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There’s been an ongoing debate about whether retirees should abandon the “4% rule” for withdrawals from retirement accounts, a retirement income rule of thumb for decades. The market volatility of recent years made that rule suspect for many new retirees, but a new study from Morningstar finds that the rule can still apply.

Do you have questions about building a long-term plan for retirement? Speak with a financial advisor today.

What Is the 4% Rule?

Created in 1994 by a financial planner named William Bengen, the 4% rule posits that retirees can make a well-structured retirement fund last 30 years by withdrawing no more than 4% of the balance in the first year of retirement, then adjusting subsequent withdrawals for inflation. Bengen’s research was based on each 30-year period of market returns and conditions dating back to 1926. He found that even during the worst three decades for markets – a stretch from October 1968 to 1998 – a retiree wouldn’t run out of money.

The popularity of the rule has fluctuated, and the strategy comes with some associated criticism. That’s because during down markets the sequence of returns risk can come into play, which occurs when the first years of withdrawals take place when the value of the retirement portfolio is down. Earlier this year, personal finance expert Suze Orman argued that the rule no longer made sense and that retirees should prolong working and withdraw as little money as possible, but no more than 3%.

How Morningstar’s Study Factors In

The investment analysis firm Morningstar has examined the safe rate of withdrawal for the first year of retirement for a few years running. Morningstar’s newest research finds that with the partial recovery of stocks, withdrawing up to 4% is once again a safe starting point.

“I estimate that retirees drawing down income from an investment portfolio can now afford to withdraw as much as 4.0% as an initial spending rate, assuming a 90% probability of still having funds remaining after a 30-year time horizon,” writes Morningstar portfolio strategist Amy C. Arnott, CFA.

Morningstar’s research on the optimum initial safe withdrawal rate started in 2021 when the analysis recommended a 3.3% withdrawal rate. For 2022, that rate increased to 3.8%. The research assumes a 90% chance of success for a portfolio where stocks make up 20% to 40% of the holdings. At the end of 30 years, the portfolio would still have value.

The big factor in this year’s assessment was a change in the estimate for long-term inflation that fell to 2.42% this year against 2.84% in 2022, along with improvements in returns on fixed-income investments, such as bonds and cash accounts. The projected 30-year fixed-income returns (including cash) increased from 4.44% in 2022 to 4.81% in 2023. The study noted that while the performance of stocks has improved so far this year, the projected 30-year returns on stocks decreased this year, slipping to 9.41% from 9.88% in 2022.

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The study notes that retirees who take a more flexible approach to withdrawals than a strict rate of 4% adjusted annually for inflation could be able to withdraw more money at the beginning of retirement when retirees often spend more money as they establish a new retirement lifestyle. Those retirees would need to accept that their cash withdrawals would fluctuate from year to year and that they might have less money left after 30 years. Consider speaking with a financial advisor to build a personalized plan based on your goals.

Bottom Line

The popularity of the 4% rule comes and goes but it can be a good starting point for creating a safe strategy for retirement withdrawals. An important consideration is how much money is withdrawn in the first years of retirement, especially if the portfolio has lost value.

Retirement Planning Tips

• A financial advisor can help you build an income plan for retirement. 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 have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Social Security plays a significant role in most people’s plans for retirement. SmartAsset’s Social Security calculator can help you estimate how much your benefits will be worth based on when you plan to claim them.

• 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.

Photo credit: ©iStock.com/Vadym Pastukh, ©iStock.com/Natalia Shabasheva

The post The 4% Rule for Retirement Withdrawals Might Finally Be Safe to Use Again, Says Morningstar appeared first on SmartReads by SmartAsset.

Many investors rightfully identify biotech stocks as being riskier than average, and those stocks certainly have a habit of earning their reputation. Still, there are a few up-and-coming biotechs that have revenue and a clear path to generating even more in the near term, which makes them notably steadier than their earlier-stage peers that don’t yet have the certainty of selling anything at all.

With that in mind, let’s examine three monster biotechs that are worth buying before the close of this year.

1. Iovance Biotherapeutics

Buying Iovance Biotherapeutics (NASDAQ: IOVA) stock before the end of the year means getting exposure to a quickly growing business that’s lined up many more opportunities for further expansion.

Amtagvi, its cell therapy for advanced melanoma, is its first product, and will also likely be the main driver of growth through the end of the decade.

Since Amtagvi’s approval in the middle of the first quarter, the therapy’s rollout has proceeded swimmingly; the company brought in $31.1 million in total sales during the second quarter. That’s just the start; management expects as much as $475 million in revenue for its 2025 fiscal year. To accomplish that, it’s applying for approval in international jurisdictions right now, and should be hearing back in early 2025 from key regions like the E.U.

Beyond the next year, Iovance also has a pipeline full of programs investigating whether Amtagvi could be useful to treat other cancers, as a monotherapy or as a combination treatment with other oncology drugs. Most of those programs are in mid-stage clinical trials. So within the next three years, it’s feasible that the company could get approval for the additional indications under investigation, and its addressable market could expand.

And that’s why it’s worth buying the stock sooner rather than later. It may not get any cheaper in the long run than it is right now.

2. CRISPR Therapeutics

With its first cell therapy Casgevy successfully marketed for a pair of hereditary blood disorders, CRISPR Therapeutics (NASDAQ: CRSP) is in a state of maturity similar to Iovance.

So far, only 20 patients have been treated with the therapy, which is a functional cure for both sickle cell disease (SCD) and beta thalassemia. Wall Street analysts estimate on average that CRISPR Therapeutics will report revenue of $51 million this year — and around $288 million next year, once more of the company’s authorized treatment centers (ATCs) are set up around the globe.

Casgevy’s addressable market could be somewhat expanded with additional research and development (R&D), but fundamentally it targets a pair of rare diseases, so its total addressable market size is destined to be small. Therefore the biotech’s roadmap for growth will likely stem from its cell therapies for oncology indications, four of which are in clinical-stage development.

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As those programs proceed toward their shot at approval and commercialization, favorable clinical data could drive the stock up in advance of any actual revenue — and at least one program will report data this year.

3. Zealand Pharma

Zealand Pharma (OTC: ZLDP.F) collects royalties and milestone payments from its medicines by licensing them out to pharma companies rather than taking on the burden of commercializing products on its own. In Q2, that revenue totaled just $4.9 million, but it’s unlikely to remain that low for much longer. Its pipeline is focused on developing drugs in one potentially very profitable field: weight loss.

Zealand’s most advanced program is already in phase 3 trials, and it has a big pharma partner, Boehringer Ingelheim, ready to go in the event that the candidate gets approved. More than one of Zealand’s programs has reported favorable clinical trial data, which suggests that it might be able to find a slice of the market due to unique advantages compared to the leading products made by leaders like Eli Lilly and Novo Nordisk. That means it probably won’t matter too much that it will show up to the market a bit late.

One other thing that positions Zealand Pharma strongly is its massive amount of cash. As of its fiscal second quarter, it had more than $1.2 billion in cash, equivalents, and short-term investments, whereas its quarterly total operating costs were just $42.1 million. This biotech won’t need to take out debt or issue more shares to generate capital any time soon — so shareholders will get to retain more of its earnings when they start to trickle in once again.

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3 Monster Biotech Stocks to Buy Before 2025 was originally published by The Motley Fool

Elon Musk, known for his bold opinions and futuristic ventures, recently made a statement that got a lot of people talking. He compared the government to the DMV, saying “The government is the DMV at scale. How much DMV do you want? That’s the question people should ask themselves.”

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Musk was actually replying to a sarcastic tweet that said:

“We need to force Mark Zuckerberg, Jeff Bezos, Elon Musk and Warren Buffett to sell off their companies and give the proceeds to Kamala Harris, so she can better allocate that capital to the people who need it most. Government is the best capital allocator.”

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When Musk asks, “How much DMV do you want?” he’s unsarcastically asking people to think about how much government they really want in their lives. Just like the DMV is more often than not slow and frustrating, the government as a whole can be the same way, but on a bigger scale. Do people want more government, even if it means dealing with more of the same problems we see at the DMV?

For a lot of people, the DMV (Department of Motor Vehicles) is the perfect example of how government can be inefficient. It’s the place where you go to renew your license, register your car, or take a driving test, and it’s known for long lines, confusing steps, and not-so-friendly service. Because of this, the DMV has become a go-to joke and a symbol of everything that’s frustrating about dealing with government offices.

See Also:

When Musk draws this parallel, he’s tapping into a widespread sentiment. Most of us have heard stories of frustrating experiences at the DMV, and these stories have become almost universal. The DMV experience is an easy metaphor for how some people view the government as a whole.

Others, however, argue that even though the government isn’t perfect, it plays a key role in ensuring that basic needs and services are met for everyone. Things like public education, health care, infrastructure, social security, emergency response systems, clean air and water, etc.

See Also:

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Interestingly, not everyone has a terrible experience with the DMV. For example, one person shared under Musk’s response: “I gotta say, I had a really good experience renewing my license in person. I booked an appointment online, showed up at that time, and was out of there in 10 minutes. Well done Houston DMV. I realize that’s not par for the course though.”

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This article Elon Musk Says ‘The Government Is The DMV At Scale. How Much DMV Do You Want? That’s The Question People Should Ask Themselves’ originally appeared on Benzinga.com

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(Bloomberg) — Stocks retreated as traders prepared for data releases that will offer insight about the health of the US economy and the Federal Reserve’s interest-rate path.

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Europe’s Stoxx 600 slipped 0.2% as mining equities declined on the back of softer commodity prices. US contracts pulled back ahead of Wall Street’s reopening following the Labor Day holiday, while a gauge of Asian stocks was little changed.

In what is historically a poor month for stocks, traders are bracing for fresh bouts of volatility. In the runup to the start of the Fed’s rate-cutting cycle, investors are wary of risks stemming from US election campaigning and rising geopolitical tensions.

The publication of US manufacturing data later Tuesday will mark the start of a busy week of economic reports, culminating with nonfarm payrolls statistics on Friday. A similar series of releases in August induced fears that the US economy was heading for a hard landing, whiplashing markets.

“We do expect higher volatility over coming weeks,” said Mohit Kumar, chief economist for Europe at Jefferies International. Central banks “are data dependent and markets’ expectations of their response function is likely to whipsaw around data releases.”

Markets are currently pricing a start to US policy easing this month, with a roughly one-in-five chance of a 50 basis-point cut, according to data compiled by Bloomberg.

In currencies, the yen rallied after Bank of Japan Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if the economy and prices perform as expected.

The dollar extended modest gains of the previous two trading days. Treasury yields were little changed.

Oil fluctuated as traders weighed concerns over China’s dour economic outlook against supply disruptions in Libya.

Corporate Highlights:

• Cathay Pacific Airways Ltd.’s inspection of its Airbus SE A350 fleet is focused on deformed or degraded fuel lines in the engines of the widebody aircraft.

• Illumina Inc.’s abandoned $7 billion bid for cancer-detection provider Grail Inc. should never have been probed by the European Union, according to a top court ruling.

• Grifols has postponed its capital markets day until further notice in light of Brookfield’s potential takeover offer, according to a letter to investors seen by Bloomberg.

Key events this week:

• US construction spending, ISM Manufacturing index, Tuesday

• Australia GDP, Wednesday

• China Caixin services PMI, Wednesday

• Euro-zone HCOB services PMI, PPI, Wednesday

• Fed’s Beige Book, Wednesday

• Eurozone retail sales, Thursday

• Germany factory orders, Thursday

• US initial jobless claims, ADP employment, ISM services index, Thursday

• Euro-zone GDP, Friday

• US nonfarm payrolls, Friday

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Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.2% as of 10:03 a.m. London time

• S&P 500 futures fell 0.3%

• Nasdaq 100 futures fell 0.4%

• Futures on the Dow Jones Industrial Average fell 0.3%

• The MSCI Asia Pacific Index was little changed

• The MSCI Emerging Markets Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.2% to $1.1049

• The Japanese yen rose 0.7% to 145.83 per dollar

• The offshore yuan was little changed at 7.1222 per dollar

• The British pound fell 0.2% to $1.3123

Cryptocurrencies

• Bitcoin fell 0.3% to $58,826.55

• Ether fell 2.1% to $2,501.91

Bonds

• The yield on 10-year Treasuries was little changed at 3.91%

• Germany’s 10-year yield declined one basis point to 2.33%

• Britain’s 10-year yield declined one basis point to 4.04%

Commodities

• Brent crude fell 0.4% to $77.19 a barrel

• Spot gold rose 0.2% to $2,504.68 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.

(An earlier version corrected the date that Chinese factory data came out.)

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