Interactive Brokers is an excellent broker from the United States. It is known for its cheap fees and its unique range of offered investment products. It is being used by many personal finance bloggers, for instance.
It is currently the best broker that allows access to U.S. ETFs. And U.S. ETFs are the most efficient ETFs for Swiss investors.
In this guide, I go over the details of how to open an Interactive Brokers account. It is not very difficult, but there are a few things you need to know before you start your application.
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When you retire based on a safe withdrawal rate, you withdraw from your principal month after month. The main risk is that you run out of money before the end of your retirement.
The main case when that would happen is if you retire just before a major stock market crash. A bad sequence of returns is a big risk for your retirement. One way to reduce the risk is to reduce the safe withdrawal rate you are using. But that means you will need to accumulate significantly more money. And you may also end up with a lot of money left at the end of your retirement.
Another solution that many people wonder about is whether they should hold more cash to protect themselves against that risk. This is exactly what we are going to find out today!
I have simulated a few usages of so-called cash cushions in retirement. We will see whether that makes sense or not.
Continue reading “Should you use a cash cushion in retirement?”
Many people want to know whether they should rebalance their portfolios. This is an excellent question, and it becomes essential once in retirement.
Rebalancing is the fact of selling the shares that have overperformed and then buy the stocks that underperformed. The idea is to keep your portfolio allocation to the same level.
People disagree on whether you should rebalance in retirement or not. People do not even agree on that during the accumulation phase. So we will cover this subject as well.
And since I now have a lot of data about the stock market, I figured it would be great to use. So, I am also going to simulate whether it has historically been better to rebalance or not.
The data on this article is based on more than 3.2 million simulations of withdrawal rates! So, without further ado, let’s delve into rebalancing!
Continue reading “Should you rebalance your portfolio in retirement?”
If you plan to retire early based on a withdrawal rate strategy, you base your FIRE plan on historical data. So, what would happen if the future is very different from the past?
We obviously cannot predict the future. So, what can we do? We can improve our FIRE plan with some margin of safety!
In this article, we will see several ways of adding some margin of safety into your FIRE planning.
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Your Safe Withdrawal Rate (SWR) is an essential component of your retirement planning if you plan to retire based on your investment portfolio. We have already talked at length about this method of retirement, the essence of the Financial Independence and Retire Early (FIRE) movement.
But we have not talked in-depth about how to choose a Safe Withdrawal Rate for your situation. No SWR would fit every situation. And while there are some rules of thumb, it is still something you have to decide for yourself.
So, by the end of this step-by-step guide, you should know how to choose your Safe Withdrawal Rate.
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You have probably heard of the 4% rule if you are interested in early retirement. This rule states that if you withdraw 4% of your portfolio every year, you can sustain your withdrawals for 30 years. But do you know where it comes from? If you have read a lot about it, you probably heard about the Trinity Study. This study is where it all started.
But do you know what the Trinity Study is? Probably not. A lot of things people are saying about the Trinity Study are not correct. A lot of people talking about this study have not even read the original paper.
There is nothing mystical about this study. It is merely a research paper by three professors of The Trinity University. Hence the name.
And do you know that it has nothing to do with early retirement? So, why is it the cornerstone of most Early Retirement articles?
Continue reading “All you need to know about the Trinity Study”
Many people are saying that I make FIRE and early retirement look too simple. And many people are falling into the trap of believing that retiring early is easy.
I want to delve into that important subject. For me, retiring early is simple. There is no doubt. However, it is not easy! The difference is fundamental. And there are no secrets to getting to FIRE. You need to focus your efforts on that goal. And how much effort you are going to put into it will shape how fast you can retire.
So, let’s see why FIRE and early retirement are simple concepts but not easy to reach.
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Having a personal finance routine can help save time and money! For a lot of people, having a strict routine will help them remember essential things. It is the case for me. Each month, I am following the same personal finance routine for my budget. In this article, I am going to describe the steps I am doing every month.
It is great to have a routine. It helps you get more efficient, and like this, you do not forget to do anything. And once you start doing it routinely, it becomes automatic, and you will save time. And time is your most important resource. And following a personal finance routine will help you avoid mistakes and maybe save money in the process!
Of course, you do not need to follow the same steps as me. You should probably not have the same steps. Every people can have different things to do based on the way they are investing or based on their situation.
But I would encourage you to define least a monthly routine clearly. You can use mine as a base template if you want. And why not even a weekly routine?
So, here are the 13 steps of my monthly personal finance routine.
Continue reading “The 13 Steps of My Monthly Personal Finance Routine”
A widespread misconception about the Trinity Study is that people believe that they will withdraw 4% of the current portfolio. If the portfolio is worth 1’000’000 USD this year, they can withdraw 4% of it, 40’000 USD.
But in reality, the withdrawal is based on the initial portfolio at the time of retirement. If you start with 800’000 USD, you can withdraw 32’000 USD of it. And then, you adjust the withdrawal every year for inflation. During the first year, this is the same thing, but these two methods are widely different in the following years.
But what would happen if you were to withdraw based on your current portfolio and not the initial portfolio? Let’s find out!
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I have recently done simulations of how often you should invest to maximize your gains. And I thought that it would also be interesting to simulate how often we should withdraw money from the portfolio while in retirement.
If you are retired and living from your portfolio, you will have to withdraw money from the portfolio to pay for your expenses. For this, you have to sell shares and use the proceeds to live.
But how often should you do that? Does it even matter (hint: it does!)? This is what we are going to see in this article. I am going to use historical to simulate different withdrawal frequencies for different Safe Withdrawal Rates.
Continue reading “How often should you withdraw money from your portfolio?”