Bob’s Journal for 4/17

A Few Retirement Myths Explored

The myths that surround retirement and retirement planning make it harder for many people to have successful retirements.

Some widespread myths address when people retire and how much of their employment income they need to replace in retirement.

Actual experience in these areas differs from many people’s beliefs and expectations, as demonstrated in the recent “Guide to Retirement” from J.P. Morgan Asset Management.

Most pre-retired people think they’ll retire at age 65 or older. Surveys indicate about 70% of Americans who aren’t retired don’t expect to retire before 65.

But the experience of retired Americans is very different. The median retirement age of current retirees is age 62, and only 28% retired at 65 or later.

Most of the reasons for retiring earlier than originally intended were out of the control of the individual. Downsizing or other changes at the employer accounted for 32% of early retirements, and another 13% stopped working because of an early retirement package or other incentive.

Health issues led to 31% of early retirements, and health issues of a spouse or other family member caused 13% to retire earlier than planned.

Only 39% retired early because they realized they could afford to, and another 19% retired before 65 because they wanted to do something else.

Most of those who continue to work after 65 do so because they want to. Staying active and involved was the reason given by 52% of older workers, while 38% said they enjoyed working.

Another widespread myth is the replacement ratio. That’s the percentage of their last year’s employment income that retirees need in retirement to pay their expenses.

A common retirement rule of thumb is that people should plan on a replacement ratio of 80%, meaning that their annual retirement income should be 80% of their income from the last year they worked.

The data show the issue is more complicated. The lower one’s final employment income, the greater the replacement ratio.

Someone who earned $30,000 or less before retiring needs a replacement ratio of 104%. The replacement ratio doesn’t fall to 81% until the final working income was $80,000.

Someone with a final earned income of $200,000 has a replacement ratio of only 60%, according to the report.

As I’ve pointed out in the past, these are only averages. Spending varies considerably from retiree to retiree, even when the retirees have similar earnings histories and savings.

Also, for many people, spending changes through retirement. Spending is relatively high in the first years of retirement, but it steadily declines as people age.

It’s important not to use rules of thumb, other people’s experiences, or similar guidelines in your retirement plans. Make estimates based on your desired lifestyle and other personal factors. Realize that every person’s situation is different and that every plan needs flexibility for contingencies and changes.

When Momentum Investing Does and Doesn’t Increase Returns

Momentum investing has been the biggest investment winner of the last 15 years or so.

Buying more of the stocks that had the highest recent returns earned higher returns than other investing strategies. Investors who bought more of the winners, ignoring fundamental factors such as high valuations and pushing caution aside, reaped rewards.

As profitable as owning the S&P 500 Index has been, far higher returns would have been earned from the summer of 1994 through the summer of 2024 by owning a momentum index, according to S&P Dow Jones Indices, as reported in The Wall Street Journal.

But use that data carefully. This period also was one that was very favorable for momentum investing.

Two factors influence investment returns over the long term: economic growth and inflation.

Most of the last 20 years was characterized by rising growth and falling inflation. That’s the ideal environment for momentum investing.

Momentum investing still generates positive returns when growth is falling and inflation is falling. But an equal-weighted version of the S&P 500 Index earns a much higher return during such a period, as does a strategy of buying high-dividend stocks.

Momentum investing loses substantial value during a period when growth is falling and inflation is rising. Other strategies do much better during such periods.

Also, the best returns for momentum investing tend to be during periods when the lowest-quality companies and stocks have high returns. These are characterized as junk rallies and immediately precede sharp market declines, according to T. Rowe Price.

One possible advantage of staying with momentum investing through downturns could be that most momentum investors tend to be less patient and analytical than other investors. When gains turn into losses, they’re likely to exit the market. That causes momentum stocks to find a bottom faster than other types of stocks, setting the stage for a big turnaround.

The Price Patterns in Bitcoin

Bitcoin hasn’t produced the positive returns many expected in 2025 despite several positive factors.

The new administration established a Strategic Bitcoin Reserve, and more favorable regulations are believed to be on the way that are likely to lead to broader acceptance of digital assets.

Instead of appreciating, Bitcoin lost about 30% from its peak to start the year.

Many people avoid Bitcoin because of two factors. It is very volatile, and the forces that move its price aren’t clear.

In its relatively short history, there have been a few patterns to Bitcoin’s price moves.

One pattern is that significant price gains occur in relatively short periods. Those price gains usually follow longer periods in which Bitcoin traded within a narrow range. The trading ranges often follow steep declines from all-time highs, but not always.

Another pattern is known as Bitcoin’s four-year halving cycle. This is a complicated concept I won’t explain in detail here, but the cycle restricts the supply of Bitcoin by reducing the amount of new Bitcoin that comes into circulation.

Typically, Bitcoin’s price appreciates for about 18 months after a new halving before settling down until the next halving. Then, the cycle repeats.

This cycle has been a bit different. The price appreciation stopped less than 18 months after the last halving in 2024. This could be because, as Bitcoin matures, each halving cycle is less significant than past cycles.

It’s more likely that the emergence of Bitcoin ETFs in 2024 changed the pattern.

The ETFs brought a lot of new investors to Bitcoin. The new investors probably caused some of the significant appreciation in 2024. Many seem to be the same investors who were buying the Magnificent Seven stocks as they rose the last few years. Bitcoin rose sharply with the prices of those stocks and tumbled with those stocks in early 2025.

I think it’s likely that the drop in 2025 shook out many of the short-term traders who bought Bitcoin ETFs in 2024. Bitcoin’s price stabilized in 2025 before stock prices did and even began to appreciate a little while stocks still were falling. We’re now back to having mostly long-term investors in the Bitcoin market.

This looks like a good time to put a very small portion of your portfolio into Bitcoin through an ETF or add to an existing allocation. We can’t identify what might trigger a turnaround. But history indicates that gains in Bitcoin happen quickly.

The Data

The Consumer Sentiment Index from the University of Michigan dropped to 50.8 in mid-April, the lowest level since June 2022, compared to 57.0 at the end of February.

The index has declined 30% since December 2024. Consumers are worried about a recession and rising inflation, with 12-month inflation expectations rising to the highest level since 1981.

Retail sales increased 1.4% in March, the biggest monthly gain since January 2023, following a 0.2% gain in February.

Vehicle sales accounted for a significant part of the increase. Excluding vehicles and gasoline, retail sales increased 0.8% in both March and February.

The Empire State Manufacturing Index rose to negative 8.10 in April from negative 20.00 in March. The negative number indicates manufacturing is declining in April but at a slower rate than in March.

Home builder sentiment improved a little in April. The Housing Market Index from the National Association of Home Builders increased to 40 from 39 in March.

The index had declined for three consecutive months. The April level is the third lowest for the index in the last 12 months.

The Consumer Price Index (CPI) fell by 0.1% in March after rising 0.2% in February. Over 12 months, the CPI was up 2.4% through March and 2.8% through February.

The core CPI, which excludes food and energy prices, rose 0.1% in March and 0.2% in February. The 12-month increase in the core CPI was 2.8% through March and 3.1% through February.

The Producer Price Index (PPI) declined 0.4% in March following a 0.1% increase in February. Over 12 months, the PPI rose 2.7% through March and 3.2% through February.

The core PPI fell 0.1% in March after rising 0.1% in February. The 12-month increase in the core PPI was 3.3% through March and 3.5% through February.

Industrial production declined 0.3% in March after increasing 0.8% in February. Over 12 months, industrial production was 1.3% higher through March and 1.5% higher through February.

Manufacturing production, which is considered a good proxy for business investment, rose 0.3% in March and 1.0% in February. The 12-month increase in manufacturing production was 1.0% through March and 0.8% through February.

New unemployment claims increased by 4,000 to 219,000 in the latest week.

Continuing claims, which lag a week behind new claims, decreased to 1.850 million from 1.893 million.

The Markets

The S&P 500 rose 8.28% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 7.23%. The Russell 2000 increased 6.83%. The All-Country World Index (excluding U.S. stocks) added 9.96%. Emerging market equities advanced 9.27%.

Long-term treasuries lost 0.60% for the week. Investment-grade bonds increased 1.08%. Treasury Inflation-Protected Securities (TIPS) fell 0.48%. High-yield bonds gained 2.09%.

On the currency front, the U.S. dollar declined 2.62%.

Energy-based commodities increased 4.31%. Broader-based commodities rose 5.06%. Gold gained 8.22%.

Bob’s News & Updates

A recent review on amazon.com of my latest book said, “Carlson is a unique national Asset while alive! Get the book, dude!” Look for “Retirement Watch: The Essential Guide to Retiring in the 2020s” (Regnery Capital: 2023) at amazon.com, barnesandnoble.com, booksamillion.com, and regnery.com.

My previous book, “Where’s My Money: Secrets to Getting the Most out of Your Social Security,” is receiving mostly five-star reviews on Amazon for telling you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on amazon.com or Regnery.com.

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Series, click here.

A recent five-star review of my book, “The New Rules of Retirement” on amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.”

If you’re interested in my books, check my amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.