The S&P 500 calculator is on the previous page. This page is general introductory info describing the 4% Rule, the S&P 500, the general market, bonds, Bear markets, taxes, etc. Stuff about the market that you should know. My interest in the calculator was what about about the 4% Rule for a 100% stock fund like the S&P 500?
The 4% Rule concept: This idea was originally about balanced funds, meaning stocks balanced with bonds, perhaps 50% stocks and 50% bonds. The idea then was that adding bonds can shield some portion from market volatility, and at least in the past, could also provide some earnings when the market is down. My own notion is that a 50-50 balanced fund will indeed drop half as much during a market crash, but it also only earns half as much in the good times (and there are many more good times). The 4% withdrawal rate has been promoted as safe, by testing past market history as always then lasting through 30 years of withdrawals in retirement from any date. Any X% withdrawal rate might seem safe if the fund average earning gain was X% to support it, but years vary in gains. The bonds in balanced funds used to pay more to aid that, but times change, and bonds pay very little now. The 4% concept specifically means the withdrawal dollars are adjusted each year to not exceed withdrawing more than 4% of the then current fund. And market years do vary erratically, when a few seriously bad years in a row can make a serious departure from the average, so the rule examines market history verifying survival of all starting dates enduring all known bad year periods. The future is still unknown of course, but knowing the history should help know what could happen.
Origin of the 4% Rule: Interest rates of bonds were higher in older years, and the purpose of a balanced fund (Balanced meaning equities mixed with some degree of bonds, often 50% composed of bonds called 50/50 stocks/bonds) was market safety, because bonds are not affected by the market, and the bonds contributed to help tide it over in bad market times. The 4% Rule was from a 1994 investigation of historical market data that tested for a reliable safe withdrawal amount for a balanced fund. Its conclusion was that a 4% withdrawal would survive 30 years of retirement withdrawals in past situations if invested anytime since 1928. However, it was done earlier than the worst times in the 2000s. Bonds are another factor. The bonds did provide some income in those days for a degree of safety in bear markets. Here's a chart of the Federal bank's interest rate history, and I'm thinking the 4% Rule look in 1994 could not foresee today's zero interest rate. A good recent article about the 4% withdrawal number is at Morningstar.
A S&P 500 Index fund is widely considered to be one of the best market investment choices for most people (those who are not market professionals following the market closely). Here is one link about that. An Index fund keeps its holdings exactly matched with the index it is tracking. The S&P 500 is the collection of the 500 largest US publicly-held companies, all well established, and widely including most industry types. Might say it's where the money is, since the S&P 500 includes about 80% of the total US market capitalization. Capitalization is a companies total dollar market value, equal to a companies total stock shares x price per share. The S&P 500 index is weighted by capitalization, to account for size, so that the largest companies count proportionally more in the index, according to their value. All of the S&P 500 index funds try to exactly match the S&P 500 Index performance, but these funds do have different expense fees. There are actually 505 listed tickers in the S&P 500, because five companies have two major classes of public common stock included (Google, Discovery, Comcast, News Corp, 21st Century Fox). Google's company name is actually Alphabet, with two stock classes A and C, with two tickers GOOGL and GOOG, which I added together in the table here.
|S&P 500 Weighting|
Top 10 as of 18 Jan 2022
|Class A & C||GOOGL|
|Berkshire Class B||BRK.B||1.51%|
See current weighting of all of the S&P 500 companies. See largest companies NOT in the S&P 500 (this list includes Berkshire Hathaway class A, but Berkshire Hathaway class B was added to S&P 500 in 2010).
There also are various S&P Equally Weighted funds, either of all 500 or just of specific industries, for example ticker RSP.
Other funds and stocks might earn more than the S&P 500 Index (many of those companies are also in the S&P 500, contributing their share). However their downside is these currently hot stocks are more volatile, their prices can swing widely, both up and down. There can be a surprise when the price of the companies change. You have to watch closely, and know when to switch stocks.
Diversification — Don't put all your eggs in one basket. The mix of 500 companies is a diversification in the various industries (tech, energy, financial, consumer, health, industrial, materials, etc). But all are US large cap stocks (which includes No small caps, emerging markets, foreign, bonds, etc.). A S&P 500 Index fund earns more than balanced funds ("balanced" means majorly mixed with bonds for diversification), but the S&P 500 goes up and down too, and can be volatile too (especially in market crashes and recoveries). But overall, the S&P 500 trend line is quite appealing. The nature of investing is that some risk is necessary to earn higher gains, a low risk investment doesn't earn much. The S&P 500 does have the normal daily market ups and downs, including the rare crashes, but the overall S&P 500 averaged gain has historically always been of about 10% a year (which is NOT a guarantee — years vary, a few years are negative, but there are many more good years than not. However a bad crash with a few bad years in a row will have a large effect). But the long term picture is very appealing, with only a few dips, which have always recovered of course.
Nothing ventured, nothing gained. Ben Franklin said that too, but the thought is centuries older. Some people do fear anything in the market is too much risk (yes, the market can crash in bad times, but then it recovers). At least it does if it was a good investment, and the S&P 500 are the largest and most successful Blue Chip companies in the US, which is a good strong bet.
The greater number of years of long-term investments makes the compounding of gains be an exponential function (with years as the exponent power), which is an astoundingly big deal. A 10% gain in each of 40 years becomes a final value of 1.1040 = 45x the initial value. Reinvested S&P 500 dividends add roughly about 2% to total returns each year, and then those additions see gains too, and those gains see more gains, every following year. Even if a few random years are negative, compounded earnings are a Real Big Deal, so think of a long term investment with reinvested dividends. Start young, and then it will be waiting at retirement. The S&P 500 calculator on previous page shows this with 50 years of past S&P 500 history.
The fund's average annual gain is Not the absolute measure of short term withdrawal safety. Because the average is just the sum of all years gain divided by the number of years, accurate "on average" over the total years, but the average can hide a few adjacent down years during which multiple withdrawals could deplete the fund. The numerical S&P average will recover, but if all your funds money was depleted earlier, it ends there. The first years are the higher risk, before it has earned much, since more money in the fund will of course always last longer in a crisis. So first building more money in the fund (before withdrawals) is the insurance to last longer when down, and to make recovery easier. Reason would suggest that first allowing maybe 20 or more years for the fund to build and grow without any withdrawals would make all the difference of survivability, and would of course also provide much greater income during retirement. The market years do vary erratically, but continually withdrawing 10% also with average earnings near 10% might (on average) usually keep it drained down to always about the same level, more or less. It can't grow more then, but its value won't vary so greatly through a long retirement. Except there are variations, and limiting withdrawals to about half of the average fund earnings rate significantly improves odds against going the fund going bust (and would also leave something for future inheritance to your heirs).
Never withdrawing anything will not go bust. Even an extremely bad rare crash probably leaves at least 50%, which is certainly no fun then, but it has in fact always recovered. Here is a chart of a few years of S&P 500 record highs. But when and if it is down low, then percentage withdrawals become fewer dollars of withdrawals when the fund is low. Instead, the biggest danger is fixed dollar value withdrawals, which if blind to current situations are not limited to a reasonable current percentage, of which an example is shown in the Test section on previous calculator page. Withdrawals are the desired and necessary goal in retirement, but are very counterproductive during the growth phase. In every case, withdrawals should be reconsidered if the fund value gets low. We don't know the future but we can look at the effect of "typical" past periods, regarding our withdrawal feasibility.
One issue of a 4% Rule is that it does not specify any specific fund, nor any specific fund value. However a fund containing more money can obviously survive withdrawing in a crash longer than would the same fund with less money. Meaning, a large million dollar fund and a small $10K fund both withdrawing after a bad crash might both fall to 50%, but 50% of a $Million is much more survivable than 50% of $10K. The survivability of a reasonable percentage withdrawal not hitting zero seems relatively independent of value — only meaning a fixed percentage rate (if the withdrawal dollars are readjusted every year to hold that percentage rate), it withdraws much less when fund is low, near zero withdrawal when near zero value, and worst case still always leaves a tiny value instead of zero. Maybe only a few cents left, but not exactly zero, so hitting zero can take a very long time. Which is the reason an adjustable $500 minimum limit was added to the calculator here to more clearly define the end of Survival due to depletion. Possibly this limit should be higher for a stronger recovery, and you can change it, because the fund does need some money left to be able to earn a faster recovery. But in the real world of fixed withdrawals in dollars, hitting zero is certainly about the fund value, since a higher value fund will always last longer through any crisis. The important thing is to maintain a fund value that can recover and survive. Withdrawals make remaining Fund Value be a very major survivability factor (and many years/decades of growth with no withdrawals until retirement is the obvious way to easily increase retirement fund value). If you had $1 Million in a fund, a bad crash might drop to 50%, but half a million would still last a very long time, and then the larger value will also recover with more dramatic gains than a tiny value could.
Investing in bonds is a very different game than investing in stock. Bonds may have paid 4% dividends in 1994, helping to support the withdrawal, but interest rate has bottomed out near zero today, so IMO, now bonds seem an outdated investment idea. Bonds do protect savings from market volatility, and in a market crash, a 50/50 balanced fund may drop half as much as a 100% stock fund, and the bonds still could provide some earnings. But bonds don't earn what the 100% stock fund can, and don't earn today what bonds have historically earned, and don't even match inflation today. Most of all, do realize that bonds are also quite volatile too, maybe safe from the market, however bond value is very seriously affected by current interest rate changes.
Existing bonds do still pay their same fixed dividends, but there's much more to know about the volatility. When inflation increases interest rates of new bonds, it lowers old bond resell values. That's because no one would pay full price for old 1% bonds if they can buy new 2% bonds at same face value price. So then buying two existing 1% bonds is required to match earnings of one new 2% bond. So existing old bond resale value can drop to half when interest rate doubles. And also vice versa, lower interest rates will increase the value of existing bonds that still pay more. (See Duration next below). Also some bonds are "callable" (most municipal bonds and some corporate bonds), with a callable date when the issuer can redeem the bond early (which stops dividend income), planning to issue new bonds paying lower interest rate.
Bond price changes when reselling are taxed as capital gains if held one year or more. However all bond dividends are taxed like interest, at regular income tax rates (except municipal bond dividends are tax free of federal tax, and sometimes free of state tax in same state).
Bonds do still pay full face value when redeemed at maturity (or when called earlier). However bond funds must buy and sell bonds continually, as investors buy and sell shares. But while bonds are still held, resell value varies with current interest rates. Price does not vary much if close to maturity, so a complication is that bond value sensitivity to interest rates depends on how close it is to maturity, in a calculation called Duration. Morningstar shows the bond Duration (in balanced funds at Portfolio tab, Bond sub-tab, if any). The meaning of a Duration of say 3 means the expected bond value will decrease 3% with each 1% interest rate increase, and vice versa, existing bond values also increase when interest rates fall. But either way, when redeemed at maturity they do still pay face value. Short term bonds will have lower duration with lower risk from interest rates, but they pay even less. Bonds rated A are considered investment grade. Generally bonds rated B are considered speculative and non-investment grade, and C rating is a highly speculative bet (speculative meaning paying greater interest, but with greater risk they could fail and default and not redeem at all).
But don't be confused by Morningstar's market return statistics showing bond and balanced funds had good performance history in recent past years. They in fact did, when interest rates fell more than 2% over 2019 and 2020, causing the existing bonds to increase in resell value. So also check their current YTD (Year To Date) results too. Typically, the current SEC 30 day yield is shown, annualized to one total year, which is the accurate current value. The federal bank interest rate is essentially at zero now, so the only way it can go now is up (and when and if it does, values of existing bonds then will go down). Bonds held until redemption at maturity do retain full face value then, except bond funds might not be able to hold them to maturity when their shareholders are ordering withdrawals. Since interest rates are near zero now, the danger for existing bonds is that rising rates (and lower values) are the only change possible now. We are expecting inflation increases which will increase interest rates. Bond dividend income is taxed with regular income tax rates, only the price changes are capital gains or losses.
If considering stock dividends for income, there are about 65 stocks referred to as Aristocrat Stocks, which to be included, companies must be in the S&P 500 (largest US companies), and must have increased their dividend every year for 25 years, a point of pride indicating a stable business. See that Aristocrat Stocks list. The annual increases can be small, and a good half of them still pay less than 2.5% dividends, and a few of those pay less than 1%. A favorite of Warren Buffet at Berkshire is Coca Cola (COKE) paying 3% plus decent earnings. AT&T (T) pays 8.2%, but has lower price gains. Whereas most of the best growth stocks pay no dividends, and also can have prices varying widely.
Inflation has historically averaged about 3%. Bonds earn less than that now, but the S&P 500 total returns (plus its dividends) has averaged 11.77% for the last 50 years (including the 13 negative years).
Since very low earnings today from bonds is less appealing, my interest was about something like the 4% Rule, but for 100% stocks, such as the very popular S&P 500 index funds. A good stock fund earns a lot when the market is good, but market value can drop significantly when market times are bad. But which is more just a delay, since long term, even a 50% drop is not the end of the world, since the bad market crashes have always fully recovered if you can hang in there and wait it out. This is definitely NOT speaking of bad investments recovering, but is instead speaking of good investments in bad times. However there is always risk that withdrawals at suffering prices can deplete a small fund. More money in the fund can survive fixed amount withdrawals longer. But if no withdrawals, it should recover and last indefinitely.
So if interest rate (of bonds in balanced funds) is near zero today, what about a "4% rule" for 100% in a S&P 500 Index fund? The calculator on the first page is intended for that.
My strong opinion is that all withdrawals ought to be planned to occur after retirement, not before. Withdrawals seriously limit long term performance. The big issue is that retirement generally means having no job or salary, requiring living off of savings for maybe 30 years, perhaps even with major health care expenses, which will require some planning. The time to realize this is when young with still many years of great opportunity.
Compounding is the largest gain effect of long term market investments. One year has earnings, which (if positive) then increases the total amount producing earnings the next year, and continuing so on every year. But market gain is variably different every year, so here's a math example with five years of 15%, -5%, 10%, 20% and 12% Total Return gains (which includes reinvested dividends):
|The Manual Calculation Method|
So this overall five year gain is ((16151.52 - 10000) / 10000) × 100 = 61.515% gain.
Or easier, it can also be computed as (1.15 × 0.95 × 1.10 × 1.20 × 1.12 - 1) × 100 = 61.515% gain.
This procedure would match the standard (interest rate)years if the gain was the same every year. Each year's gain is an individual multiplier of the value. Each factor is (1 + gain/100) with 15% gain becoming the 1.15x multiplier of value. This same factor method is also used for the negative 1 + (-5/100) resulting in 0.95x value that year. The 1 is the 1x initial value, which is subtracted from l value multiple to see the gain, or 1 is added to gain to see the total value multiplier.
And then, the Total Final Value is (1 + gain/100) × initial value, or 1 + 0.61515 is 1.61515 × $10000 = $16151.52
Compounding is a really big deal, making long term investments be the most profitable part. Compounding is exponential with time, over the years. If it were simple fixed interest at 12% every year, the 30 year value would be 1.1230 = 29.96 x initial value.
In history, most by far of the S&P 500 years are positive gain, but market years vary, and the future is always unknown. However the preceding 50 years of the S&P 500 have actually averaged about 12% simple average gain (speaking of individual years Total Return without compounding, but which includes reinvested dividends). Your retirement might be a long time away, but the wise are already planning for it today, because time is by far your best tool. Wasting that most valuable opportunity would be a real shame and loss.
Based on past S&P 500 performance history, earning a million dollars has been relatively easy, if given the sufficient span of years to let it grow. Investing more grows larger faster, but twice the years is vastly more valuable than twice the starting investment. And more is definitely better. Withdrawals of 4% of $100,000 is $4,000 a year, but 4% of $1,000,000 is $40,000 a year.
The long range of years is a great opportunity. The calculator on previous calculator page can show that only $10,000 invested in 1980 for 40 years (which sounds like an extremely long time, but it could be just age 25 to 65) and untouched until today would have been worth $1 Million now. That's about 12% gain annually, with dividends reinvested and compounded for 40 years, despite including a few very bad market years. (Starting in any year, and/or with any other starting value, can be shown in the Survival Test Mode chart with calculator on previous calculator page). The $10,000 doesn't earn so much in the beginning, but after it's grown to six digits in the last few years, the growth seems amazing. And that growth keeps earning more, which is the concept of compounding.
Compounding is easy, all you have to do is wait (but it requires starting early and waiting long term). And think what adding even more investment to that all along could have done. That growth will become quite important at retirement time, but it requires an early start. It also continues earning and compounding during the maybe 30 years of retirement withdrawals. If looking for magic, this comes pretty close, and seems a mighty big deal.
$10,000 might have seemed impossible for me at age 25, but starting with $1200, and adding $1200 a year ($100/month) to it for 40 years all along (without fail, adding $51.6K overall) also creates $1 Million.
Or one approach is you can create a self-directed IRA that invests in a S&P 500 fund. A S&P 500 Roth or IRA that adds the $6000 maximum every year could reach $1 Million in just 30 years (example 5 on previous calculator page). Or you can of course do both.
Age 65 will come for all of us, when salary stops and we will need replacement income, which will become very important then. Planning makes that possible if you start early. Then thereafter, 4% withdrawals from $1,000,000 is $40,000 a year to help live on Social Security. The fund would continue making its gains then, but if $1 Million, $40K a year would last 25 years even if zero additional gain.
The easy and best solution is simply to start a good investment early, without fail, as early as possible. The 4% Rule was concerned with market bad times surviving 30 years of retirement withdrawals, after building substantial value with years of investment without withdrawals. From my own experience, my notion is that it takes many young people many years to realize that the many years of opportunity available to them would have been their very best and easiest and greatest tool BY FAR, but then there is no going back for a redo. Wasting that most valuable opportunity is a real shame.
Again, these results are computed from the past years in history, and future results are not known. Past success does not guarantee future performance.
The market is usually good, with many more good years than not, and long term wins. But starting the calculator data at 1970 was deliberately chosen here to include actual real data for some seriously bad times. The crashes of 1974 and 1982 and 2001 and 2008 were exceptionally bad economic and market times. In contrast, the 2020 pandemic crash, -34% was tough on the economy and market, but its cause was not economic or political, and the market recovered quickly to current all time record highs. And there were other smaller dips, but the 1970s were poor (one crash to 50%) and the 2000s were worse (two crashes to 50%). The recovery from 2008 took the longest in modern history (until 2012), and the entire 2000s decade was down 9.4% (called the "lost decade"). So 2000 was the worst year to start the fund in the last 50 years of history. The price of the actual S&P 500 was under $1000 in 1997, again in 2002, and again in 2008, but even so, has reached $4700 in 2021. That is just the price, but the compounded gains have been exponential in the many years of gains. Investing for long term is the way to bet.
The 2001 and 2008 dips made the entire 2000 decade lose 9.4%. The 2020 pandemic dip was deep but short.
The S&P calculator on previous page shows these annual chart values too, but it shows year end values instead of the actual dips.
A Brief History of U.S. Bear Markets provides a very clear graph and details of our bear market history. That one does not show any of the good times, but for that, also see the second green graph just below it (click it to enlarge it a bit). Certainly you should realize that crashes do happen now and then, but also, that they do recover. A Bear Market is defined by at least a 20% decline, which can seem mighty uncomfortable at the time. Many investors panic and sell and end their fund then, which just makes their loss permanent and very real. But instead hang in there, and it will eventually recover into happy times again with continued gains. Most years are good, and the long term gains are hard to ignore. Politics and taxes do need watching, and bad times do happen every once in a while, but then recovery also happens too.
Predictions about the market future are largely only guesses, and at any given time, many "expert" guesses heard will always be rosy and bright, and many others are always gloom and doom. It doesn't take long to figure out that no one actually knows the future. I am certainly no expert, and I don't know either, but it is easy to see that the long term S&P 500 graph (meaning a few decades) sure always looks great, but with some dips. The market goes up and down every day, with many more good years than bad years (but yes, expect a few bad years as a matter of course). Withdrawing everything is the worst plan in the bad years, that simply guarantees the loss is real and permanent. It will recover if no withdrawals. But there is no one safe magic percentage withdrawal such as 4%. Because how long a fund can survive withdrawals in bad times depends on:
We don't know those things about the future, but we can see such instances in the past, to suspect what we might expect sometime in the future. We can see that it has always recovered. If the fund value drops 50%, then from there, it must recover 100% to reach the same original value again. Our own withdrawals also during the low times are dangerous to the survival of our fund. The one advantage of a percentage withdrawal is that (if the withdrawal rate is then adjusted), the withdrawal becomes very low when the fund value is low. Except actual withdrawals are set up as fixed dollar amounts every month. So a percentage withdrawal implies the withdrawal is recomputed every year from current fund value, which becomes less withdrawal when the fund value is lower.
Withdrawals of course depend on money still remaining available in the fund. If no withdrawals, the fund will survive and continue growing, but withdrawals will drop the fund value fast, especially when low in bad times. This calculator program cannot predict future gains, but its purpose is to see the result of some typical actual bad times from recent history, and also to see the results of withdrawals, to help know the best future plan.
Again, this is definitely NOT speaking of bad investments recovering, but is instead speaking of good investments in bad times.
25 years ago, the original 4% Rule data looked at the market back to include the Great Crash of 1929, but times and laws and market rules have since changed so much, and IMO the last 50 years seem typical enough of today's world. This calculator Test is ONLY about actual S&P 500 Index history. It has no historical data for any other funds except S&P 500 Index funds (which are a very popular class). All of those will show the same S&P result, except they do vary in the fee they charge (the fund fee is withdrawn every year, and a fund with a low fee is a big plus).
How much withdrawal will survive bad crashes is a vague question though. Situations vary. A market crash just when you need the withdrawals is the fear. Another danger is an early crash before the fund has grown to be able to survive it. Do realize if a fund loses 50%, the low price then has to regain 100% to recover.
The market goes up and down every day, but fund survival depends on how much value is in the fund, and specifically, how much value is also being withdrawn from the fund.
Withdrawing from a fund of low value won't last long in worst situations, but a larger fund value certainly helps. If for example, a $2 Million fund crashes to 50%, it still has $1 Million, which is $40K a year for 25 years, even without any recovery or future gains. That case seems a lesser problem, and recovery will come. Just saying, starting early to accumulate a larger fund is a great plan.
Realize that 4% of not much money is even less money, but 4% of a lot of money is much more satisfying. The S&P 500 has always averaged about 10% all along, meaning withdrawing 10% should stay at more or less the same fund value (with risky variations), but withdrawing the average gain cannot grow much. The calculator shows (if starting with $25K) the S&P 500 would have survived 10% withdrawals every year of the last 50 years, but 10% of say $25000 is only about $200 month, and is even less withdrawal when fund value is low.
And for example, 10% withdrawal even from the first year would survive starting in any of the 50 years if able to start with $50K, but it could not grow much then if 10%. The Test says 10% falls to $15K if starting 1999, but the point is, more fund money does last longer, and withdrawals approaching the fund gain rate cannot grow. But the main goal in retirement is that it just needs to last 30 years.
The commonly seen market advice about risk is "Past success does not guarantee future performance." Meaning, we don't know the future, and unexpected bad times do happen. But IMO, that is speaking of short term events (up to a few years). I get my encouragement by looking at a graph of the S&P 500 history. Market gains certainly offset inflation, however do unclick the Inflation-Adjusted box there to show the actual S&P data. The world might someday end, but the graph long term trend does look very promising. :) The notches in the rising curve are the bad times, and there's been many of them, but they get forgotten as the curve goes up. It does show that the 1970s and the 2000s decades were serious bad times (a mouse-over there shows the dates). The bad times will seem drastically bad at the time, but they always recover (might take a year or two, but retirement is a long term goal, right?)
The actual risk is that if the fund is saving for a specific time, like for retirement or a child's college expense, a 100% recovery might not be fully available at the time needed. But college is a four year duration, not all needed at once on the first day, so it has more time. And retirement is possibly a 30 year duration, and growth continues all during that time. We don't know about the future, but the program can show the effects of some past bad time drops.
Fund values seriously suffer from any withdrawal, both by reducing the remaining balance, which also limits the future gains. IRA RMD (Required Minimum Distribution) is required after age 72, but otherwise withdrawals are a choice, but if the withdrawn money had remained invested, that money would have earned more money itself, repeated every year, compounded. It is certainly wise to cut back on withdrawals in really bad times, to avoid depleting the fund. And it is always best to reinvest the dividends, and you can see the tremendous difference that makes here (of compounded growth in time). Bad times are the worst possible time to sell out and close the fund since that absolutely locks in and guarantees maximum loss, with no recovery possible. The market will drop in value now and then, maybe to around 50% in the very worst times, which will seem catastrophic and unbearable at the time. But if you can hang in there, it will recover and will then be forgotten (eventually, which could be fast, or could take one or more years). It no withdrawals, the S&P 500 has always recovered to hit new highs, and will resume and continue earning more. Currently, the last ten years have had good results, but the market behavior before 2010 might be considered expected now and then, however it always recovers.
Taxes: USA Income Tax Summary (but tax laws can change):
IRA RMD details are in the IRS chart showing the annual IRA RMD calculation according to age.
RMD dollar amount is end-of-year total IRA fund dollars / Distribution Period (for your age)
or, RMD withdrawal percentage is 100 / Distribution Period.
Capital Gains tax does not apply to IRA. IRA withdrawals are always taxed at ordinary income tax rates. So IRA withdrawals greater than RMD can increase taxes significantly. The RMD is required, but for additional amounts, pay attention to the tax rates on the tax brackets. Perhaps you have other capital gains withdrawals possible with a lower tax rate.
If multiple IRA accounts, each IRA fund brokerage firm computes only all of your IRA funds that are in their care.
The RMD is computed at the beginning of each year (if by the same fund brokerage firm) from the total IRA values then. You can have multiple IRA, and the RMD applies to the total of all, but which can be withdrawn from any one of them (if by the same fund brokerage firm). The RMD plan is that the tax must be paid, but if this mandatory withdrawal is more than you need, the withdrawal can always be reinvested somewhere else. Some say this IRS RMD chart is not a bad plan for safe non-IRA withdrawals too.
However, any IRA you might inherit is kept very separate. Its withdrawals are still 100% taxed but the new law has very different RMD rules. Unless inherited from a spouse, then IRA inherited after 2019 have no annual RMD as such, however 100% of it must be withdrawn within 10 years. Be aware that one lump-sum total IRA withdrawal likely increases income into a higher income tax rate than if it were distributed more evenly over the full 10 years, while it can also still be earning.
When you retire or if you just change employer, you can convert your previous company 401K or IRA into a self-directed IRA of your own choice, which then allows your direct control of its investment choices. For example it could be any stocks or funds you wish. Which is neat, because buying and selling are not taxable events in an IRA. You will get a tax 1099 for any withdrawal, including RMD, and regular income tax will be owed on that, so specifying some RMD withholding is suggested. Depending on your investment success, retirement tax rate may be higher than when working, A Roth conversion as early as possible seems an advantage, less tax is owed when fund is still smaller, and more future tax-free gains too.