In recent days, we have experienced a selloff from the new market highs reached in September 2019. This selloff is normal as equity owners take profits off the table and as uncertainty of international trade again raises its head. This should be very short-term! The China trade settlement, as we have mentioned in our recent letters, is likely to occur soon. It could be this month and is extremely probable by the end of 2019. That precipitating event will tip the markets back towards growth as it tips our economy toward higher Gross Domestic Product. There are many other participating events on the horizon, but I will cover those at another time.

One of the things I have learned in the last 32 years is that none of us can control the markets. We can, however, control our emotions and recognize that selloffs are part of the investment process. If you are also already in retirement, or for clients that are in the pre-retirement stage, there are two things that you also unilaterally do control. The first is your spending. Most of SFA’s clients do this well – and some of us can do better. The second thing you control is your distribution rate from your accounts. Many of you have heard me talk about distribution rates, or read about it in various SFA communications. Distributing 4% from your financial assets, in my view, is kind of a “magic” number. A 4% distribution should, many studies show, result in no diminution of capital no matter what the economic environment. A 5% distribution is more or less a maximum for younger retirees. Distribution rates higher than 6% are cautionary and 7%, or higher, is dangerous!

Note below what would happen if our team did not make good long-term decisions about your financial future (which will not occur!). The depicted chart below starts with a $50,000 investment on January 1, 1980 and shows three lines. The blue line shows account values with a 0% distribution rate, orange shows a 4% distribution rate, and the last line shows a 5% distribution rate. The chart starts in 1980 for a reason – that is because this is one of the worst times that you could have started taking distributions from your retirement, due to the incredibly ruinous recession from 1980 to 1982. Regardless of this “sequence error” (because the 1980 retirement started just as a very long and deep recession began), you still end up making a lot of money. Your capital growth long-term far exceeds the rate of inflation and growth after your distribution. Note these numbers carefully because they are really important. If you control the two things that you are able to control, your spending and distribution rate, the market will take care of the rest. It is our firm’s mission to make this process even smoother and more profitable for you.


Control your spending and utilize a 4-5% distribution from your total financial assets and you will build your wealth and realize much, much higher retirement income from your growing account long-term. Take comfort in knowing that we can’t move the economy, but you can control these two issues. Please call us if you have any questions.