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Your ‘Set It and Forget It’ 401(k) Made You Rich. No More. — WSJ (apple.news)

submitted 11 months ago by [email protected] to c/[email protected]

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For four decades, patient savers able to grit their teeth through bubbles, crashes and geopolitical upheaval won the money game. But the formula of building a nest egg by rebalancing a standard mix of stocks and bonds isn’t going to work nearly as well as it has.

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[–] [email protected] 6 points 11 months ago

Can't read this specific article, but I'll point out that the "4% rule" and similar strategies mostly come from historical analysis of only the US stock market and US treasuries. The 4% rule really only works in the US, Canada, and Australia - developed nations that weren't destroyed by WWI and WWII. The rest of the world has had "once in a generation" catastrophes every 20-ish years, which is just about once every generation. And not little micro-catastrophes like Covid or 2008 that recover after a couple years.

If you've only been saving since 2019, that is approximately no time at all. They may tell you that, on average, the stock market returns 8-10%/year, which might make you think that some of your savings should be up 40%, but that's not how it works. (US) stock market averaged 8% after inflation, 10% including inflation, through the 20th century, but its actual, annual return is more like 10±12%. You need a lot of years to average out that much variability.

The financial industry makes its money on fear. On people scared to make their own decisions, so turn to a professional; or people scared of the future so they do desperate, emotion-driven trades. The financial media are there to propagate that fear. Add to that going into an election year with a Democratic President, and you're going to see mountains of negative economic sentiment and outlook.