Morning Brief – Retirement and the 4% Rule

Morning Brief – Retirement and the 4% Rule

Mon 12 Apr 2021

Retirement and the 4% Rule


Look away now unless you have a strong constitution! Conventional wisdom was that all one needed to do to ensure a stress free and funded retirement was create a pension split 60%/40% Equities to Bonds and in the first year of retirement draw a max of 4% of the fund; thereafter that 4% for annual drawings could only be increased by the inflation rate. That way the fund would last for 30 years. Unfortunately while that rule might work in the USA 95% of the time, analysis undertaken by the Barcelona Business School for an observation period of the past 120 years in 22 countries has shown that that is not the case in many other countries, such as: the UK and Switzerland only 80% but France and Germany still less at 50% and Italy only 33%. So it depends on in which equity and bond markets one is invested. With global interest rates at near zero, equity markets are having to pick up that shortfall, but the message is clear: the world needs greater economic productivity and higher savings rate ratios to pay for retirement in the 21st century.


Caribbean Islands


This is where we have reached in the post pandemic world: desperate journalists unable to tempt us with travel articles are now writing about the least expensive places to live longer term. I will not list those Caribbean destinations that offer best value other than to warn you that they include Haiti and Panama-enough said. At the other end of the cost spectrum are St Thomas in the Virgin Islands and Grand Bahama in the Bahamas. James Bond fans will remember the Grand Bahama Ocean Club in Casino Royale and for those of you itching to get sand between your toes, look no further for a dream Four Seasons managed vacation resort that is, I can confirm, reassuringly exclusive and consequently expensive. GBP at $1.37 or EUR near USD 1.19 will help dull the pain. The Martinis are naturally top notch!


Seasons in the Sun


Back at this time in 1974, Canadian Terry Jacks was at Number 1 in the UK charts with Seasons in the Sun. It was the English adaptation of the Belgian Jacques Brel song named Le Moribond meaning the dying man which he wrote in a brothel in Tangiers. Despite this unpromising provenance, the song was not described as a hit but as a global phenomenon such was its success. Others had a go at it including Westlife. Here it is:


Goodbye to you my trusted friend
We’ve known each other since we were nine or ten
Together we’ve climbed hills and trees
Learned of love and ABC’s
Skinned our hearts and skinned our knees
Goodbye my friend it’s hard to die
When all the birds are singing in the sky
Now that spring is in the air
Pretty girls are everywhere
Think of me and I’ll be there


We had joy, we had fun
We had seasons in the sun
But the hills that we climbed
Were just seasons out of time


Goodbye Papa please pray for me
I was the black sheep of the family
You tried to teach me right from wrong
Too much wine and too much song
Wonder how I got along
Goodbye Papa it’s hard to die
When all the birds are singing in the sky
Now that the spring is in the air
Little children everywhere
When you see…




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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