It almost went away, but in the past decade (or so) the LP has made a comeback among some music listeners. Which on some level is cool. Having grown up with the LP, I get the appeal. For the vast majority of music fans, digital formats have taken over the industry.
The data above show the people have spoken. Digital is better. Digital is more convenient. It doesn’t scratch like an LP or need cleaning and you don’t have to get up every 25 minutes or so to flip the record.
The same is true in financial planning. For a long time, the 4% rule, was the go-to for financial planners. The 4% rule dictates that you spend the same amount from your portfolio each year in retirement (after inflation). This rule-of-thumb was important, because as Blair duQuesnay at the Belle Curve writes:
The number one risk retirees face is that their living expenses will increase at a faster rate than their investment portfolio can grow to sustain those withdrawals.
Financial goals are typically far off into the future so it can be difficult to measure progress along the way (especially since life invariably gets in the way and changes those goals). That’s why financial planning is always a process and not an event.
It’s also why the most important aspect of a good plan comes from periodically benchmarking progress towards the client’s financial and life goals. It becomes easier to take avoidable risks if you don’t know how close you are to achieving financial success.
For those of you who want to take a deeper dive into the topic of flexible spending rules in retirement. Here are a couple of recent articles on the topic*:
- Dynamic Spending in Retirement Monte Carlo by Nathan Faber; and
- The Problem With FIREing at 4% and the Need for Flexible Spending Rules by Michael Kitces.