Not much of one, actually.
One normally lessens their allocation of equities as they near retirement.
Many studies have shown a 60/40 balance between stocks and bonds, respectively, supports a safe withdrawal rate of 4 percent per year.
And by stocks, I don’t mean individual stocks, but something like Vanguard’s S&P 500 Index or Total Stock Market funds.
Plenty of people had their retirement wiped out during the last crash.
It’s good to have lifecycle funds, I agree.
That wouldn’t help when the entire market crashed.
BeeEss… at least with respect to the methodology I’m referring to. If they bought individual stocks and sold, well sure, but I’m not referring to that. The stock market has more than recovered from that crash. In fact, if people in a 60/40 scenario, re-balanced from bonds into stocks during the crash, they made out like bandits. And without rebalancing they should be ahead as well.
These people that supposedly lost their entire retirement savings had no idea what they were doing. They either sold at the bottom or held individual stocks. The market did not go to zero.
I hope you realize that nothing in that article refutes what I said.
The first item listed… don’t time the market. I could not agree more.
And this, I specifically addressed one should not do, if one does not have the ability or willingness to take the additional risk of individual stocks:
“Jeffrey Smith was still living with the consequences of his portfolio moves a decade earlier. During the financial crisis, Smith’s IRA dropped 75%, as individual stock holdings, such as the troubled insurer American International Group, got crushed.”
That’s a grossly oversimplified conclusion from the data (assuming the data analysis is correct). That 11% have been in the top 1% at some point does not mean 11% will going forward - the top 1% is a moving target that’s become more difficult to hit as the delta between rich and middle class expands. From 1979 - 2017, the (inflation adjusted) income level of the top 1% went up 157%. It takes over $500k to be in the top 1% now (other data sources say over $700k)…
It might come close to that going forward if it includes things like one time payouts like selling a house or a life insurance payout, but even then, I doubt it…
For some perspective, I sold a house 2 years ago with a couple hundred k in equity, I have a top 3-5 percentile income job, and I have a paid of rental property. And I didn’t sniff the top 1% that year.
Of course those moving into the top one percent includes one time payouts. It’s probably a decent part of it. Again, that’s why referring to the one percent as a rigid class of anointed is misleading. It’s more a function of age. And sure the difference between middle class and the top one-tenth of one percent is widening, but again, it’s not the same people over time.
Also, as far as economic movement is concerned, according to a Pew Research Group study (which if anything is a left leaning group), yes the middle class has shrunk, but 4 percent moved down and 7 percent moved-up. (Yeah, I know there are studies claiming other things.)
I don’t think inequality is a black and white issue (not referring to race here). But like most things it’s grey, meaning there is some good and some not so good to it. Having everybody equal is not necessarily a good thing either (I’m not claiming that’s your position).
Ahh, but most of those 1 time items would NOT be included. 
Those numbers are almost almost AGI. In the US, a primary residence will have the first $250k ($500k for a couple) excluded from taxes if you’ve lived in it 2 of the last 5 years), so it won’t show up in AGI for most people…how many people are going to have gains high enough to push them into the top 1%? Maybe the top couple percent, if they’ve lived in their houses for a while? Similarly, life insurance is generally tax free (had to look that one up), other than interest on it, so if that’s significant, you’re really only talking the top percent again, and not someone popping in.
So how do you see 11% of americans making $550k+ (up to $750k or so, depending on the source) at some point in their lives? If this was 40 years ago and the top 1% was (in today’s dollars) like $200k, yeah, sure. But at $550-700k? You really buy into that?
Pretty much. Perhaps it may becoming less a function of age. There have been a crazy number of successful start-ups these days insanely enriching who knows how many. Also, I would guess there are more athletes and entertainers these days making gobs of money more than there were in the past.
However, when I look at median income for the top one percent by age. It, for the most part, starts to climb at around 42 years of age. Of course, it’s not a consistent rise for each increase in year.
High income earners seem to come from everywhere these days. Here’s one excerpt… never would have guessed:
"Bloggers making over $400,000 a year are everywhere, you probably just don’t realize it. Here are some that make the list: Darren Rowe (Pro Blogger), Michael Arrington (Tech Crunch), Pete Cashmore (Mashable), John Chow (John Chow), J. Shoemoney (Shoemoney), Perez Hilton (Perez Hilton), Ben Huh (Cheezeburger Network), Peter Rojas (Gizmodo), Leo Babauta (Zen Habits), and many top personal finance bloggers…There are hundreds more that we’ve never heard of. "
Sure 400K may not get one into the top 1%, but it illustrates some relatively new business models and enterprises that are making tons of money that we may not have realized. Again that is another indicator of fluidity in the economy (yeah, it’s anecdotal).
No, bloggers making over $400k/yr are not everywhere; there’s a relative few that are popular (that’s why they make that much) so it seems like they’re everywhere, because those few are everywhere.
There’s about 5k pro athletes in the 4 major sports in the u.s.
Something like 7% of workers own stock options, and most of those aren’t worth hundreds of thousands.
To be top 10% in income you “only” need to make in the mid $100ks; how’s that typical upper middle class someone going to make $550 in a year? Hell, let’s take two working professionals making good money - say an engineer and a family doctor making $350k combined. What’s their path to making $200k more? One has to become a VP or the other start a successful private practice? 11% of the population going to do something equivalent? Really?
There’s NOTHING to support that you can extrapolate the numbers in the study you posted to today’s market with it’s much wider wage gaps.
You misread the article.
His IRA dropped 75%.
His IRA dropped because individual stocks as a whole dropped. His IRA contains many differenti individual socks, but most of the market crashed.
3.4 trillion in retirement savings were wiped out.
It’s called wage inflation adjustment, which in European countries used to happen a few times a year. Everything gets more expensive, rents rise so it equals out. Normally rent will increase on a yearly basis, but by no more then inflation.
We have that in the US too, it’s called COLA. But that’s for government employees primarily. Private sector might or might not have it.
No you apparently do not understand what I wrote. His portfolio of individual stocks dropped 75%. The S&P 500 did not drop 75%. If one invested in something like the S&P 500 and held, one would not have lost 75% of one’s savings, even at the trough. And again, I am referring to a 60/40 allocation. Again most who got wiped out did not invest wisely or prudently. The methodology I speak of would have left an investor in fine shape today. No market timing involved. Just staying the course.
Again, your article does not refute my claim.
In Belgium it’s for everyone, but sometimes government employees lag a little, and inflation should reach a certain amount before it kicks in. And it depends on how they calculate it, a few years back they changed the goods that got in the calculated ‘basket’ (no more cigarettes …)
How would a landlord know you had a wage/salary increase? You bought a bigger, more expensive car?
Reading lots of stories in local news about people getting shafted by that lately.
Yeah in the US they use the Consumer Price Index. It doesn’t include food and gasoline because those are volatile.
There are wide wage gaps, but you haven’t offered anything to show that the 1% is relegated to a permanent class of people.
These stats are from 2012, but show me some stats that the source of the 1% has changed. It’s what one would expect, doctors, lawyers, managers
, and some we may not expect: The Top 1 Percent: What Jobs Do They Have? - NYTimes.com
I don’t raise the rent on my tenants. I raise it when they move out.
Really?