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Old 08-29-2015, 08:29 PM   #161
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Thanks you for that chart. I just put those same start/ending dates into my trusty Quicken investment performance calculator and it came up with 4.5% over that time. Not great but I guess the 4% WR is alive and well with a diversified 50/50 portfolio with a value tilt.
You know, I didn't put those dates into my spreadsheet to see what I actually got during that period. I think I'll do that! Maybe that will cheer me up a bit.
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Old 08-29-2015, 08:58 PM   #162
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An annualized return of 4.5% over that terrible period is not bad. But one must also take out inflation for comparison to the S&P chart that sengsational posted.

Cumulative inflation over the last 15 years is 38%. It works out to 2.2% annualized. So, the 4.5% nominal return becomes 2.3% real return. I guess the bond component along with rebalancing are responsible for that.
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Old 08-29-2015, 09:11 PM   #163
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Yep, I just got done with the calculation and 38% is what found too. I actually took the monthly CPI and adjusted the starting balance and all of the cash flows by a factor to turn them all into "today's dollars". I got an internal rate of return of 11.2% over that span. I was in accumulation mode most of that time, so I suspect dollar cost averaging, rebalancing, and being in various asset classes beyond just the S&P 500 is why. So I don't feel so bad telling my daughter to just pick an asset allocation target, keep adding, rebalance occasionally, and ignore the balance fluctuations.
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Old 08-29-2015, 09:23 PM   #164
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But we are not in accumulation mode anymore. It's a different game now.

There's another thread where the fate of a Y2K retiree is discussed. If he drew 4%WR COLA'ed from a 60 stock/40 bond portfolio, his WR would now be up to 6.2% nominal. He's in trouble!
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Old 08-29-2015, 09:29 PM   #165
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But we are not in accumulation mode anymore. It's a different game now.
Absolutely! I'm wondering if the smooth, age-driven asset allocation splits are really wise. It seems like there should be a bigger change when one leaves the accumulation phase.
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Old 08-29-2015, 09:44 PM   #166
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An annualized return of 4.5% over that terrible period is not bad. But one must also take out inflation for comparison to the S&P chart that sengsational posted.

Cumulative inflation over the last 15 years is 38%. It works out to 2.2% annualized. So, the 4.5% nominal return becomes 2.3% real return. I guess the bond component along with rebalancing are responsible for that.
Aye, I guess one should take the nominal official inflation rate out for a true apples to apples comparison but I have to tell you that my personal inflation rate is nothing like the CPI. I don't know if it's a substitution effect or what but my actual dollar expenditures have been remarkably stable over the last dozen years since ER. And the weird thing is, my standard of living feels about the same, eat out just as often, drink the same booze, travel just about as often, get the same toys etc etc. Weird.
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Old 08-29-2015, 10:02 PM   #167
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I do not disagree with you. I do think our cost of living has gone up some, but less than the CPI number. Could it be because we retirees do not buy the stuff that youngsters do? Or perhaps we are following Bernicke's spending pattern without realizing it?

The gummint may be correct in saying that SS recipients do not really need the COLA that is given out. I suggest that we keep this between ourselves, and do not publicize it. No need to give them any ammo.
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Old 08-29-2015, 10:13 PM   #168
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Absolutely! I'm wondering if the smooth, age-driven asset allocation splits are really wise. It seems like there should be a bigger change when one leaves the accumulation phase.
Should there be a change in allocation when one switches from allocation to withdrawal? Absolutely. I imagine many folks do.
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Old 08-29-2015, 10:15 PM   #169
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I do not disagree with you. I do think our cost of living has gone up some, but less than the CPI number. Could it be because we retirees do not buy the stuff that youngsters do? Or perhaps we are following Bernicke's spending pattern without realizing it?

The gummint may be correct in saying that SS recipients do not really need the COLA that is given out. I suggest that we keep this between ourselves, and do not publicize it. No need to give them any ammo.
OK, I'll be quiet....
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Old 08-29-2015, 10:17 PM   #170
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I happened to look at net worth today, and we are at the same level as where we started the year - after 7.5 months living expenses plus big estimated taxes paid. Now I don't feel like I lost anything!
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Old 08-29-2015, 10:39 PM   #171
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I happened to look at net worth today, and we are at the same level as where we started the year - after 7.5 months living expenses plus big estimated taxes paid. Now I don't feel like I lost anything!
That's wonderful! Congratulations. I'm not quite at the same amount, but my present net worth does look better when I compare with the beginning of the year.


I am definitely spending more than I ever have before.
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Old 08-29-2015, 10:42 PM   #172
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That's wonderful! Congratulations. I'm not quite at the same amount, but my present net worth does look better when I compare with the beginning of the year.
Well if your present net worth is higher than where you started the year, you are ahead for the year, IMO.
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Old 08-29-2015, 10:45 PM   #173
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Well if your present net worth is higher than where you started the year, you are ahead for the year, IMO.
It's not! That's why I congratulated you. It just looks a little less awful when I compare, and consider that it wasn't that wonderful at the first of the year.
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Old 08-29-2015, 11:05 PM   #174
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It's not! That's why I congratulated you. It just looks a little less awful when I compare, and consider that it wasn't that wonderful at the first of the year.
OK, I get it. You aren't down as much when you compare it to the start of the year.
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Old 08-30-2015, 05:21 AM   #175
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I happened to look at net worth today, and we are at the same level as where we started the year - after 7.5 months living expenses plus big estimated taxes paid. Now I don't feel like I lost anything!
We keep an Excel graph of where we were financially at each month's end, (house at a fixed rate, and any outstanding CG taxes not included), and have a tendency, (especially after drops), to look back and say "We have the same amount now as we had on such and such a date; we thought we were doing pretty well then, and we've lived/traveled/etc since that time".

Doesn't totally 'cheer us up' after a big drop....but it helps.
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Old 08-30-2015, 10:03 AM   #176
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We keep an Excel graph of where we were financially at each month's end, (house at a fixed rate, and any outstanding CG taxes not included), and have a tendency, (especially after drops), to look back and say "We have the same amount now as we had on such and such a date; we thought we were doing pretty well then, and we've lived/traveled/etc since that time".

Doesn't totally 'cheer us up' after a big drop....but it helps.
That is a great idea! I looked back after reading your post, and found I had a smaller portfolio less than two years ago. I thought I was doing pretty well then.

Another thing I have been doing lately is assuming a level of annual spending, and then computing the difference in withdrawal rates required based on the larger vs the smaller portfolio size.

The difference is not too drastic so that cheers me up a little bit too.

Also, I try to remember that it is not my investments failing me but instead, simply the fact that buying a house, selling a house, and moving, all involve various transaction costs and other costs that do not contribute to net worth. I knew this going in, and this is how I wanted to spend my excess portfolio so now that it is done I should expect to be down. I'm happy with that decision overall and just need to get used to seeing different numbers.
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Old 08-30-2015, 10:25 AM   #177
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For whatever reason, I was not the least bit concerned about this recent market drop. I am not that far off from my all time high, within 1%, although I have put in a considerable amount over the year. And will continue to do so. My deposits have generally offset the declines, not quite, but close.

I am also still working, but within a few months of retirement. I am not 100% sure how I would feel if this steady decline lingers on for several more years...

I am thinking that if a decline like this is worrisome to people, they should continue working, or get a financial planner to insulate them from the market.

This type of correction, if it really is that, is not at all uncommon. If you are 65 and retired, there are not too many left, and you do not need to worry as much. If you are 45 and retired, you better get used to them.
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Old 08-30-2015, 10:34 AM   #178
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I am also still working, but within a few months of retirement. I am not 100% sure how I would feel if this steady decline lingers on for several more years...
You will feel pretty lousy if the market keeps on declining month after month, trust me.
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Old 08-30-2015, 10:41 AM   #179
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Doesn't totally 'cheer us up' after a big drop....but it helps.
We had the benefit of retiring in 2002 after the 2000 swoon. While we have had blips along the way, we are better off today than we were in 2002. We never lose sight of that when our net worth fluctuates. And we don't need a new Honda anytime soon.
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Old 08-30-2015, 02:06 PM   #180
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I am thinking that if a decline like this is worrisome to people, they should continue working, or get a financial planner to insulate them from the market.
Or pick an asset allocation that allows them not to worry as much.

How would a financial planner insulate someone from the market?
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