Is Now a Bad Time to Retire?
Kanebridge News
    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,599,192 (-0.51%)       Melbourne $986,501 (-0.24%)       Brisbane $938,846 (+0.04%)       Adelaide $864,470 (+0.79%)       Perth $822,991 (-0.13%)       Hobart $755,620 (-0.26%)       Darwin $665,693 (-0.13%)       Canberra $994,740 (+0.67%)       National $1,027,820 (-0.13%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $746,448 (+0.19%)       Melbourne $495,247 (+0.53%)       Brisbane $534,081 (+1.16%)       Adelaide $409,697 (-2.19%)       Perth $437,258 (+0.97%)       Hobart $531,961 (+0.68%)       Darwin $367,399 (0%)       Canberra $499,766 (0%)       National $525,746 (+0.31%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 10,586 (+169)       Melbourne 15,093 (+456)       Brisbane 7,795 (+246)       Adelaide 2,488 (+77)       Perth 6,274 (+65)       Hobart 1,315 (+13)       Darwin 255 (+4)       Canberra 1,037 (+17)       National 44,843 (+1,047)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,675 (+47)       Melbourne 7,961 (+171)       Brisbane 1,636 (+24)       Adelaide 462 (+20)       Perth 1,749 (+2)       Hobart 206 (+4)       Darwin 384 (+2)       Canberra 914 (+19)       National 21,987 (+289)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $770 (-$10)       Melbourne $590 (-$5)       Brisbane $620 ($0)       Adelaide $595 (-$5)       Perth $650 ($0)       Hobart $550 ($0)       Darwin $700 ($0)       Canberra $700 ($0)       National $654 (-$3)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $730 (+$10)       Melbourne $580 ($0)       Brisbane $620 ($0)       Adelaide $470 ($0)       Perth $600 ($0)       Hobart $460 (-$10)       Darwin $550 ($0)       Canberra $560 (-$5)       National $583 (+$1)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,253 (-65)       Melbourne 5,429 (+1)       Brisbane 3,933 (-4)       Adelaide 1,178 (+17)       Perth 1,685 ($0)       Hobart 393 (+25)       Darwin 144 (+6)       Canberra 575 (-22)       National 18,590 (-42)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 6,894 (-176)       Melbourne 4,572 (-79)       Brisbane 1,991 (+1)       Adelaide 377 (+6)       Perth 590 (+3)       Hobart 152 (+6)       Darwin 266 (+10)       Canberra 525 (+8)       National 15,367 (-221)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.50% (↓)       Melbourne 3.11% (↓)       Brisbane 3.43% (↓)       Adelaide 3.58% (↓)     Perth 4.11% (↑)      Hobart 3.78% (↑)      Darwin 5.47% (↑)        Canberra 3.66% (↓)       National 3.31% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 5.09% (↑)        Melbourne 6.09% (↓)       Brisbane 6.04% (↓)     Adelaide 5.97% (↑)        Perth 7.14% (↓)       Hobart 4.50% (↓)       Darwin 7.78% (↓)       Canberra 5.83% (↓)       National 5.76% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.7% (↑)      Melbourne 0.8% (↑)      Brisbane 0.4% (↑)      Adelaide 0.4% (↑)      Perth 1.2% (↑)      Hobart 0.6% (↑)      Darwin 1.1% (↑)      Canberra 0.7% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.4% (↑)      Brisbane 0.7% (↑)      Adelaide 0.3% (↑)      Perth 0.4% (↑)      Hobart 1.5% (↑)      Darwin 0.8% (↑)      Canberra 1.3% (↑)        National 0.9% (↓)            AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 28.7 (↓)       Melbourne 30.7 (↓)       Brisbane 31.0 (↓)       Adelaide 25.4 (↓)       Perth 34.0 (↓)       Hobart 34.8 (↓)       Darwin 35.1 (↓)       Canberra 28.5 (↓)       National 31.0 (↓)            AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 25.8 (↓)       Melbourne 30.2 (↓)       Brisbane 27.6 (↓)       Adelaide 21.8 (↓)       Perth 37.8 (↓)       Hobart 25.2 (↓)       Darwin 24.8 (↓)       Canberra 41.1 (↓)       National 29.3 (↓)           
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Is Now a Bad Time to Retire?

Research shows how those who retire during bear markets can still preserve their nest eggs.

By ANNE TERGESEN
Wed, Aug 31, 2022 9:52amGrey Clock 4 min

Retiring during a market downturn and soaring inflation can feel like sailing into the wind instead of the sunset.

The market’s performance in the first few years of retirement can have a big impact on how long a nest egg lasts, partly because losses take a bigger bite out of a portfolio when it is typically at its largest, advisers and economists say.

Of course, it isn’t always possible to time your retirement to coincide with a bull market.

But those nearing retirement right now can take some comfort in research that shows that even people who retired in the worst time to do so since 1926 would have made their money last 30 years by sticking to certain rules. As the stories of the four retirees The Wall Street Journal profiled this week show, even those who retired in 2008 have done fine provided they managed their money well.

Negative returns at the start of retirement, when a portfolio is usually largest, create a problem because the combination of market losses and withdrawals can leave a portfolio too depleted to last decades.

“The five years after retirement are a pivotal period for determining a sustainable lifestyle in retirement,” said Wade Pfau, a professor at the American College of Financial Services in King of Prussia, Pa., and author of “Retirement Planning Guidebook.”

Consider a 62-year-old who retired on Jan. 1 with $1 million and is following the 4% rule to determine how much to spend in retirement. (Such an approach, which has been questioned recently, calls for spending 4% of a balance in the first year of retirement and adjusting that amount in subsequent years to account for inflation.)

After taking the first annual withdrawal of 4%, or $40,000, the investor would have $960,000 left. With a 15% loss in the first year, the balance would fall to $816,000. Two more years of similar withdrawals and 15% losses would leave about $527,000 to last potentially for decades.

By contrast, a 62-year-old who retires with $1 million and experiences 15% annual gains would have about $1.36 million after three years of $40,000 withdrawals.

Despite the market’s importance in early retirement, history shows that the portfolios of people who retire in down markets can recover.

Thanks to the long bull market and low inflation that followed the financial crisis of 2008, someone with 50% in stocks who retired with $1 million on Jan. 1, 2007, and spent $40,000, adjusted annually for inflation, would have had about $874,000 left after two years, but would have about $1.63 million today.

“As long as you didn’t panic and sell your stocks in 2008 you’d be doing fine today,” said Mr. Pfau, who crunched the numbers for a portfolio with 50% in U.S. large-cap stocks and 50% in intermediate-term U.S. government bonds.

Another lesson for retirees contending with losses is to cut spending if possible, since “if you’re overspending from a portfolio that is simultaneously dwindling, that just leaves less in place to repair itself when the markets eventually recover,” said Christine Benz, director of personal finance at Morningstar Inc.

The worst 30-year period in which to retire began in the late 1960s. Those who retired then were clobbered with back-to-back bear markets that started around 1969 and 1973, plus years of high inflation. These factors caused many to drain their nest eggs faster than they would have otherwise, although many in that era were able to fall back to some extent on traditional pension benefits.

If markets slide and inflation remains high for the next couple of years, as some economists have predicted, Mr. Pfau said it could create “the perfect storm,” leaving investors with a choice between withdrawing more from a shrinking portfolio or cutting spending to try to protect their nest eggs even as prices rise.

Here are steps retirees can take to improve their odds of making their money last:

Cut spending when markets decline

The 4% rule would have protected retirees from running out of money even in the worst 30 year period since 1926 in which to retire, which turned out to be from 1966 to 1995, according to Mr. Pfau.

For current retirees, Mr. Pfau recommends forgoing inflation adjustments following any year in which your portfolio incurs losses.

“A very small change in spending can have a dramatic effect,” said Mr. Pfau.

For example, someone who retired in 1966 and stuck to the 4% rule would have run out of money after 30 years. But by spending 3.8% to start instead, the investor would have preserved most of his or her original nest egg by year 30, he said.

Manage volatility

People entering retirement often have 40% to 60% or more in stocks to help their nest eggs grow.

A 2014 study by researchers including Mr. Pfau finds that those who start retirement by reducing their stockholdings to 20% to 30% of their portfolio and then gradually push it back up to 50% to 70% in stocks have the highest probability of making their money last 30 years using the 4% spending rule.

Those who take a different approach, tapering stockholdings from 60% to 30%, are likely to run out of money after 28 years in the worst-case scenarios, according to the research.

That said, the conventional approach of starting retirement with more in stocks and reducing that exposure over time comes out ahead if stocks fare well in the early years of retirement. But reducing stock market exposure up front provides better downside protection in those early years, when retirees are most vulnerable to financial losses, says Mr. Pfau.

Use other assets

When markets decline, rather than sell stocks at a loss, retirees with whole life insurance may be able to withdraw from their policies to meet living expenses. Another option is to tap home equity with a reverse mortgage line-of-credit. There can be downsides, including high fees on reverse mortgages, so weigh the pros and cons carefully, Mr. Pfau said.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: August 30, 2022.



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Why Prices of the World’s Most Expensive Handbags Keep Rising

Designers are charging more for their most recognisable bags to maintain the appearance of exclusivity as the industry balloons

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The price of a basic Hermès Birkin handbag has jumped $1,000. This first-world problem for fashionistas is a sign that luxury brands are playing harder to get with their most sought-after products.

Hermès recently raised the cost of a basic Birkin 25-centimeter handbag in its U.S. stores by 10% to $11,400 before sales tax, according to data from luxury handbag forum PurseBop. Rarer Birkins made with exotic skins such as crocodile have jumped more than 20%. The Paris brand says it only increases prices to offset higher manufacturing costs, but this year’s increase is its largest in at least a decade.

The brand may feel under pressure to defend its reputation as the maker of the world’s most expensive handbags. The “Birkin premium”—the price difference between the Hermès bag and its closest competitor , the Chanel Classic Flap in medium—shrank from 70% in 2019 to 2% last year, according to PurseBop founder Monika Arora. Privately owned Chanel has jacked up the price of its most popular handbag by 75% since before the pandemic.

Eye-watering price increases on luxury brands’ benchmark products are a wider trend. Prada ’s Galleria bag will set shoppers back a cool $4,600—85% more than in 2019, according to the Wayback Machine internet archive. Christian Dior ’s Lady Dior bag and the Louis Vuitton Neverfull are both 45% more expensive, PurseBop data show.

With the U.S. consumer-price index up a fifth since 2019, luxury brands do need to offset higher wage and materials costs. But the inflation-beating increases are also a way to manage the challenge presented by their own success: how to maintain an aura of exclusivity at the same time as strong sales.

Luxury brands have grown enormously in recent years, helped by the Covid-19 lockdowns, when consumers had fewer outlets for spending. LVMH ’s fashion and leather goods division alone has almost doubled in size since 2019, with €42.2 billion in sales last year, equivalent to $45.8 billion at current exchange rates. Gucci, Chanel and Hermès all make more than $10 billion in sales a year. One way to avoid overexposure is to sell fewer items at much higher prices.

Many aspirational shoppers can no longer afford the handbags, but luxury brands can’t risk alienating them altogether. This may explain why labels such as Hermès and Prada have launched makeup lines and Gucci’s owner Kering is pushing deeper into eyewear. These cheaper categories can be a kind of consolation prize. They can also be sold in the tens of millions without saturating the market.

“Cosmetics are invisible—unless you catch someone applying lipstick and see the logo, you can’t tell the brand,” says Luca Solca, luxury analyst at Bernstein.

Most of the luxury industry’s growth in 2024 will come from price increases. Sales are expected to rise by 7% this year, according to Bernstein estimates, even as brands only sell 1% to 2% more stuff.

Limiting volume growth this way only works if a brand is so popular that shoppers won’t balk at climbing prices and defect to another label. Some companies may have pushed prices beyond what consumers think they are worth. Sales of Prada’s handbags rose a meagre 1% in its last quarter and the group’s cheaper sister label Miu Miu is growing faster.

Ramping up prices can invite unflattering comparisons. At more than $2,000, Burberry ’s small Lola bag is around 40% more expensive today than it was a few years ago. Luxury shoppers may decide that tried and tested styles such as Louis Vuitton’s Neverfull bag, which is now a little cheaper than the Burberry bag, are a better buy—especially as Louis Vuitton bags hold their value better in the resale market.

Aggressive price increases can also drive shoppers to secondhand websites. If a barely used Prada Galleria bag in excellent condition can be picked up for $1,500 on luxury resale website The Real Real, it is less appealing to pay three times that amount for the bag brand new.

The strategy won’t help everyone, but for the best luxury brands, stretching the price spectrum can keep the risks of growth in check.

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