WITHDRAWAL RATE AND PURCHASING POWER OF THE DOLLAR
Caller: A caller wanted Bob's advice on what her rate of withdrawal should be in retirement. Bob said he favors using a 4% withdrawal rate from your portfolio during retirement. That is a conservative number which should allow you to make annual withdrawals but keep your portfolio in tact. For someone a little more aggressive, Bob said you could go up to 5%, but recognize that depending on the economy and stock market, you may lose purchasing power of your portfolio over time. Bob said he wouldn't go above 5% for a withdrawal rate.
Kirk's Comment: See What Is A Safe Withdrawal Rate in Retirement?
Caller: Our dollar has been getting killed. What can we do to improve its status around the world? Bob said one thing that would help the most would be if we had a bona fide energy policy which did not put us at the mercy of relying on oil production around the world. Throughout the weekend, Bob discussed the need for a more comprehensive plan for reducing our reliance on foreign oil and suggested our government needed serious action, something in the nature of the Manhatten project, but one for energy.
Brinker Comment: Another thing that would help the dollar would be fiscal responsibility and a balanced budget. If we had that, we would not need to sell our Treasuries to foreign governments. Those two things would be huge in providing positive momentum for the dollar. The last 15 years, under both Bush and Clinton, have been a disaster in terms of energy policy. Fiscal policy has been a disaster as well. Even with a Republican Congress and Republican President, the spending went unchecked and Bob said the new Democratic-controlled Congress doesn't seem to be any better.
Later in the broadcast, Bob said he has not seen anything from any of the Presidential candidates that would suggest they have a program to reduce the national debt. In terms of at least getting a balanced budget, Bob doesn't see that happening either as none of the Presidential candidates have offered any kind of plan to get there. Obama and Clinton have proposed many new programs, not the least of which is health care for everyone which under Clinton will cost $110 billion and which many think will be much higher.
DAVID KORN: The dollar is near a two-month high against a basket of major currencies, but still has been getting hammered over the longer term. Just try to go travel in Europe and you will how painful it is when you exchange your dollars for euros.
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- Our strategy paid off in handsomely this year. Our Aggressive Growth and Income Model Portfolio 1 produced an annual return of 9.52% for 2007. This portfolio handily beat the S&P 500 by almost double, despite only having 50% of the portfolio invested in equities.
- Our Moderate Growth and Income Model Portfolio 2 produced an annual return of 8.58% for 2007. This portfolio also handily beat the S&P 500, despite only having 29% of the portfolio invested in equities.
- Our Conservative Capital Preservation Model Portfolio 3 produced an annual return of 8.32% for 2007. Like our other two portfolios, this portfolio also handily beat the S&P 500, despite having no investments in stocks.