Day: October 25, 2024

• Emerging markets stocks are set for their worst monthly decline since January.

• The slump comes as investors price in higher odds of a Trump win in the upcoming US election.

• Trump has pledged to drastically raise import tariffs to as high as 20%, and up to 60% for China.

It’s been a tough month for emerging market stocks as the odds of a Donald Trump election win rise — and with it, the odds that his proposed tariff plan will actually see the light of day.

Emerging market stocks are headed for their worst monthly decline since January, with the MSCI Emerging Markets Index falling for a fourth day on Thursday for a 3.1% decline this month.

A select few EM stocks have taken the biggest hits, with Samsung, Alibaba, Tencent, and Meituan accounting for more than half of the index’s fall.

The decline comes as the market prices in higher odds of a win for former President Donald Trump with just two weeks until the election.

On crypto betting market Polymarket, Trump’s odds of winning soared as high as to 66% on Tuesday, their highest since President Joe Biden was still in the race in July. Odds are now slightly lower at 62%.

Polls, meanwhile, are much closer, with the most recent national polling average compiled by RealClearPolitics showing Harris at 48.7% versus 48.5% for Trump.

Trump has proposed raising tariffs on imports from all countries to as high as 20% and has said imports from China would be subject to a 60% tariff.

Investors’ fears of a damaging trade war aren’t unfounded. In 2018, Trump’s trade war with China led to a significant underperformance compared to US stocks, and strategists say the election’s outcome is again pushing investors away from EM shares as uncertainty builds.

“US elections have become a key driver of uncertainty as risk positioning is clearly fluctuating to a more cautious stance. In our recent client interactions, we have sensed global EM investors’ appetite to increase risk budgets over the next weeks may have been significantly reduced,” analysts from Citi wrote in a note last week.

The strategists note that the latest sentiment is a sharp contrast from a month ago, when investors were pricing in higher odds of a Harris win.

“There has been a significant change in investor sentiment, and investors’ risk budgets have likely been changing as a function of that.”

Other factors, like rising geopolitical tensions in the Middle East and a bond market sell-off, are also driving investors away from riskier assets. Investors are also expressing disappointment in China’s stimulus measures, which initially fueled a rally in EM stocks last month.

Read the original article on Business Insider

My wife and I are both 65 years old. She will retire this year and I’ll work until I’m 67. We’ll get about $42,000 in Social Security and have about $1 million in savings. Can we live on $90,000 per year?

-Terry

$90,000 per year is going to be pushing the upper limit of what I’d be comfortable with as a general rule. Whether it will work for you, however, is highly individualized. I’ll give you an overview of some of the things you’ll want to look into before deciding if you are comfortable with spending $90,000 per year. (And if you need more help planning for retirement, consider working with a financial advisor.)

Does Your Expense Number Include Taxes?

Will the $90,000 you expect to spend each year cover your annual tax bill or is that how much money you plan to spend after taxes? The answer to this question is vital. If it’s the latter, you’ll need to withdraw even more of your savings each year, further stressing the longevity of your portfolio.

Whether your savings are held in a tax-deferred, Roth or taxable account matters. I assume your money is mostly tax-deferred, meaning it’s held in 401(k)s and IRAs. You’ll have to account for income taxes that you’ll owe when you start withdrawing that money. If a considerable portion of your assets is in Roth accounts, your distributions are tax-free, which will simply the process. (And if you want more help managing your retirement savings, consider matching with a financial advisor.)

What’s Your Investment Plan and Risk Tolerance?

You need to invest according to your own risk tolerance. But if your portfolio is too conservative or aggressive it will place additional strain on your savings.

• If you and your wife are especially conservative that will likely inhibit your ability to keep up with that level of spending over time. 

• If you’re too aggressive, you may expose yourself to too much volatility, which can also wreck a retiree’s portfolio once withdrawals start.

The 60/40 portfolio has historically been so popular with retirees because it leaves them with enough equity to benefit from the long-term growth that’s often required for a decades-long retirement without too much volatility. It’s not right for everybody, but the point is that if your entire balance is in CDs, for example, your money likely won’t grow fast enough. The opposite is true for a 100% stock portfolio. It’s too volatile and one or two bad market years, especially early on, could be catastrophic. (A financial advisor can help you find the right mix of stocks, bonds and other investments for your risk tolerance.)

Story Continues

What’s Your Withdrawal Rate?

A lot of retirement income planning focuses on your withdrawal rate. The classic “rule of thumb” is that if you withdraw 4% of your savings in your first year of retirement and adjust subsequent withdrawals for inflation, you can be reasonably sure your money will last 30 years. I use that term loosely. It isn’t a hard rule but more of a guideline for understanding safe withdrawal rates in a historical context. Most people should modify it in some way. You may not need or want to plan for your money to last 30 years, for example.

Again, depending on what that $90,000 expense includes, I think you could be easily looking at a withdrawal rate in the neighborhood of 5% and quite possibly higher. This isn’t necessarily a show-stopper. However, you’ll want to take some time to understand how your withdrawal rate plays into your ability to sustain your spending without depleting your savings too quickly. (And if you need help determining an appropriate withdrawal rate, this tool can help you match with a financial advisor.)

Bottom Line

Whether your savings and Social Security benefits can cover $90,000 in annual expenses depends on a number of factors. You’ll want to consider whether you need $90,000 before or after taxes and think about both your investment mix and risk tolerance. You’ll also want to figure out what kind of withdrawal rate you’ll require to support your spending needs in retirement.

Tips for Finding a Financial Advisor

• Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Consider a few advisors before settling on one. It’s important to make sure you find someone you trust to manage your money. As you consider your options, these are the questions you should ask an advisor to ensure you make the right choice.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Brandon is not a participant in the SmartAsset AMP platform, nor is he an employee of SmartAsset, and he has been compensated for this article.

Photo credit: ©iStock.com/William_Potter, ©iStock.com/Cecilie_Arcurs

The post Ask an Advisor: We’re 65, Have $1 Million Saved and $42K in Social Security Benefits. Can We Live on $90K Per Year? appeared first on SmartAsset Blog.