Introduction
- Overview of the article's purpose, drawing inspiration from various financial experts and personal strategy.
Pay Off Debt First
- Highlight the universal agreement on prioritizing credit card debt.
- Mention Dave Ramsey's approach of paying off all debt, including mortgages and car loans.
Max Out Retirement Accounts
- Strategy: First, max out a Roth IRA. In 2023 max of $6k
- Next, contribute enough to a 401k to get employer matching.
- Considerations for those without employer matching, like opting for a SEP IRA.
- Subsection: Investing Beyond Retirement Accounts
- Discuss options for investing outside retirement accounts.
- Introduce Health Savings Accounts (HSAs) as an alternative investment vehicle.
The Case for VTSAX
- Detail the advantages of investing in VTSAX.
- Include the story and outcome of Warren Buffett’s bet on index funds vs. hedge funds.
How Much Money Do I Need to Retire?
- Discuss the concept of calculating retirement needs.
- Suggest reading materials and resources, potentially from Boggleheads, for deeper understanding.
The 4% rule, often referenced in retirement planning, originates from a study known as the Trinity study. This study was conducted by three finance professors at Trinity University in 1998. The study examined various scenarios of annual withdrawals from a retirement portfolio consisting of stocks and bonds. The 4% refers to the portion of the portfolio withdrawn in the first year, with subsequent withdrawals adjusted for inflation to keep pace with the cost of living. The study's objective was to determine "safe withdrawal rates" from retirement portfolios that could last for 30 years without being exhausted. It is important to note that the Trinity study and similar ones have faced criticism for their approaches to withdrawal strategies, highlighting the need for flexibility and adjustment based on market conditions https://en.wikipedia.org/wiki/Trinity_study
The original Trinity study used data up to 1995, but it has been updated in subsequent studies, such as one by Pfau in 2010, using data through 2009 https://en.wikipedia.org/wiki/Trinity_study#:~:text=The%20original%20Trinity%20study%20was,6%5D
Spend Less to Retire Earlier
- Strategies for reducing expenses to fast-track retirement savings.
- Include a graph from Early Retirement Extreme illustrating the impact of spending on retirement timeline.
Conclusion
- Summarize key takeaways.
- Encourage readers to adapt the advice to fit their individual financial situations.
Recommended Sources to Read Next
- Suggest "The Bogglehead's Guide to Investing", "Early Retirement Extreme", and "How to Get Rich" by Felix Dennis for further reading.
This updated outline incorporates your specific instructions and preferences for each section. Regarding Warren Buffett's bet, it was a wager made in 2007 where Buffett bet that over a ten-year period, an S&P 500 index fund would outperform a collection of hedge funds. Buffett chose a Vanguard S&P 500 index fund, and the hedge funds were selected by an asset management firm. The bet concluded in 2017, with the index fund significantly outperforming the hedge funds. This story is often cited as evidence of the efficiency and reliability of low-cost index funds over actively managed funds.