Latest news with #SchwabCenterforFinancialResearch
Yahoo
01-06-2025
- Business
- Yahoo
CD vs Treasury bonds: 5 factors to decide what's best for you
Certificates of Deposit (CDs) and Treasury bonds are generally considered some of the safest investments, but which one is best for your money? Schwab Center for Financial Research fixed income strategist Cooper Howard joins Wealth with Brad Smith to outline five factors to take into consideration when deciding between investing in a CD or Treasury bond. To watch more expert insights and analysis on the latest market action, check out more Wealth here.
Yahoo
27-05-2025
- Business
- Yahoo
The 4% rule: How to make your savings last through retirement
Nearly two-thirds of Americans are more worried about running out of money than death, according to Allianz's 2025 annual retirement study. Schwab Center for Financial Research managing director of financial planning, Rob Williams, joins Wealth to outline the 4% retirement rule and how it can help ensure your retirement savings last. To watch more expert insights and analysis on the latest market action, check out more Wealth here. A recent study by Allianz found nearly two in three Americans, or 64%, worry more about running out of money than death. And even with this fear, 62% say that they are not saving as much for retirement as they would like. So, we want to help you get retirement ready by talking about how much money you can spend in retirement without running out. One common method is known as the 4% rule. According to Schwab, the 4% rule says that you should add up all of your investments and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount to withdraw to account for inflation. By following this formula, you should have a very high probability of not outliving your money during a 30-year retirement. But our next guest says that this is not a one-size-fits-all plan. Here with more, we've got Rob Williams, managing director of financial planning at Schwab Center for Financial Research. Rob, good to have you here. So, let's just start with this. Why is 4% a reasonable place to begin? Well, it's a rule that's been around for almost 30 years now, and it was a great place to start because, as you said, Brad, so many people worry about how much to spend in retirement and need a place to start. But a couple things that we've written about, and I think are important, it's a rigid rule. So, it assumes that you increase that dollar amount. So, say, 4% times a million, that's $40,000 each year with inflation for a 30-year retirement and never make any adjustments. It also assumes that you want a very high probability that your money's not going to run out, which is makes sense, but what if you can remain flexible and make some adjustments? And most of all, it's not personalized. It's a fine place to start, but with technology, with modern planning, we can do a lot better if we know a little bit about your situation, and you can remain flexible. So, how do you determine your own personalized spending rate? Well, the first is to determine what your time horizon is because a 30-year retirement, if you're 65, which is what the 4% rule was designed for initially, 65 to 95, that's a 30-year retirement. But let's say you're in your 70s. Well, perhaps you could spend a little bit more than that. The other is, how much confidence do you want to have that you're not going to run out versus legacy goals, so leaving money behind. And if you want very high confidence, you spend less and potentially invest a little bit more conservatively as well. And the last, the one that I think is most important is, how flexible can you be? Can you divide your expenses into your essential expenses and then some discretionary expenses? And most investors and retirees naturally are going to cut back on some of their discretionary spending, say, in a down market. And if you do that, that can really help your savings last. So, how flexible can you be? Those are three questions to ask to help you get to a more personalized spending rate. So, once you've asked yourself all these questions, just take us through the math here. Let's assume 30-year time horizon and a conservative allocation here, then how do you make sure that that plays out correctly, and you don't run out of money? Sure. And this is a simple chart that we've put together, and there's more to it, but in different scenarios. But in this scenario, let's take the conservative example. Conservative at the top means how aggressively you've invested your portfolio. And in this case, based on our research and our numbers, the conservative portfolio is 60 to 70% bonds and the rest in stocks, and the more aggressive portfolios includes more stocks. And what it says is, in this case, you spend 4.1% in the first year of a 30-year retirement, and then, based on our current projections of how we think different asset classes, stocks, bonds, et cetera, will perform, 4.1% would be the highest initial spending rate that first year, as you described, Brad, and then you increase it every year with inflation to have a very high, a 90% probability of lasting through retirement. So, that's what the table means. It's a fine place to start, but for all the reasons I suggested, you can do much better by personalizing it by staying flexible and using a modern retirement income plan. Rob, good to have you here with us. Thanks so much. Good to be here. Thank you. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
27-05-2025
- Business
- Yahoo
The 4% rule: How to make your savings last through retirement
Nearly two-thirds of Americans are more worried about running out of money than death, according to Allianz's 2025 annual retirement study. Schwab Center for Financial Research managing director of financial planning, Rob Williams, joins Wealth to outline the 4% retirement rule and how it can help ensure your retirement savings last. To watch more expert insights and analysis on the latest market action, check out more Wealth here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
12-05-2025
- Business
- Yahoo
Markets Left Worst Case Scenario Behind, Schwab's Jones Says
Kathy Jones, Schwab Center for Financial Research chief fixed income strategist, says the recent progress on trade talks bodes well for financial markets on "Bloomberg The Close." Sign in to access your portfolio
CNBC
06-05-2025
- Business
- CNBC
The economy is showing signs of weakening. Here's what it means for investors hunting yield
Cracks are starting to appear in the economy, and that means now is a good time for investors to get a little pickier about where they dig for portfolio income. The first-quarter U.S. gross domestic product reading , released last week, showed the economy shrank 0.3% as uncertainty around President Donald Trump's trade policies dragged on businesses. Further, investors are fresh off of a tumultuous April in which the 10-year Treasury yield tumbled and then rose to top 4.5% – and the S & P 500 briefly slid more than 20% from the record high it reached in February. Tuesday saw fresh volatility for investors who are still awaiting trade agreements, as the major averages tumbled for a second day. While many investors like the idea of padding out their portfolio with attractive yields, they should be cognizant of the quality of the assets paying out that income. High-yield bonds, for instance, have a close correlation with stocks and their prices will likely slide as equities sell off. Consider that the iShares iBoxx High Yield Corporate Bond ETF (HYG) slipped about 0.4% in April, while the S & P 500 lost nearly 0.8% that same month. HYG 1M mountain The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) in the past month "Periods of volatility are painful but good reminders to understand what is under the hood of the portfolio and to stay diversified," said Thomas Murphy, senior manager research analyst for Morningstar. "Remember the role bonds play in the broader portfolio: It's ballast for the equity allocation." A preference for higher quality Investors were willing to take a risk last year amid interest rates that remained relatively high, putting $25.6 billion into bank loans and collateralized obligation exchange-traded funds in 2024, according to State Street. Large investors can buy bank loans, which institutions make to companies, and benefit from the floating coupon rate on the loans. While the loans may be investment grade, they are secured by the borrower's assets. Collateralized loan obligations (CLOs) are similar in that they are pools of floating rate loans to businesses. Within an individual CLO, there are tranches, which have their own risk characteristics. A triple-A rated CLO is first to get paid if a borrower goes bankrupt. While the yields on these ETFs are attractive – upward of 5% for some and topping 7% for others with lower credit quality – investors should be wary of pursuing income without thinking about the quality of the underlying loans. "These are small companies with a lot of leverage on their balance sheets," said Kathy Jones, chief fixed income strategist at Schwab Center for Financial Research. "They are leveraged to the economy because they are supposed to be growth oriented. When rates rise, the floating rate aspect is nice, but rates are likely to fall." Investment grade plays To that end, Maulik Bhansali, co-head of the core fixed income team at Allspring Global Investments, notes that there are still attractive opportunities in investment-grade fixed income and sources of 5.5% to 6% yield. "At a high level, there's a lot to like about the investment-grade fixed income market, and you can get that without taking a whole lot of risk on the credit side of things," he said. Bhansali called out several sectors of investment-grade bonds he likes. First, there are top-quality banks. "They have the gas in the tank to weather what might come, and they are pretty much insulated from the direct tariff risk that's out there," he said. He also likes utilities and health care. "These are high quality sectors that should respond well in a downturn, and they are pretty steady Eddie as it goes," Bhansali said. "They trade at relatively cheaper levels, and I think there's a lot of value." Within health care, he likes large pharmaceutical names and managed care companies. Finally, he highlighted agency mortgages and the asset-backed securities market. "These are securities that tend to get dislocated when there is a lot of interest rate volatility, which we have right now," Bhansali said, referring to agency mortgages. They are "a spot where you can pick up high-quality securities with attractive cash flows, 5.5% yields." "The main theme is that you don't need to reach in order to achieve attractive returns across the high-quality spectrum," he added. Core bond funds For investors seeking a mix of diversification and quality, core bond funds might fit the bill, said Murphy at Morningstar. "Core bond portfolios offer a good building block to a fixed income portfolio because you have that broad exposure to the fixed income market," he said. Investors should look for solid active managers and names that leverage strong analyst teams, Murphy noted. As they research core bond funds, investors should understand the credit quality of the underlying portfolio, as well as the duration – or the portfolio's price sensitivity to swings in interest rates, he added. "Look at prior months of volatility and understand the biases in these funds," Murphy said. "Stick with active managers, good managers who have weathered periods of volatility and are time tested."
