The last time I wrote the newsletter was the first week in April. I wrote that the markets in Q1 were down 4.6%. What a difference five weeks makes! In the month of April, the S&P 500 was up 10.42%. And as of Wednesday morning May 6th, when I am writing this, the S&P 500 is up 6.04% for the year. And even more startling, the NASDAQ, which as of the end of Q1 was down 7.11% for the year, is now up 8.97% for the year.
Why the sudden turnaround? The conflict in the Middle East is ongoing, the Strait of Hormuz remains disrupted, and gas prices are above $4.50 a gallon. But markets are forward-looking. The Middle East conflict may not be settled, but the signals are looking more positive for a negotiated resolution. More importantly for the US stock market, corporate earnings have come in strong. Inflation, however, may still be the skunk at the garden party.
Inflation and Retirement: Why 1968 Was Worse Than 1929 for Retirees
Barron’s asked William Bengen, the person credited with the idea of the 4% safe withdrawal rate, to look at what year over the last century would be the worst to retire. He looked at inflation, bull and bear markets and geopolitical events. He concluded that 1968 was the worst year to retire. Funny for me since that was the year I was born. Barron's
In his calculations, he included a 30-year retirement, a 65% equity/30% bond/5% cash portfolio, and a 4.77% annual withdrawal rate. He then looked at how a $100k portfolio starting in October of 1929 would compare to the same portfolio starting in October of 1968. The surprising outcome is that it was better to be invested through the Great Depression than in the 1970s.
One of the most important factors was inflation. The 30-year retirement starting in 1929 included an accumulated inflation of about 70%. A $100,000 in 1929 would equate to about $170,000 in 1959. If you look at the 30-year retirement starting in 1968, the accumulated inflation is about 368% so $100,000 in 1968 would equate to $468,000 in 1998. The Great Depression came with deflation and was at the beginning of the retirement period, which meant annual withdrawals could go down. This allowed the portfolio to recover, and it was able to weather the inflationary pressures of World War II that came later. The 1968 retirement period had to endure more than a decade of high inflation from 1969 to 1982. Because it was at the beginning of the time period, the portfolio never recovered.
One of the most important takeaways is not simply that 1968 was a bad year to retire. It’s that the sequence of returns — combined with inflation — can make or break a retirement portfolio. When markets decline early in retirement while withdrawals are ongoing, the portfolio has less capital available to recover when markets rebound. Early losses can permanently reduce long-term portfolio sustainability. And if inflation is elevated like it was in the 1970s, the portfolio withdrawals must rise just to keep up with inflation. Combine higher withdrawals with early market declines, and retirement planning becomes much more difficult.
What can you do? First, talk with your advisor. At RSWA, we test retirement plans for different return sequences and include inflation projections. You don’t want to exaggerate market movements or inflation, making you too conservative in your spending, but it’s powerful to know how these factors can affect your retirement projections.
Financial Planning/Investment Strategy Corner:
Saving For Retirement – The New Trump IRA:
President Trump recently signed an executive order intended to expand retirement savings access for workers without employer-sponsored retirement plans. The proposed “Trump IRA” program could include federal matching contributions and low-cost investment options. Here are the details:
- Savers may be eligible for 50% contribution matching up to $1,000 from the federal government.
- If you are under 18, a dependent or a full-time student, you don’t qualify for the federal match.
- The match is limited to lower- and middle-income workers but the specifics have not been released yet.
- The website for the new program, TrumpIRA.gov, is expected to go live on January 1, 2027.
- The executive order outlined that the plan would offer low-cost investments similar to those in the Thrift Savings Plan.
- All fund fees are supposed to be capped at 0.15%.
- The new program will integrate with the Saver’s Match program that was established by the Secure 2.0 Act in 2022.
- For those of you I haven’t told – my first grandchild (a girl) is due in August! Behind the Name First-time grandparent do’s and don’ts for first time grandparents
- I watched Nuremberg on Netflix last weekend. It was powerful. I forgot that in those days they didn’t have all the information that we do today. They handle that well in the movie. Nuremberg (2025) - IMDb
- When my kids were younger, I liked to read what they were reading so I have read all the Harry Potter books, the Hunger Games and many others. For Christmas, my son gave me books that he and his sister have read recently. I just finished Mistborn and am now working on John Dies At The End. It’s fun! Goodreads MISTBORN
- Amazon wants to build a warehouse in Gorham. Some people in the town aren’t happy. Gorham Planning Board hears pushback on Amazon warehouse proposal
- Ollie Wright, Heart of Pine player, is going to play in the Drive Fore Kids charity golf tournament next month. Hearts of Pine soccer star to join Drive Fore Kids charity golf tourney
- “Strive not to be a success, but rather to be of value.” – Albert Einstein
- “Few things can help an individual more than to place responsibility on him, and to let him know that you trust him.” – Booker T. Washington
- “Children today are tyrants. They contradict their parents, gobble their food, and tyrannize their teachers.” – Socrates 😊Forbes Advisor Money
Quick Hits:
Artemis II Photo Drop:
NASA
Over the weekend, NASA released more photos of last month’s mission to the moon. This one is my favorite. Not sure if it’s just me (or maybe because we just passed May 4th – as in “May the 4th be with you” 😊) but this picture definitely reminds me of the Death Star! Artemis II Multimedia NASA photos from Artemis II
Weight Training After 50:
For the first time since my early 20s, I joined a gym. I have been a treadmill walker for over 20 years and still going. But there is more and more evidence that weight training, especially as you age, is important. So, I had to admit I am aging. The next step was to find a place that fits into my schedule and was convenient so that I wouldn’t have any excuses. My husband joined with me, which is key so we can keep each other honest and have someone to whine to. I will admit, it’s very humbling. But what isn’t after 50?! And since I am closer to 60 than 50, I am starting a bit late. 7 Benefits of Lifting Weights for Women
Few Quotes:
Happy Mother’s Day to all the mothers out there!
Thank You for Reading
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Be well, take care, and stay safe!
