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View Poll Results: 4% withdrawal
yes 34 53.13%
no 20 31.25%
not sure 10 15.63%
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Old 07-12-2008, 07:45 PM   #21
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Nords can't be talking about Ohio because here they use "you'ns" instead of "all y'all."
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Old 07-12-2008, 08:00 PM   #22
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During the last trip we got awful tired of hearing "All y'all's from Hawaya, and yer vacationin' hee-yur?"
I doubt if you heard that in South Bend.
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Old 07-12-2008, 08:03 PM   #23
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[quote=lazygood4nothinbum;682266]my brother & sil are a little upset with me that i'm not on vacation with them right now. but i just can't justify to myself spending any more money than need be when times don't look so good. to make this even more absurd, they were paying for everyone; it wouldn't have cost me a dime.

LG4NB, you are holding the reins too tight if you're uncomfortable going on a free family outing.
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Old 07-12-2008, 08:23 PM   #24
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There is this here psych er logical problem. In my heart I'm a cheap bastard. After 2006's 5% variable and not getting any younger - I'm trying to keep my spending up in the 4-5% of portfolio range but my subconscious is with pssst Wellesley - don't spend more than you are getting in dividends and interest (3 to 3.5%). Note that I own Target 2015 not Wellesley.

My comfort zone seems to be running less than 4% - on paper(IMHO) it should be more and at least it's more than my checked bursts of 'extreme frugal' of the past(early ER in the 90's).

heh heh heh - hormones!, behavioral, what the heck .
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Old 07-12-2008, 08:34 PM   #25
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Once I make the 4% commitment, I would think I would be comfortable with the decision, although I would still avoid trying to spend the 4% if I didn't have to.

Only 3% is required to meet my post-retirement budget if I don't include any travel and entertainment. But, there are so many free or almost-free things I can do to entertain myself and my family that I don't think we would miss an expensive vacation. A day at a local beach, a day at the many museums with a free pass from the library, a picnic at a local park, going to a minor league baseball game (Go Pawsox! Go Spinners!), going to local free concerts, weekly Boston North-End feasts, fishing, hosting a small BBQ for family and friends, fall foliage watching, bird watching, free ice skating in the winter, or even just playing a family board game.
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Old 07-12-2008, 09:01 PM   #26
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Just curious, where was that? I know you didn't vacation in Mississippi.
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I doubt if you heard that in South Bend.
Believe it or not, it was indeed South Bend. But the Notre Dame student was from Texas.

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Nords can't be talking about Ohio because here they use "you'ns" instead of "all y'all."
Pittsburgh, too (where I grew up) at Carnegie-Mellon. About day #2, when we were with one of my high-school friends, our kid looked over at me and said "Dad, why are you talking like that?"

We also get it a lot at Annapolis and in Florida (Orlando/Tampa). But at Anaheim's Disneyland, particularly at the Castle Inn & Suites, you're likely to find two dozen locals hanging out in the hallways. We all understand the attraction of traveling thousands of miles for a Disney resort since there isn't one in Hawaii. Yet.

But I guess this year it's a stay-cation.
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Behavioral finance
Old 07-12-2008, 10:46 PM   #27
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Behavioral finance

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Great point. It goes to show that the best plans on paper are only good as the emotional resolve to follow them.

The 4% rate was tested to weather the Depression of the 1930s and the low-growth, inflationary 1970s. So if someone believed in 4% on that basis, I would submit that they have to be convincing themselves that this will be worse than BOTH of those events in order to justify dropping the rate if they believed it survived those previous lousy markets. Either that or they are discovering that fear trumps reason.

IMO, it's a perfect example of emotions like greed and fear clouding rational thinking.

If nothing else, the 4% theory is being shown as just another general truism that people abandon in bad and uncertain times -- *exactly* the kind of times that number was created to survive.
I agree with this post. The subconscious mind (according to the book Think and Grow Rich) overrides rational thought when one is "losing money" and the emotional response is to sell no matter how low the price (which is otherwise known as "capitulation"). But through autosuggestion and preparation, one can condition one's subconscious mind to behave differently when under fire from a declining market (or under temptation from a rising market).

That is why value investors are taught to stay within their circle of competence and to know what the value is of the fractional ownership interests in the wonderful businesses (i.e., securities) they are buying. They will be able to tell the difference between a "falling knife" and "fallen angel" and have the confidence to react accordingly (i.e., stay away from a falling knife and consider buying more of a fallen angel if appropriate in terms of one's overall portfolio).

Another aspect of one's reaction to market conditions is one's liquidity situation. Money needed within the next five years for living expenses should not be in the stock market because the market can be down for long periods of time. If one needs to cash out investments within the next few weeks or months to pay living expenses and the market is way down, that is extra stress one can do without (i.e., it's easier to sleep well when you don't need to sell any of your securities for another five years when the market is tanking).

All of this takes planning ahead of time. Think through various market scenarios and write down how you would want to react. Everyone thinks they will be able to buy low if the market tanks (because they want to "buy at the bottom") and be able to sell right before the peak of the bubble (because they want to "sell at the top"). This is much easier said than done, but mentally rehearsing one's responses to various scenarios takes some of the emotion out of the situation when the actual situation happens.

Also, think of this market condition as a dress rehearsal for its next occurrence. While every bear market is different, they do have one thing in common -- the ability to cause investors to make serious mistakes that are driven by emotional reactions to financially stessful situations. But you can condition yourself to be Mr. Spock cool (or Mr. Buffett cool) to these kinds of situations and take advantage of them by being on the other side of the transactions of those people who are capitulating due to their emotions.
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Old 07-13-2008, 09:37 AM   #28
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Thanks everyone for your posts . I'm still way below the 4% but I am going to ramp it up a bit with some home improvements . I am going to sell at some point so I need to repaint and update a few rooms. This is my first full year in retirement so I'm still adjusting .
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Old 07-13-2008, 09:46 AM   #29
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Its probably prudent to cut back a little when times are tough. I certainly wouldnt be pulling extra money out just to meet the 4% guideline.

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Keep in mind that this model survived the Great Depression and the high inflation bad market of the 1970s. We tend to have short memories about things like this that make us think these are the worst and the scariest times ever.

Having said that, just because "4% plus inflation for life" hasn't ever failed with a 60/40 portfolio doesn't mean it *can't* fail. Then again, there are no guarantees for *any* level.
Yeah, but many of those successful runs almost failed or came down to extremely low balances. I think the good question here is whether people would be brave enough to keep taking their 4% when they were down 40-50-60%. Heck, just a little bear market has everyone eying the windows.

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What I find really funny is that for years anyone who suggested on these forums that valuation of stocks mattered in choosing a withdrawal rate was stoned.
When did that happen, because I dont remember it? I do remember one guy who mentioned valuations as part of his trolling routine. Since that guy was banned by 12 other forums and two of them collapsed as part of his antics, it seems like kicking him off was reasonable and prudent.

That guy also proposed a valuation system that would have kept people out of the stock market since 1993.

How would that have worked out for you folks?
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Old 07-13-2008, 10:31 AM   #30
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I voted yes, but I'm following the 4%/95% rule that Bob Clyatt advocates.

I'm in my first few months of ER, so this should be a good test of my resolve.
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Old 07-13-2008, 10:50 AM   #31
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J(...) but many of those successful runs almost failed or came down to extremely low balances. I think the good question here is whether people would be brave enough to keep taking their 4% when they were down 40-50-60%. Heck, just a little bear market has everyone eying the windows.
Other than bravery, there are aesthetic aspects to consider. Maybe I could afford to take some maximum SWR each year for life, but I like seeing that my nestegg is over "X dollars" in size.

If I cut back a little during bear markets while still living the good life, and that helps the nestegg recover more quickly, that would make me happy. It might or might not be strictly NECESSARY, but it might be something that makes me happy.

Doesn't mean I'm chicken or about to jump out of a window - - just means that a nice, plump nestegg is a beautiful sight to behold.
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Old 07-13-2008, 10:52 AM   #32
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Nords can't be talking about Ohio because here they use "you'ns" instead of "all y'all."
Southern Ohio?
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Old 07-13-2008, 11:33 AM   #33
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I voted yes, but I'm following the 4%/95% rule that Bob Clyatt advocates.
I'm in my first few months of ER, so this should be a good test of my resolve.
You'll stay out of trouble if you're ramping up your spending for home improvement instead of Poconos trips...
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Old 07-13-2008, 03:00 PM   #34
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Notmuchlonger - NW Ohio.
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Old 07-13-2008, 03:23 PM   #35
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You'll stay out of trouble if you're ramping up your spending for home improvement instead of Poconos trips...
Ramping up? I'll probably be ramping down my spending.

Taking a part-time job or even a full time one for a while is not out of the question if DW and I get nervous... but we're not there yet.
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Old 07-13-2008, 04:21 PM   #36
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Notmuchlonger - NW Ohio.
So...lots of salmon then?
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