fund over long bonds is not motivated by a market timing judgment that inflation and interest rates will rise over coming years. Given the recent spike in inflation to the highest level in 40 years, many are betting that long bonds are entering into a long-term bear market. They may very well be right, of course. But it\u2019s not out of the question that the global economy could suffer a deflationary collapse; we saw a hint of that at the beginning of the COVID-19 pandemic, you may recall. A total bond index fund would serve a retiree well in both the inflation and deflation scenarios, while long bonds would be <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ropriate only in the second.<\/p>\n<p><strong>Allocate a portion of the fixed-income allocation to TIPS<\/strong><\/p>\n<p>McQuarrie found that in some limited circumstances a small allocation to inflation-protected bonds was a good idea. Those circumstances are when everything goes wrong at the worst possible time, in both the stock and nominal bond markets.<\/p>\n<p>McQuarrie adds that, but for these circumstances, TIPS rarely help a retiree\u2019s portfolio last longer. And he stresses that the circumstances in which they do help have been very limited historically. He says that a modest TIPS allocation (perhaps 20%, taken from the fixed income allocation) is therefore most appropriate for the extremely risk-averse retiree.<\/p>\n<p><strong>Global diversification<\/strong><\/p>\n<p>McQuarrie next investigated whether global diversification increased the longevity of a retiree\u2019s portfolio. He found that it did in the case of equities, for the familiar reason that it reduces portfolio volatility. However, at least for U.S.-based investors, he found mixed results when global diversifying the bond portion of a retiree\u2019s portfolio. That\u2019s because, as McQuarrie put it, \u201cthere\u2019s too much tail risk [for the U.S. investor] in foreign government bonds.\u201d<\/p>\n<p>He notes, however, that global diversification of the bond portion of a portfolio may be a better idea for \u201cresidents of a small nation whose governing structures have historically not been stable.\u201d They \u201cmight not regard bonds from their own government as in any way superior to foreign bonds.\u201d<\/p>\n<p><strong>Real estate<\/strong><\/p>\n<p>Lastly, McQuarrie found some evidence that the addition of residential real estate to a portfolio increases the odds that that the retiree will not run out of money. He stresses that this conclusion is tentative, because of limited historical data on the performance of residential real estate. That he was even able to reach a tentative conclusion about real estate is due to the monumental project of several academic researchers to construct a long-term database that includes \u201c<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/doi.org\/10.1093\/qje\/qjz012\" class=\"icon none\">the rate of return on everything.<\/a>\u201d In any case, McQuarrie found that \u201cthe addition of real estate to [a retiree\u2019s portfolio]\u2026 was <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly successful,\u201d and for investors outside the U.S. \u201csometimes remarkably so.\u201d<\/p>\n<p>McQuarrie, in an interview, acknowledged the difficulty putting this finding into practice, since there is no available investment that is benchmarked to the performance of residential real estate generally. At a minimum, however, he said that his findings suggest retirees shouldn\u2019t automatically exclude their real estate holdings when constructing their financial plans for dealing with all possible contingencies. The key will be whether their residential real estate holdings perform at least as well as the national average.<\/p>\n<p>The bottom line from McQuarrie is good news: \u201cTwo centuries of global market history indicate that exhaustion of tax-sheltered retirement savings before the age of 100 is unlikely to occur for retirees\u201d who hold a balanced portfolios.<\/p>\n<p><em>Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com<\/em>.<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author mobile-scrim hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Mark Hulbert\",\"subhead\":\"The Wall Street Journal\",\"list\":[{\"type\":\"link\",\"icon\":\"bio\",\"url\":\"https:\/\/www.marketwatch.com\/topics\/journalists\/mark-hulbert\",\"text\":\"Biography\"},{\"type\":\"link\",\"icon\":\"twitter\",\"url\":\"https:\/\/twitter.com\/MktwHulbert\",\"text\":\"@MktwHulbert\"},{\"type\":\"link\",\"icon\":\"email\",\"url\":\"http:\/\/www.marketwatch.com\/news\/mailto:contributors@marketwatch.com\",\"text\":\"contributors@marketwatch.com\"}]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Mark_Hulbert\"><\/span>Mark Hulbert<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-78D3-3CA4FF3E1F5C%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#Retirement Weekly: Here are the odds you\u2019ll outlive your money&#8221; There\u2019s good news and bad news Ready for today\u2019s retirement investing pop quiz? What year was the worst possible time in U.S. history to retire, from an investment point of view? To put this question another way: What year\u2019s U.S. retirees had the greatest difficulty&#8230;<\/p>\n","protected":false},"author":1,"featured_media":401729,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.mktw.net\/im-476270\/social","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-401728","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/401728","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=401728"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/401728\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/401729"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=401728"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=401728"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=401728"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}