Скачать или смотреть Can YOU Afford to Retire? | 4% Rule and Trinity Study Explained

How much money do you need to retire comfortably? If your goal is to live on $100,000 a year the answer is roughly $2.5 million in investments. Even though that is a correct answer, it doesn’t do you any good if you don’t understand how I came up with that number, and that is where the Trinity Study comes in.

What is the Trinity Study and why does it matter?
The “Trinity Study” or “4% rule” are both informal names given to a paper written by three finances professors at Trinity University in the 1990s. The paper sought to answer the question of what how much money you can withdraw from your nest egg every year and not run out of money. It is a fine balancing act: If you withdraw too much, you will run out of money during retirement (AND) If you withdraw too little, then you needlessly lower your standard of living.

How was the study conducted?
The study used the historical rates of returns for two time periods: 1926-1995 and 1946-1995 to provide a control against the significant losses during the Great Depression. They examined withdrawal rates from 3% up to 12% over four payout periods of: 15, 20, 25, and 30 years. Representing the average life expectancies after retirement for most retirees Then they examined different portfolio compositions ranging from 100% Bonds to 100% Stocks.

What are the takeaways?
You need diversity in your investments. While you should lean heavily on the stock market in your portfolio, you should also have fixed income assets to help you weather the years when the market performs poorly. A 4% withdrawal rate will virtually guarantee portfolio success over a 30-year timeline. However, in many cases you will achieve portfolio success with higher withdrawal rates even at the 5-6% rate and will still have money left over for your heirs. Over a short payout period of 15 years or less, you can achieve portfolio success at much higher rates, even up to 9% in some cases.

What could be improved on?
This study only examined stocks (represented by an S&P 500 portfolio) and bonds as avenues for investing. It makes sense that the variables needed to be limited, but it’s important to know that with the variety of passive income options available today, the results do not necessarily convey in a 1:1 fashion. Additionally, with the growth of the FIRE community and more and more individuals wanting to retire early with payout periods that vastly exceed 30 years, this will likely drive a lower withdrawal rate if you don’t have any other revenue streams.

Final Notes
Finally, while not a critique of the study with anything regarding personal finances everything must be taken with a grain of salt when applied to your specific situation. You may need a lower or higher withdrawal rate depending on what you want your retirement to look like and how much if anything you want to leave to your heirs.

Synopsis of the Trinity Study https://www.rbcwm-usa.com/resources/f...
Actual Trinity Study https://www.aaii.com/files/pdf/6794_r...

0:00 How much money do I need to retire?
0:37 Trinity Study Explained
1:06 Trinity Study Methodology
2:34 Trinity Study Results
6:57 Key Takeaways
8:15 Potential Improvements
9:52 Closing Thoughts

#trinitystudy #retirement #personalfinance


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DISCLOSURE: We are not financial advisers. The ideas presented in this video are for entertainment purposes only. Although the information is researched and vetted beforehand, it may not be up to date at the time of viewing. Please do your due diligence and research on the topic. You (and only you) are responsible for the financial decisions that you make.