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Good morning investors! Goldman Sachs sees the S&P 500 to only rise 4.2% next year but for now investors are enjoying the incredibly hot market.

Fun fact: Gold has a low correlation with other major asset classes like stocks and bonds, which makes it a good alternative to these popular options.

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📊 Economy and News

Starbucks workers have filed several complaints with New York City, alleging that the coffee chain violated the Fair Workweek law.

What went wrong? New York’s Fair Workweek law says that employers have to give their workers regular schedules from week to week, 14 days’ notice of their scheduled hours and extra pay for shift changes, among other requirements. Starbucks baristas have repeatedly accused the company of running afoul of the law: They have filed nearly 90 complaints with the city related to the law since February.

The allegations come as Starbucks baristas at more than 200 locations nationwide strike during the company’s busy Red Cup promotion.

Making it right: Starbucks has said it’s working to improve workers’ jobs by automating boring tasks and raising pay. Furthermore, it will bump employees’ wages by at least 3% in 2024.

The consequences: Starbucks could face a big penalty and it will not be the only restaurant chain to do so. Last year, Chipotle paid $20 million to workers, and $1 million to the city, to settle Fair Workweek violations.

📈 Stocks

S&P 500 4,508.24 (+0.12%)
DJIA 34,945.47 (-0.13%)
NASDAQ 15,833.17 (+0.10%)
BRENT CRUDE 77.58 (+0.21%)
* Prices as of Nov 17th, 12:20 AM UTC

Alibaba stock fell over 9.1% yesterday after announcing its decision to not proceed with the full spin-off of its cloud group due to chip export restrictions.

Furthermore, it announced that the family trust of founder Jack Ma was planning to sell down its stake in the business, selling 10 million shares for $870.7 million in cash.

A lot seems to be happening in the company and it has decided to delay its plans to list its Freshippo retail chain for groceries. It still, however, plans to list its Cainiao smart logistics division in Hong Kong.

Earnings:

Dividend: The company also announced that it will issue its first-ever annual cash dividend in 2023.a

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China just deployed six warships near Israel.

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💵 Personal Finance

Dave Ramsey, known for his YouTube videos and financial tips, is in hot water due to his on-air rant about the popular 4% rule for retirement withdrawals.

What is it about? It all started on ‘The Ramsey Show’ when a 30-year-old man with $120,000 already saved for retirement called to discuss retirement. Not sure of his financial situation, he asked what percentage of his assets he should plan to withdraw in retirement over a 30-year time period.

The conversation revolved around a recent YouTube video published by The Ramsey Show” co-host George Kamel, in which he told viewers to follow a 3% withdrawal rate if they want their nest egg to survive over 30 years or longer.

Ramsey doesn’t agree: Ramsey called this advice “ridiculous” said he’d be “perfectly comfortable” withdrawing 8% per year, assuming you can earn a 12% annual return from “good mutual funds” — in line with the S&P 500, which has earned an average annual return of 11.8% since 1926 — and you set aside 4% for annual inflation.

The world has a problem: This advice did not. go well with other financial advisors who are calling it “scary,” and “incredibly dangerous.”

What’s wrong with it?

The 4% rule is the go to option for most retirees, Ramsey’s 8% suggestion is double the amount. He justified it with this statement:

“It’s too low! It's not realistic. You do not need to live on 4% of your money for your nest egg to survive.”

“Where the flip is the other 8% going?” said Ramsey. “Well, 4% of it went to inflation [and] the other 4% is just sitting there, so you’re growing your investments instead of living off of them. I'm not destroying the nest egg, I’m not even touching [it]. I’m growing the nest egg by leaving 4% in there and taking 8% off of a 12% growth rate,” he added.

His suggestion doesn’t. work because it rests on assumptions. You can never be sure how much you will make because returns aren’t guaranteed. Plus, his suggestion “doesn’t account for investment volatility.”

What do others say?

Dave McKnight, author of “The Power of Zero” took aim at Ramsey in a Youtube video where he said the radio host was “living in a fantasy world where he thinks these kinds of stratospheric distribution rates are sustainable in retirement.”

Fellow personal finance author, Rob Berger, made a similar point on his Youtube channel: “Dave is fundamentally wrong. Without equivocation, he is wrong. An 8% withdrawal rate would be incredibly dangerous.”

Berger called out the over-simplicity of Ramsey’s argument: “I will certainly agree with Dave that 12 - 4 = 8, but that’s about where our agreement ends.”

He used Portfolio Visualizer to show the CAGR for U.S. stocks was actually 10.25% from 1972-2023, thus proving Ramsey wrong.

Caleb Hammer, a personal finance personality who focuses on helping people out of debt, described the advice as “scary” and highlighted that only 32.5% of people would still have money in their nest egg after 30 years of retirement.

How much to withdraw?

There is no straight answer to this question. The 4% rule works for some people but it might not always be the best option. We think you can do better by finding your personalized spending rate.

Here’s a chart that could be of help:

A good rule of thumb is to take no more than 5% of your household savings in the first year of retirement

You can then adjust this figure based on a range of factors, such as your retirement timeline and how confident you want to be that your withdrawals are sustainable.

Reminder: The longer your retirement, the lower your withdrawal rate should be, to make your money last.

Also, the higher the probability of the retirement savings being sustainable, the lower the recommended withdrawal amount. So, it is safe to say that you can withdraw more than 4% but that depends on how much money you have, what age you are retiring at, and what sources of income you have after retirement.

Check this video for more tips:

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.