4% rule gone for good?

[haha]

They like controlled inflation, because deflation freezes all commerce.
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This is commonly said. But look at England's history from Waterloo to WW1. Perhaps the longest period of excellent economic progress ever experienced, and accompanied by steady gentle deflation. When productivity increases, consumer prices should deflate. THe story of semiconductors over the past ~50 years.

Ha

 

[Totoro]

They like controlled inflation, because deflation freezes all commerce.

I haven't seen as of yet convincing evidence (in reality!) that deflation has a negative effect.

Even the theoretical reasoning employed is shaky at best. For example people supposedly would start postponing consumption with sustained deflation. News flash counterexample: electronics get cheaper every year and people still buy them! Likewise, investment returns mean money today is worth less than tomorrow, and consumption still happens.

What certainly does have negative effects are volatile and/or high inflation/deflation rates. It just works both ways.

I do have high (irrational?) hopes that central banks have become better at playing the inflation/deflation game in the past 100 years. One risk factor less.

 

[dallas27]

Japan.


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[ERD50]

I think with this methodology, the Boglehead wiki refers to it as liability matching (my husband calls it the TIPS and a beach condo (or in general low baseline expenses) plan), the idea is to generally invest in inflation adjusted, low volatility asset classes, particularly I bonds and TIPS ladders, with a zero or greater real yield, always holding the bonds to maturity.

With even a zero real return over a 40 year retirement horizon, one could have a SWR of 2.5%, and real yields, though still low by historical standards for TIPS, currently are higher than zero for TIPS with a maturity date greater than 5 years:

United States Government Bonds - Bloomberg

This means, depending on your rolling average real yields, your SWR might be 3%+ with no worries except in the case of a government collapse or Treasury bond default.

Thanks for reminding me of that. I'll consider that when I'm further along, for a portion of my portfolio.

-ERD50

 

[Hamlet]

This is commonly said. But look at England's history from Waterloo to WW1. Perhaps the longest period of excellent economic progress ever experienced, and accompanied by steady gentle deflation. When productivity increases, consumer prices should deflate. THe story of semiconductors over the past ~50 years.

Ha

I think that it is important to distinguish between deflation caused by increased productivity (like anything electronic), and deflation caused by a collapse in demand/incomes (like a recession). The second kind of deflation destroys any economy with sizable borrowing being done.

Likewise, inflation can be caused by a rise in demand/incomes, or it can be caused by a supply shock that reduces productivity.

Ultimately, it all boils down to real changes in incomes. No one cares about a little inflation if their pay is going up faster than prices. And people don't mind a little deflation as long as their incomes aren't going down too.

 

[Totoro]

My view too

Japan had deflation, yes, and some say it was no so well off in the past few decades.

Haven't seen any evidence though that any mischief was caused by deflation in itself. More the opposite, bad things (e.g. collapsing real estate bubble) caused deflation.

 

[Mulligan]

My view too

Japan had deflation, yes, and some say it was no so well off in the past few decades.

Haven't seen any evidence though that any mischief was caused by deflation in itself. More the opposite, bad things (e.g. collapsing real estate bubble) caused deflation.

I watched a show in the past year on Japans "lost decades". But it appeared for the general working masses it had no major effect on them, compared to the outsiders view of what had happened. Probably a lot of "ying and yang" going on. For every person losing their shirt on an over leveraged purchase, there was someone coming in scooping it up on the cheap at the backend.


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[audreyh1]

I watched a show in the past year on Japans "lost decades". But it appeared for the general working masses it had no major effect on them, compared to the outsiders view of what had happened. Probably a lot of "ying and yang" going on. For every person losing their shirt on an over leveraged purchase, there was someone coming in scooping it up on the cheap at the backend.


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Also - many Japanese investors have bought US Treasuries! They aren't confined to investing in Japanese assets.

 

[Jack_Pine]

What was this thread about?

 

[2017ish]

What was this thread about?

All threads are governed by the rules of Calvin Ball.

 

[Jack_Pine]

All threads are governed by the rules of Calvin Ball.

Had to look that up, you nailed it.

 

[old woman]

+1

I think it would be fun to squander some money when I'm older - or have the luxury of being able to give away some during the course of my everyday life. I'm thinking things such as bigger tips, footing bills in stores for strangers in need, donating to charities etc.

This is my spending method, I retired last year with a lot of money. I am gifting things to my boyfriend this week he got a grill, and folding table and 26 baby chickens so I blew about $500 on him. I have given thousands of dollars to nieces and nephews and 10K to a great nephew for college, he will get another 10K in the fall to help with senior year. I also spent 28K on a boat for my boyfriend last year.
I messed up retirement planning and ended work with about 3X what I needed. I am giving to charities and tipping way too much. I got a $12 hair cut and gave about $10 tip. I always add at least $3 to any tip now just because they can use the money more than I can. I am even sending online shopping gifts to a cat like cases of his favorite food because I like shopping.
My withdrawals are about 1% for spending and maybe 2% to spend or gift to others or blow on stuff I don't really need like new tires, ball joint tightening, brakes and shocks for a truck I seldom drive because it got a flat tire.

 

[Major Tom]

I messed up retirement planning and ended work with about 3X what I needed.

What a sublimely enjoyable way to "mess" up your retirement planning!