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Old 10-16-2011, 11:13 AM   #21
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That seems to be a valid approach, and if you use a calculator like FIDO's Retirement Income Planner it will show you year by year where your income is coming from to match your budgeted expenses.
+1 (with comments).

You must be a FIDO (Fidelity) customer to have access to the program. In addition, FIDO offers three different forecast software programs, with Retirement Income Planner (RIP) being the most "robust".

As a side note, if you use it, you should also use the Fidelity "Full View" product, with all your various holdings (regardless of vendor). The output goes directly to RIP, but more importantly FV interfaces to M* to get a complete breakdown of your holdings. You can ceratinly manually add your info to RIP, but this ensues a better forecast plan, IMHO.

BTW, FV is actually Yodlee "under the covers" to acquire your account/holding information. If you are not comfortable with Yodlee accessing your accounts to gather info, you probably will have a problem with FV and will have to use manual "guesstimates" of your holding breakdown within RIP. Just an FYI...
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Old 10-16-2011, 02:00 PM   #22
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I think there are two flaws with that study.

First, it's trying to determine the max withdrawal rate-- the maximum that a retiree could spend every year without paying any attention to any outside economic factors.
[...]

Second flaw: Assuming that a 4% SWR means starting at 4%. Yeah, maybe that's what the procedure says, but the math is that some scenarios will start out at 5% or even 6% during down economies. The theory is that the economy will recover, so will the portfolio, and what started as a 6% withdrawal rate will ease off to less. The overall portfolio spending will run out at the same time as the rest because it's followed the overall 4% math.
Hi Nords, I am not following your second flaw. Where does the math suggest 5-6% withdrawal? I get a sense that it's related to first flaw you mentioned however (i.e. flexible spending is not accounted for).

Regarding the first flaw, I don't see it as a big flaw for the following reason. Imagine your expenses consisting of 2 parts - fixed part and flexible part. Fixed part is what you MUST spend to live on; i.e. bare-minimum expenses like shelter, food, health, necessary repairs, insurance, etc.. Second part is flexible-expenses - not must-haves, but nice-to-haves that can be cut during recessions, perhaps some hobbies, going out, and such.

What you are saying is that the study does not account for these two categories where second set of expenses could vary from $0 to $X. However, if you believe the math in the study, it does suggest that the fixed expenses can be at most 2% to be safe (1.8% in 2010). So, if a retiree in 2010 decided they can live on 4%, they really should be able to tighten their belts by a factor of ~2 in "bad" times according to the authors...

Actually, even more strongly, if 2% is the constant max SWR, then your tight years and spend-thrift years may need to average around 2% with the flexible plan as well, or at least it seems like a reasonable starting point (instead of 4%)... so, perhaps the implication then is that during good times you have to live on less than 2%, and during good times on more than 2% but you have to ensure it somehow averages out to something close to 2%? Well, probably a bit more than 2% since you get positive effect from tightening when your portfolio is doing bad, but I doubt this positive effect would get you to even 3%, let alone 4%... ?

If I follow the logic of the study, it's advantage over FIREcalc is that it explains why you get what you get in FIREcalc based on the outside economic factors at the time of retirement, and thus can better predict what you would get if you were to start your retirement today by taking both history and current conditions into account.
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Old 10-16-2011, 03:17 PM   #23
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Unless I'm overlooking something, I don't think it matters what your initial draw rate is for a short period of time, assuming you can realistically get back to a 4% draw rate once Social Security, pension or other sources of income kick in. For example, I have $1 million dollars and I pull $60,000 (or 6%) at age 60. Then I do the same, or increase, the w/d for inflation at 61, 62, etc until age 66 when Social Security starts. Now let's say I only have $600,000 left at age 66 but I still need $60,000 but Soc Sec covers $36,000 so I only need $24,000 (4% of $600,000) from the portfolio I think that still works. I don't think it's any different than retiring at at 66 with $600,000 and applying for Social Security immediately. I've been thinking about this issue lately as well, so if someone can catch a flaw in my thinking please jump on it.
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Old 10-16-2011, 03:50 PM   #24
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Unless I'm overlooking something, I don't think it matters what your initial draw rate is for a short period of time, assuming you can realistically get back to a 4% draw rate once Social Security, pension or other sources of income kick in. For example, I have $1 million dollars and I pull $60,000 (or 6%) at age 60. Then I do the same, or increase, the w/d for inflation at 61, 62, etc until age 66 when Social Security starts. Now let's say I only have $600,000 left at age 66 but I still need $60,000 but Soc Sec covers $36,000 so I only need $24,000 (4% of $600,000) from the portfolio I think that still works. I don't think it's any different than retiring at at 66 with $600,000 and applying for Social Security immediately. I've been thinking about this issue lately as well, so if someone can catch a flaw in my thinking please jump on it.
It seems to me that the more you draw up front the more vulnerable you are to a bad sequence of returns. But the sequence problem exists for everyone -- it is just amplified if the draw is higher.
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Old 10-16-2011, 03:52 PM   #25
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Unless I'm overlooking something, I don't think it matters what your initial draw rate is for a short period of time, assuming you can realistically get back to a 4% draw rate once Social Security, pension or other sources of income kick in. For example, I have $1 million dollars and I pull $60,000 (or 6%) at age 60. Then I do the same, or increase, the w/d for inflation at 61, 62, etc until age 66 when Social Security starts. Now let's say I only have $600,000 left at age 66 but I still need $60,000 but Soc Sec covers $36,000 so I only need $24,000 (4% of $600,000) from the portfolio I think that still works. I don't think it's any different than retiring at at 66 with $600,000 and applying for Social Security immediately. I've been thinking about this issue lately as well, so if someone can catch a flaw in my thinking please jump on it.
I'd say it partially depends on what Mister Market does while you are accelerating the depletion. If it picks that time to go south and stay south, it makes it less certain that the 4% will be as much as you'll need to be once other income sources kick in.
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Old 10-16-2011, 03:59 PM   #26
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Unless I'm overlooking something, I don't think it matters what your initial draw rate is for a short period of time, assuming you can realistically get back to a 4% draw rate once Social Security, pension or other sources of income kick in. For example, I have $1 million dollars and I pull $60,000 (or 6%) at age 60. Then I do the same, or increase, the w/d for inflation at 61, 62, etc until age 66 when Social Security starts. Now let's say I only have $600,000 left at age 66 but I still need $60,000 but Soc Sec covers $36,000 so I only need $24,000 (4% of $600,000) from the portfolio I think that still works. I don't think it's any different than retiring at at 66 with $600,000 and applying for Social Security immediately. I've been thinking about this issue lately as well, so if someone can catch a flaw in my thinking please jump on it.
I think that will work if you think of it as a target of $600k to fund $24k/yr starting at age 66.

Then you need to have 6 years of expenses ($400k) in low risk places place such as CD's, I-Bonds, short term bond funds, munis etc. to RE at 60.
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Old 10-16-2011, 04:04 PM   #27
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By the time you get to age 66 the original 60K of expenses is elevated to approx 72K (assuming 3% inflation/yr). Deducting 36K for social security leaves 36k required from the portfolio. dividing by 0.04 yields approx 893K but the actual portfolio at age 66 is 600K so there is a disconnect.
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Old 10-16-2011, 04:07 PM   #28
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By the time you get to age 66 the original 60K of expenses is elevated to approx 72K (assuming 3% inflation/yr). Deducting 36K for social security leaves 36k required from the portfolio. dividing by 0.04 yields approx 893K but the actual portfolio at age 66 is 600K so there is a disconnect.
The SS estimate one gets from the SS website is in today's $, so you could expect SS payments to also rise with inflation, but I get your point about the needed 60k/yr rising with inflation also.
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Old 10-16-2011, 06:31 PM   #29
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Very true, inflation is important so I didn't mean to overlook that issue. I guess was I was trying to get at was if the draw rate at some future date dropped to 4% of that future value because of a new source of income, isn't that pretty much just as safe as retiring now and drawing 4% immediately? It's like I just retired again and got to restart the clock. Point well taken on what happens if the market doesn't cooperate; what if you need to draw 5% b/c the portfolio is less than you expected it would be 5 years from now. That seems like the biggest difference (and risk)... because if you FIRE today and draw 4%, the theory is that you could maintain that w/d rate (+infl) even if the market has a downturn... b/c it builds in those down years, correct?
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Old 10-16-2011, 07:19 PM   #30
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Hi Nords, I am not following your second flaw. Where does the math suggest 5-6% withdrawal? I get a sense that it's related to first flaw you mentioned however (i.e. flexible spending is not accounted for).

Regarding the first flaw, I don't see it as a big flaw for the following reason. Imagine your expenses consisting of 2 parts - fixed part and flexible part. Fixed part is what you MUST spend to live on; i.e. bare-minimum expenses like shelter, food, health, necessary repairs, insurance, etc.. Second part is flexible-expenses - not must-haves, but nice-to-haves that can be cut during recessions, perhaps some hobbies, going out, and such.

What you are saying is that the study does not account for these two categories where second set of expenses could vary from $0 to $X. However, if you believe the math in the study, it does suggest that the fixed expenses can be at most 2% to be safe (1.8% in 2010). So, if a retiree in 2010 decided they can live on 4%, they really should be able to tighten their belts by a factor of ~2 in "bad" times according to the authors...

Actually, even more strongly, if 2% is the constant max SWR, then your tight years and spend-thrift years may need to average around 2% with the flexible plan as well, or at least it seems like a reasonable starting point (instead of 4%)... so, perhaps the implication then is that during good times you have to live on less than 2%, and during good times on more than 2% but you have to ensure it somehow averages out to something close to 2%? Well, probably a bit more than 2% since you get positive effect from tightening when your portfolio is doing bad, but I doubt this positive effect would get you to even 3%, let alone 4%... ?

If I follow the logic of the study, it's advantage over FIREcalc is that it explains why you get what you get in FIREcalc based on the outside economic factors at the time of retirement, and thus can better predict what you would get if you were to start your retirement today by taking both history and current conditions into account.
I'm just suggesting that having to withdraw 6% in the first five years of an ER isn't much different than having to draw 6% in the next five years of ER, although the first will deplete the portfolio a tad more. Sequence of returns does make a difference, but retirements can start at a higher withdrawal rate as long as (1) they make it up somewhere down the road and (2) the long-term result is somewhere around the 4% SWR overall.

The procedure we all know starts at 4% and raises it for inflation, even though in a few years (with a bear market) that year's withdrawal may be as much as 6-7%. The math isn't much different whether that happens first or later. Of course nobody wants to retire, take out 6% the first year, and start hoping for a bull market to pull their portfolio out of the danger zone. That's why Bengen & the Trinity Study started at 4%.

The first flaw is only a serious flaw if it keeps you in the workplace longer than it should. In other words, if you assume that you have to be 100% safe based on an algorithm which spends the same amount every year, then 99.9+% of the time you're going to have money left over when you die. I believe the study is saying that all expenses over the entire life of the spending period have to stay below an overall withdrawal rate of 2%. In my opinion that is based on an assumption that the ER is spending the same amount every year (which we all know is not reality). The assumption is wrong so the SWR is too low.

But, hey, show me the text in the study where it suggests that fixed expenses have to be 2% and "variable" expenses can be higher. More to the point, let's try to figure out how to design a budget around that constraint.
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Old 10-18-2011, 10:02 AM   #31
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I'm just suggesting that having to withdraw 6% in the first five years of an ER isn't much different than having to draw 6% in the next five years of ER, although the first will deplete the portfolio a tad more. Sequence of returns does make a difference, but retirements can start at a higher withdrawal rate as long as (1) they make it up somewhere down the road and (2) the long-term result is somewhere around the 4% SWR overall.

The procedure we all know starts at 4% and raises it for inflation, even though in a few years (with a bear market) that year's withdrawal may be as much as 6-7%. The math isn't much different whether that happens first or later. Of course nobody wants to retire, take out 6% the first year, and start hoping for a bull market to pull their portfolio out of the danger zone. That's why Bengen & the Trinity Study started at 4%.

The first flaw is only a serious flaw if it keeps you in the workplace longer than it should. In other words, if you assume that you have to be 100% safe based on an algorithm which spends the same amount every year, then 99.9+% of the time you're going to have money left over when you die. I believe the study is saying that all expenses over the entire life of the spending period have to stay below an overall withdrawal rate of 2%. In my opinion that is based on an assumption that the ER is spending the same amount every year (which we all know is not reality). The assumption is wrong so the SWR is too low.

But, hey, show me the text in the study where it suggests that fixed expenses have to be 2% and "variable" expenses can be higher. More to the point, let's try to figure out how to design a budget around that constraint.
My understanding of the study is as follows. Older studies looked at all periods they could find in US and found that in 96% of cases 4% would suffice. Effectively, older studies gave equal weight to all prior periods. (Analogous to FIREcalc)

This study looked at what might explain differences in SWR based on economic factors. So instead of looking at all prior periods and giving them equal weight, you can better predict which prior periods are more applicable to current situation.

So, my understanding of their lower number is NOT because of increase from 96% to 100% success, but rather because of concentrating on relevant economic conditions so instead of equal-weighting historical numbers, they can only look at applicable ones.

I assume your #2 statement of "the long-term result is somewhere around the 4% SWR overall" is based on Trinity and like studies. This one brings new perspective as I understood and described it above. Thus, instead of starting your planning with 4% Trinity study, 2010 retiree may want to start with the more applicable / likely 1.8% in this one...

Quote from the article:
Quote:
By 2011, countless current and prospective retirees have relied on the tables of success rates provided by the Trinity study, which was recently updated in the April 2011 Journal of Financial Planning by Cooley, Hubbard, and Walz (2011). They show, using rolling periods from the historical data, the success rate for various fixed and inflation-adjusted withdrawal rates using various asset allocations and for various assumed retirement lengths. Though results vary by expenditure strategies, asset allocation, and allowances for potential failure, the basic idea for this study’s users can be provided with an example. A retiree plans for 30 years of inflation-adjusted withdrawals and decides on a 50/50 strategic asset allocation of stocks and bonds in retirement. Using the study’s Table 2, the retiree learns that a 4 percent withdrawal rate worked in 96 percent of the 30-year rolling periods from the historical data. If our previously mentioned retiree decided this was a reasonable success rate and settled on using 4 percent for her withdrawal rate (assuming, of course, that her desired retirement spending needs were not less than 4 percent), the 1921 retiree would only obtain a withdrawal amount equal to 28.9 percent of the withdrawal amount enjoyed by the 2000 retiree, who had accumulated 3.46 times as much wealth.

An Alternative Perspective

Should both the 1921 retiree and the 2000 retiree follow the traditional advice exemplified here by using a 4 percent withdrawal rate? In the May 2011 Journal of Financial Planning, Pfau (2011a) suggests that the answer is no. Rather, by linking the accumulation and retirement phases together, it becomes clear that “the lowest sustainable withdrawal rates (which give us our idea of the safe withdrawal rate) tend to follow prolonged bull markets, while the highest sustainable withdrawal rates tend to follow prolonged bear markets.” <clip> The present study fills the gap by extending the underlying framework in Pfau (2011a) regarding the effects of bull and bear markets to consider whether new retirees may be able to predict their sustainable withdrawal rate given the market conditions facing them at their retirement date.
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Old 10-18-2011, 10:45 AM   #32
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Thus, instead of starting your planning with 4% Trinity study, 2010 retiree may want to start with the more applicable / likely 1.8% in this one...
Not necessarily.

Like Nords commented on, you also have to allow for future income streams, not being "active" on the date of retirement.

For those that retire and on the same date start all their other income streams (e.g. pensions, SS, SPIA's, etc.) that 4% (or less, whatever suits your needs) is a guide.

For those that retire before those income streams come "on-line" (as I/DW, and many on this board are), your annual retirement portfolio withdrawls can/may exceed that "magic 4%" (or lower, adjusted for your own view of the future).

In reality, most ER folks will not know their "true" WD rate long after they retire and see their total income vs. their retirement portfolio withdrawls.

BTW, for me, it's a period of 11 years (age 59 at retirement, and age 70 at initial SS benefits). Eleven years is a long time. While I'm much better off than my forecast of 4.5 years ago (as measured as of my plan, on that date vs. actual expenditures in the years hence), there is no guarantee that the plan would meet reality. Luckily, it has but I still know that I may need to make adjustments along the way (in expenditures) if reality does not meet forecast.
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Old 10-18-2011, 10:54 AM   #33
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Thus, instead of starting your planning with 4% Trinity study, 2010 retiree may want to start with the more applicable / likely 1.8% in this one...
IOW, delay retirement until after age 75...
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Old 10-18-2011, 11:42 AM   #34
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IOW, delay retirement until after age 75...
That doesn't sound like fun!

Maybe some might want to kick up the LBYM and retire on a little lower percentage, though, after checking the Daily Disaster (oops, I meant the financial pages) to see how the recession is doing... and considering their computations of the infamous Sleep-At-Night Percentage too.
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Old 10-18-2011, 12:09 PM   #35
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My understanding of the study is as follows. Older studies looked at all periods they could find in US and found that in 96% of cases 4% would suffice. Effectively, older studies gave equal weight to all prior periods. (Analogous to FIREcalc)
This study looked at what might explain differences in SWR based on economic factors. So instead of looking at all prior periods and giving them equal weight, you can better predict which prior periods are more applicable to current situation.
So, my understanding of their lower number is NOT because of increase from 96% to 100% success, but rather because of concentrating on relevant economic conditions so instead of equal-weighting historical numbers, they can only look at applicable ones.
One of the perpetual complaints about FIRECalc (and other historical calculators) is the lack of data. We're trying to run ERs of at least 30 years (maybe even 40-60 years) and we have less than 150 years of data... if that. (Some of today's asset classes didn't really get good performance data until the 1970s.) Kinda hard to run enough projections with "actual" market data when your ER is already at least 20% of the sample.

So the authors are proposing to remove all the "irrelevant" data from the analysis to come up with the years that really matter, thereby removing even more information. Maybe removing it is a good idea, but it seems awfully pessimistic to project that the future is always going to be no better than the past.

I don't think a statistician would be able to extract a very high confidence level from this data mining.

Unbeknownst to the authors, their research is complicated by a notorious Internet troll who's been espousing "valuation-based ER" since the late 1990s. This particular character, whose poster name is spelled h-o-c-u-s, has allegedly been 100% cash since 1996 awaiting the right market conditions to return to equities. Unfortunately he's also been ER'd on that portfolio, and it's not going well. He claims that the "real SWR" is also a lot lower than 4%. I'm not comparing the researcher's study or your analysis to this troll, but we always run into this problem when we're trying to have a decent discussion about it.

But let's set aside the data and the trolls for a minute to ask a more practical question. Let's say that you've determined you're going to work until you drop achieve a 1.8% SWR. One day you notice that your portfolio is big enough (and returning enough) for you to ER under a 4% Trinity Study SWR. A year or two later you notice that you could retire on a 3% withdrawal. A few years later you notice that it's 2.5%. You run the data provided by this study's authors (who presumably are also still working) and determine that you have another five years in the workplace until you reach your 1.8% goal.

When do you (1) cut back to part time, and (2) ER?
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Old 10-18-2011, 12:42 PM   #36
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....... inflation is important
Ding, Ding, Ding!

There it is! The youbet understatement of the day! You're the winner!

Motivated by the fact that the inflation of the 70's was as destructive to FIRE portfilios as the Great Depression (or more so according to some), I've run a number of FireCalc trials assuming various inflation scenarios and have come to the conclusion that potential ER types underestimate the impact of inflation.

I retired into the current recession. Well, slightly before it hit. I'd rather have done that than retired into a few years of 10% - 12% inflation. Down markets usually correct. Inflation seldom corrects. The prices you pay for life's necessities will be permanently higher for the rest of your life. Deflation (inflation correction) is very, very rare.
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Old 10-18-2011, 01:01 PM   #37
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...I've run a number of FireCalc trials assuming various inflation scenarios and have come to the conclusion that potential ER types underestimate the impact of inflation.
While I understand your comment on inflation, may I suggest that its impact is somewhat muted by your income sources?

For those who have income from such sources of SS, COLA adjusted pensions or SPIA's, the impact would be much less.

Yes, I still have my WIN button so I know where you are coming from and at the time, my employer was giving generous salary COLA adjustments. During that time inflation meant little to DW/me. We didn't have to apply for a note/mortgage at the going rate of +18%, nor did we have the money to purchase CD's at a 20% rate (special opportunities of the time).

It's just another part of the retirement income equation that must be considered, but not necessarily one that "breaks the bank", IMHO.
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Old 10-18-2011, 01:02 PM   #38
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Not necessarily.

Like Nords commented on, you also have to allow for future income streams, not being "active" on the date of retirement.

For those that retire and on the same date start all their other income streams (e.g. pensions, SS, SPIA's, etc.) that 4% (or less, whatever suits your needs) is a guide.
That's different. Clearly if you have future income streams, then you don't need to worry about covering that part of future expenses. Question that Nords and I are discussing here is whether 4% should be the guide or more like 2% given the new research. In either case, you would only need cover parts that are not already covered by future streams - e.g. use your guide number + X% because you know that in few years you will only need your guide number - Y% due to additional income stream to cover the expenses... but here the question is not about what X and Y should be but what your starting guide number should be...

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One of the perpetual complaints about FIRECalc (and other historical calculators) is the lack of data. We're trying to run ERs of at least 30 years (maybe even 40-60 years) and we have less than 150 years of data... if that. (Some of today's asset classes didn't really get good performance data until the 1970s.) Kinda hard to run enough projections with "actual" market data when your ER is already at least 20% of the sample.

So the authors are proposing to remove all the "irrelevant" data from the analysis to come up with the years that really matter, thereby removing even more information.
I agree with the problem you mentioned. But if it looks like some data is more relevant than other, then would not it make sense to give it more weight? There is a lot of other "irrelevant" data we can add just so we can have more data, but that would not necessarily improve the predictive quality of a new 2%,4%, or an X% rule.

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Maybe removing it is a good idea, but it seems awfully pessimistic to project that the future is always going to be no better than the past.
They are just saying that's what the data shows. It does not mean future will not be better. It does not mean the future will not be worse. There is no extra pessimism in their call-it-2%-rule than in the 4%-rule. Neither assume future is always going to be worse than the past. Both just indicate what worked in the past and it's up to the retiree to decide how much weight to put in these findings going forward. Just like one can disregard 2% study, they can disregard 4% one, or 6% one, or all of them.

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I don't think a statistician would be able to extract a very high confidence level from this data mining.
I hope so... but I have not heard that level of analysis. Not sure if there are statisticians here or elsewhere that would analyze this work, but I would be interested in outcome.

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[...] You run the data provided by this study's authors (who presumably are also still working) and determine that you have another five years in the workplace until you reach your 1.8% goal.

When do you (1) cut back to part time, and (2) ER?
This is the same question as with 4% goal. Nothing different. If you are five years away from 4%, when do you cut back to part time and ER? If one tends to believe one study over another because it produces an easier goal, that's up to them. Perhaps they would even be happier with another study which finds 7% SWR is quite reasonable. What I want to know is which studies have most merit. Unfortunately, this study produced lower SWR (for now - perhaps in 10 years it will be higher than 4% by the way). But their approach seems to have common sense and it also seems to make sense to me why their study is more believable than the older 4% Trinity one. If there is a basic flaw in their study I have not heard one yet. Perhaps your note about a statistician finding a flaw would pan out - I just have not seen such rebuttal yet and would love to see it.
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Old 10-18-2011, 01:16 PM   #39
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This is the same question as with 4% goal. Nothing different. If you are five years away from 4%, when do you cut back to part time and ER? If one tends to believe one study over another because it produces an easier goal, that's up to them. Perhaps they would even be happier with another study which finds 7% SWR is quite reasonable. What I want to know is which studies have most merit. Unfortunately, this study produced lower SWR (for now - perhaps in 10 years it will be higher than 4% by the way). But their approach seems to have common sense and it also seems to make sense to me why their study is more believable than the older 4% Trinity one. If there is a basic flaw in their study I have not heard one yet. Perhaps your note about a statistician finding a flaw would pan out - I just have not seen such rebuttal yet and would love to see it.
Sorry, I thought you'd be able to pin a tail on an answer those two questions using units of years or percentages. Seemed pretty straightforward to me. But, hey, you're the one who's working-- and you have to find the answer that works for you.

Personally, I was comfortable retiring at 4% because the preponderance of the studies available in 2002 were in the 4% range. If the military had let me go part-time at 5% I would have done that too. I knew that we could cut our spending to the bone during a recession or that I could even get a job to smooth over the rough patches. If any-- so far so good.

There's my answer. It'll be interesting to see what you decide to do. Personally I think you're locked up somewhere between paralysis analysis and "just one more year" syndrome. But that's just my opinion, and yours is the one that matters.
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Old 10-18-2011, 01:27 PM   #40
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There's my answer. It'll be interesting to see what you decide to do. Personally I think you're locked up somewhere between paralysis analysis and "just one more year" syndrome. But that's just my opinion, and yours is the one that matters.
Sometimes, one has to have confidence there is "water in the pool" before diving in.

And sometimes, that can't be known unless you actually dive in ...

There are no "absolutes" in life, IMHO. Do the best you can, and proceed. One can stay forever on the side of the pool, or the diving board.

"What if" is not a plan, but preparing for any actual outcome, is ...
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