Connect with us

News

Vanguard strategist on saving for retirement and spending when you get there

Published

on

Vanguard strategist on saving for retirement and spending when you get there

Beach bonfires, sunrise sound-bath meditation, and yoga sessions mixed with high-level financial discussions on everything from bitcoin to bonds: That’s the Future Proof Festival, which took place last month in Huntington Beach, Calif.

More than 4,000 wealth advisers and vendors from across the country came to talk about investment strategies, learn about buzzy fintech, and scarf down tacos and ice cream while singing along with Third Eye Blind and the X Ambassadors.

One afternoon I popped into the Vanguard Investments tent to sit down with Colleen Jaconetti, a senior investment strategist for Retirement Solutions at Vanguard. Jaconetti’s focus for the past two decades has been financial planning and digging into the balance between spending on immediate needs and saving for the future.

Here’s what Jaconetti had to say, edited for length and clarity:

Advertisement

Kerry Hannon: You’re known for your behavioral coaching. What is a key driver to saving for retirement?

Colleen Jaconetti: The most important thing is recognizing that if you want to have enough to live on in retirement, you have to start saving early and have a portfolio with low costs.

For a lot of the young people, it’s hard to take money out of their current paycheck for retirement. They’re focused on paying their bills right now. The discipline and the understanding that foregoing something in your early years can pay huge dividends is hard to get your hands around. That discipline helps you hold steady when markets get shaky, which is a key to long-term investment success.

Some of it is just people’s personality. I have one nephew who likes to spend his money as soon as it’s in his hands. It’s his natural inclination. He’s very generous. I’m not criticizing people who spend more. They want to enjoy their life. But it’s harder to get someone like that to understand the value of savings.

Advertisement

Then the second part is education. While you really want to spend now, if you understand that if you save it now that means you can maybe retire three years earlier. That makes it a more tangible thing for younger people.

It helps to understand the trade-offs of small sacrifices. You need to see where in your budget you can consider trimming.

Read more: Retirement planning: A step-by-step guide

What advice would you give a young person just starting to save for retirement?

Advertisement

Set enough aside in your employer-provided retirement plan to at least get the employer match. Many employers contribute anywhere from 50 cents to $1 for every $1 an employee contributes, up to 3% or 4% of their salary. Ideally, workers should aim to save 15% of their pre-tax income each year, including any match. Giving up the employer match would be a huge disservice to yourself.

Did you have an issue with saving when you were starting out?

No, but I remember exactly how much I made every other week when I started as a senior auditor at Ernst & Young in 1994. I was paying for my apartment and insurance all for the first time, and I was like, wait, where is my money going?

Advertisement

Once you are aware of where all your money goes, you realize that a little bit over here in retirement savings actually will make a huge difference later.

Vanguard has been at the forefront of the movement to help people roll over their 401 (k) savings to an IRA and not cash out when they change jobs — a mistake I made as a 30-year-old. Can you elaborate on that issue?

People say, ‘oh, it’s not that much money, so it’s okay if I just take the cash now because I want to buy a house.’ But you can’t put that money back, and you’re giving up that tax-deferred investment and the compounding for two decades or more, and that’s a lot. When you show people what it would be worth in the future, they usually say, ‘oh wow, I didn’t realize that that amount today would accumulate to be so much down the road.’

If you’re not in retirement yet, but you’re edging up to it, what should you be doing?

Advertisement

This is the time to put together the big picture of what you want to do, and then how much do you need, and what’s the best way to minimize taxes.

The biggest thing is what do you envision doing in retirement? Some people want to be gardening and reading books, and some people are going to be taking two or three trips a year.

It’s figuring out how much do you need to retire and live the life that you want to live. How much Social Security will you get? Can you afford to delay receiving your benefit? Then you need to consider whether you should spend from your taxable or tax-free accounts.

colleen

Colleen Jaconetti, a senior investment strategist for Retirement Solutions at Vanguard. (Photo courtesy of Vanguard) (Vanguard)

Let’s talk about the angst people have about spending in retirement.

Advertisement

A lot of people get to retirement with a number in mind. I need a million dollars to retire. Whatever it is, they decide to have a number.

Then when they have that, they don’t want to spend from their principal in retirement. So they’re going into retirement with a broadly diversified, low-cost portfolio. They’re all set and then when they look at current yields, all of a sudden, they don’t want to spend their principal.

So they overweight their portfolio in dividend-paying stocks and high-yield bonds to get the income that they desire. But what they don’t realize is that you could actually be putting the principal value at risk more than if you just spend from it.

When you think about spending in retirement, don’t be so narrowly focused on preserving principal that you forgo diversification.

Advertisement

Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.

What’s a spending solution that can ease people’s concerns about running out of money?

Dynamic spending. It’s responsive to annual market performance but the year-over-year spending amount is kept within a set range to provide a level of stability.

For many retirees, our dynamic strategy offers the best of both worlds. It’s responsive to market changes without causing significant fluctuations in annual spending.

Advertisement

This strategy allows them to set controlled maximum (ceiling) and minimum (floor) spending limits. Retirees can spend more when markets perform well or cut spending when they don’t — within limits.

Say a retiree starts with $1 million in a 60% US stocks, 40% US bonds portfolio. You’d start with $40,000 a year in income with a 4% initial withdrawal rate as the basis for comparison and an expected 30-year retirement.

Dynamic spending allows retirees to receive more, say 5%, or $42,000 in income. In practical terms, this could translate to enjoying a higher quality of life, however they define it: more travel, greater ability to donate, or perhaps having greater means to help family members financially.

If there’s a period of prolonged underperformance — especially early in retirement — year-over-year real spending could decline each year. In other words, real spending could drop to $39,000 in year one, $38,200 in year two … down to say $35,000 in year five.

Advertisement

Having the flexibility to make small spending decreases in down markets, and the desire to spend more in a positive market is a compelling strategy for many retirees.

Take a short survey and get matched with a vetted financial adviser.

Take a short survey and get matched with a vetted financial adviser.

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.

Click here for the latest personal finance news to help you with investing, paying off debt, buying a home, retirement, and more

Read the latest financial and business news from Yahoo Finance

Advertisement

Source link

Continue Reading
Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

News

Tropical Storm Milton Path: Where It’s Heading, What to Know

Published

on

Tropical Storm Milton Path: Where It's Heading, What to Know

Tropical Storm Milton, currently in the Gulf of Mexico, has strengthened throughout the weekend and is expected to become a hurricane later Sunday, according to an advisory posted by the National Hurricane Center (NHC) on Sunday morning at 9 a.m. EST.

The NHC stated that a National Oceanic and Atmospheric Administration (NOAA) aircraft showed Milton gaining strength, and there is an increased “risk of life-threatening impacts” for parts of the Florida West Coast.

Currently, a “Tropical Storm Watch” is in effect for the coast of Mexico from Celestun to Cancun, though interests remain throughout the Yucatán Peninsula, Florida, the Florida Keys, and the northwestern Bahamas.

Hurricane and storm surge watches could be required for portions of Florida later on in the day.

Advertisement

On Saturday afternoon, Florida Governor Ron DeSantis declared a State of Emergency for 35 counties, writing that the storm will impact “communities still recovering from recent Major Hurricane Helene.” As of Sunday morning, that State of Emergency has been expanded to 51 counties.

In a press conference on Sunday morning about disaster preparedness, DeSantis focused on containing the effects of debris from Helene ahead of Milton’s arrival. He urged residents to  prioritize preparation throughout the rest of the weekend, Monday, and Tuesday. 

“We are using every resource at our disposal to help our local communities to get the debris out…this is all hands on deck,” DeSantis said. “This is not a good track for the state of Florida.”

As of early Sunday morning, Milton’s center was moving slowly eastward, and is forecast to quicken across the Gulf of Mexico and reach the west coast of Florida during the week. The storm’s winds increased to 60 m.p.h as its eye currently lies around 850 miles west southwest of Tampa, Florida.

Advertisement

Rainfall amounts are predicted to be 5 to 8 inches, with localized targets up to 12 inches through Wednesday night in Florida which bring “risk of flash, urban, and areal flooding.” Mexico is expected to get less rainfall—2 to 4 inches—across the Yucatán and Cuba. Surf swells are also expected across “much” of the coast of the Gulf of Mexico, which could cause “life-threatening surf and rip current conditions.”

Milton comes on the heels of an already extremely active hurricane season, especially for Florida.

Read More: Here’s What You Need to Know About Hurricane Kirk’s Expected Path

Less than two weeks ago, Florida’s west coast was hit hard by Hurricane Helene, which made landfall in the state as a Category 4 storm. The devastation and damage from Helene spread from Florida, with its death toll—per the the New York Times as of Friday afternoon—climbing to at least 225 people. The NHC is also tracking Hurricane Leslie and Hurricane Kirk, though the former currently poses no hazard to land, and the latter’s impact currently is contained to surf swells causing “rip current conditions.”

Advertisement

Source link

Continue Reading

News

Woman killed and 10 injured in shooting in southern Israel

Published

on

Woman killed and 10 injured in shooting in southern Israel

A policewoman has been killed and 10 others injured in a shooting in the southern Israeli city of Beersheba, local authorities said.

The gunman was shot dead at the scene after what police described as a “suspected terror attack” at the city’s central bus station.

The victim has been named as Shira Chaya Suslik, a sergeant from Israel’s border police.

Israel’s ambulance service said medics are treating ten people for injuries, some of whom suffered gunshot wounds.

Advertisement

One of the injured is in a “moderate to serious” condition and four others are in a “moderate condition”, the ambulance service said.

They have been taken to the nearby Soroka Hospital.

Police said a preliminary investigation showed the gunman was “eliminated in a few seconds by the security forces” who were there.

Shortly after the attack, Israel’s Transport Minister Miri Regev called for the families of “terrorists” to be deported from the country.

Advertisement

“The time has come for a deterrent punishment to prevent the attacks on Israeli territory,” she wrote on X.

Israeli opposition leader Yair Lapid described the attack as “severe and despicable”, writing on X “we must act hard against terrorism”.

Last week, seven people were killed in a shooting and knife attack in Tel Aviv after a gunman opened fire at members of the public in the Jaffa area.

Israeli authorities have said they are on high alert across the country ahead of the one year anniversary of Hamas’s assault on southern Israel on 7 October last year, which triggered the current Gaza war.

Advertisement

Source link

Continue Reading

News

More than 900 people arrive in small boats in a day

Published

on

More than 900 people arrive in small boats in a day
GARETH FULLER/PA WIRE A group of people thought to be migrants are brought to Dover in Kent from the RNLI lifeboat on SaturdayGARETH FULLER/PA WIRE

More than 900 people crossed the English Channel in 17 boats on Saturday

More than 900 people crossed the English Channel in small boats on Saturday – the highest daily total so far this year.

According to the Home Office, 973 migrants arrived in 17 boats, bringing the total number for the year to 26,612 people in 503 boats.

The crossings came the same day French authorities said four people, including a two-year-old boy, had died while trying to cross the Channel to reach the UK.

The Home Office has said previously it was making progress in its bid to end dangerous small boat crossings, “which threaten lives and undermine our border security”.

Advertisement

The previous highest daily total of arrivals in 2024 was 882 people on 18 June.

While there were no recorded crossings in the first three days of October, on Friday, 395 migrants arrived in the UK after making the journey.

The total number of arrivals in 2024 so far is now higher than at the same point last year, when 25,330 migrants had reached the UK.

But it is still far lower than at the same point in the year in 2022, when 33,586 people had made the crossing.

Advertisement
GARETH FULLER/PA WIRE A group of people brought in to Dover, Kent, from a Border Force vessel on FridayGARETH FULLER/PA WIRE

The total number of arrivals in 2024 so far is still lower than for the same period in 2022

On Saturday, French authorities said the four people who died while attempting to cross the Channel were likely “trampled to death” in two separate boats that had engine failures.

French interior minister Bruno Retailleau said the deaths were a “terrible tragedy”, adding that people smugglers “have the blood of these people on their hands”.

UK Home Secretary Yvette Cooper said the deaths were “appalling”, and that “criminal smuggler gangs continue to organise these dangerous boat crossings”.

Prime Minister Sir Keir Starmer previously said he was “absolutely determined” to tackle the smuggling gangs facilitating the crossings but would not commit to a timeframe for doing that.

Advertisement

Source link

Continue Reading

Business

OpenAI is right to abandon non-profit status

Published

on

Unlock the Editor’s Digest for free

The writer is a general partner of Air Street Capital and co-author of the State of AI report

Frontier artificial intelligence labs are unusual beasts. Unlike other businesses, a number of their founders believe their life’s work has the potential to end the world. Yet the vast sums needed to develop capable models forces them to demonstrate immediate commercial success.

Advertisement

OpenAI’s unconventional structure was a creative way of reconciling these tensions — on paper at least.

By combining a not-for-profit oversight board with a for-profit commercial entity that limited returns, it hoped to allow researchers concerned about existential risk to live under the same roof as their revenue-minded peers, safe in the knowledge that excessive financial returns could not override their mission to do good. 

Now, OpenAI is widely expected to dispense with its non-profit status. Investors who took part in its latest $6.6bn funding round can recover their money if the conversion does not take place.

This is unsurprising. Any founder or investor will tell you that no amount of corporate structural Jenga can glue together a team that is not aligned.

Advertisement

Last year, tensions between OpenAI’s non-profit board and Sam Altman, its co-founder and chief executive, led to Altman’s dramatic firing. He was rapidly rehired and the board has since been replaced. Several senior executives have left the company, including co-founder and chief scientist Ilya Sutskever.

Altman is now free to arrange the company as he pleases. Without a profit cap, it should be even easier for OpenAI to raise the funds it needs.

OpenAI was founded in 2015 as a non-profit research organisation and created a for-profit subsidiary in 2019. At the Paris Peace Forum last November, Microsoft president Brad Smith even spoke admiringly of it — comparing it to Meta, where founder Mark Zuckerberg maintains control by holding shares with extra voting rights.

“Meta is owned by shareholders. OpenAI is owned by a non-profit,” said Smith. “Which would you have more confidence in? Getting your technology from a non-profit? Or a for-profit company that is entirely controlled by one human being?”

Advertisement

While it might seem surprising that investors like Microsoft were willing to accept this unusual structure, it was less of a sacrifice than it appears at first sight. First, OpenAI is not yet profitable so returns remain theoretical. Second, Microsoft was set to receive 75 per cent of OpenAI’s eventual profits until it recouped its initial investment and the subsequent profit cap did not kick in until a healthy return. Microsoft’s decision to back Altman also suggests that it believed one human being has substantial sway over that company too.

Still, any structural oddity can put off investors and OpenAI’s funding needs are vast. If it now adopts the public benefit corporation model employed by AI peers such as Anthropic and xAI, investors need not be concerned that lofty goals will get in the way of profits. While this requires companies to pursue social goals, there are no exacting standards needed to demonstrate compliance.

As generative AI products begin to drive billions of dollars a year in revenue, more teams are being forced to move away from philosophical debates and decide if they’re serious about commercialisation or not.

But there is no inherent conflict between running a straightforward for-profit company and building safe, robust technology. Reckless behaviour that regulates an industry out of existence endangers profits.

Advertisement

Companies like Google DeepMind and Anthropic have more conventional structures than OpenAI and have built substantial AI safety teams. In this industry, complicated corporate engineering achieves very little.

Source link

Advertisement
Continue Reading

News

Prime Minister Sir Keir Starmer’s chief of staff Sue Gray quits

Published

on

Prime Minister Sir Keir Starmer's chief of staff Sue Gray quits

Sue Gray has quit her role as Prime Minister Sir Keir Starmer’s chief of staff, saying she “risked becoming a distraction”.

She had been caught up in rows over pay, after the BBC’s political editor revealed her salary was higher than Sir Keir’s, and donations from Lord Alli.

A Downing Street spokeswoman confirmed Ms Gray is to take up a new role as the PM’s envoy for nations and regions.

Labour said Ms Gray will be replaced by Morgan McSweeney, who was previously chief adviser to the PM and masterminded Labour’s election campaign.

Advertisement

Resigning, Ms Gray said it had been an honour to “play my part in the delivery of a Labour government” as Sir Keir’s chief of staff, both in opposition and in No 10.

“However in recent weeks it has become clear to me that intense commentary around my position risked becoming a distraction to the government’s vital work of change,” she said.

“It is for that reason I have chosen to stand aside, and I look forward to continuing to support the prime minister in my new role.”

Ms Gray has been subject to intense internal briefings and criticism in a government yet to reach its first 100 days in office, and it’s that level of dysfunction that has made it clear to Sir Keir that something needed to shift.

Advertisement

The recent Labour conference was overshadowed by controversy over clothing donations from Labour peer and longstanding donor Lord Waheed Alli, for whom Ms Gray reportedly authorised a temporary Downing Street pass after the election.

Much more damaging for her, though, was the level of anger towards her at the heart of government, indicated by high level sources being willing to leak the BBC confidential details of her salary.

One reason for that turbulence was special advisers in the team being asked to take pay cuts, on top of unhappiness about a lack of contracts after the election victory.

Now the prime minster has reshuffled his top team, not only by promoting Mr McSweeney, but also making four other appointments, most notably by hiring a strategic communications lead.

Advertisement

These announcements tell us publicly what people within government have been saying privately for weeks, with the perception that not enough of the right people were in the right roles or the right structures – and this, it is believed, contributed to missteps and unforced errors by the government.

The government’s list of planned announcements, known internally as “the grid”, had been under the command of Sue Gray, but will now be under the control of the No10 communications team, where some believe it should always have been.

The move follows private frustration voiced by several sources over Downing Street’s communication strategy, which has led to the appointment of James Lyons as a strategic communications lead.

Mr Lyons is a former political journalist at the Sunday Times and the Daily Mirror, who went on to work for the NHS and for TikTok, and he will now be in charge of plotting the government’s communications strategy three, six and nine months ahead.

Advertisement

Sir Keir now also has two new deputy chiefs of staff, Vidhya Alakeson and Jill Cuthbertson, and a new principal private secretary – a key civil service role for every prime minister – in Nin Pandit.

Ms Cuthbertson is a Labour veteran, who worked for Gordon Brown and Ed Miliband, and has been promoted alongside Ms Alakeson, who worked as a civil servant before working for Labour in opposition and then in No 10.

Thanking Ms Gray for her work preparing Labour for government and in Downing Street, Sir Keir said he was “delighted” she would stay by his side in her new role, and added the shake-up showed his “determination to deliver”.

There is another role that will need to be filled in the coming months, because the most senior civil servant in the country, Simon Case, is stepping down as cabinet secretary at the end of the year, following 18 months of treatment for what is described as a neurological condition.

Advertisement

There had been reports of tension in No 10 between Mr Case and Ms Gray, who replaced him as the head of the Partygate inquiry after it emerged a gathering had taken place in his own office in December 2020.

Lord Gavin Barwell, who worked with Ms Gray in his role as chief of staff to former PM Theresa May, told Radio 4’s The World this Weekend that she had “made the right judgment” to stand down from her role.

“On a personal level I’ve worked closely with Sue…and she is an incredibly dedicated public servant and I feel for her, but I think she’s made the right judgment, which is when you’re in this kind of job once you become the story it becomes very hard to do the job,” he said.

The Conservative peer criticised the Number 10 operation put in place by Sir Keir since becoming prime minister, claiming “because Number 10 hasn’t been right we’ve had government by Treasury, too much doom and gloom.”

Advertisement

He added today was a “crucial moment for the prime minister – he’s got to get the second iteration of his No 10 operation right if he’s going to recover some of the political ground he’s lost over the last couple of months.”

Source link

Continue Reading

Business

PwC launches UK operations overhaul to include standalone tech and AI unit

Published

on

Unlock the Editor’s Digest for free

PwC’s new UK chief has launched an overhaul of its operations in the country, which will involve creating a standalone technology and artificial intelligence unit, in a move that bosses acknowledged could be “unsettling” for staff.

The Big Four accounting firm told employees last week that it would embark on a reorganisation of areas of the business affecting about 2,700 staff and partners, adding that it was part of its “new vision to become the pre-eminent firm”, according to a document seen by the Financial Times.

Advertisement

Under the plan, PwC will create a “digital delivery unit” focused on tech innovation, AI engineering, cloud and data. The firm will also overhaul parts of its consulting, deals, risk and tax practices by moving and merging certain functions, creating six new teams.

It is the biggest internal overhaul of PwC’s UK business in years. It also marks the latest reorganisation of a Big Four accounting firm as the sector seeks to adapt to changing client demand and grapple with how best to structure their fledgling AI advisory businesses, which partners see as a lucrative growth area.

The realignment will create upheaval for about a tenth of PwC’s UK workforce who will be transferred into new teams and service lines. Reorganisations within professional services firms can often lead to jostling for position within the business.

Laura Hinton, PwC’s UK managing partner who was a runner-up to Marco Amitrano in the race to lead the firm earlier this year, was dispatched to break the news to staff last week in a pre-recorded video message.

Advertisement

In the message, a transcript of which has been seen by the FT, Hinton said that the reorganisation was designed to “simplify” the business and “reduce duplication”. She added that it would “create scale and increase our market impact”.

“I know that, for some, change can feel energising, while for others it can feel unsettling,” Hinton said. “As we continue to adapt to our clients’ needs, it’s important that we all get used to being more agile, while continuing to support each other.”

Details of Amitrano’s broader strategy for the firm will be shared with its 1,000-plus partners at briefings on Wednesday, according to several people familiar with the matter.

It comes after a bruising period for the industry, with PwC last month reporting a drop in average partner pay as revenue growth slowed and higher costs and provisions for legal claims hit profits.

Advertisement

Rival Deloitte, which embarked on an overhaul of its global operations earlier this year to cut costs and reduce the group’s complexity, also posted a drop in average partner pay and weaker growth.

PwC’s reorganisation is not designed to cut costs and will not lead to new redundancies, according to a person briefed on the plan. The firm last year axed hundreds of jobs amid a market downturn and also launched a round of “silent lay-offs” in the UK earlier this year.

Hinton said the new digital delivery unit would house 900 “technologists” and work across the firm’s different service lines. It will also be given a “market-facing name”.

“These plans are a work in progress so, although we don’t have all of the detail or answers, we still wanted to share this now to be open and transparent,” she said.

Advertisement

Separately, the firm’s consulting leaders shut down speculation that PwC had plans to sell Strategy&, the firm’s strategy consulting arm, to Bain & Co, or any other buyer, telling staff that the industry rumours were not correct, according to an email seen by the FT.

In a statement to the FT, Amitrano said the changes “reflect our strategic focus on clients, technology and PwC’s global network. They will make it easier for us to collaborate and mobilise teams to better deliver for clients”. The changes will come into effect from January next year.

Source link

Advertisement
Continue Reading

Trending

Copyright © 2024 WordupNews.com