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Old 08-25-2015, 03:06 PM   #41
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Originally Posted by mathjak107 View Post
kitces says close but the 2000 retire may still be a failure point while the 1929 retire was not . the length of the recovery in 2000 is the main difference .

in dollar terms the 1929 retiree recovered pretty quick since consumer prices fell 18% and dividends were double digits .
"Anything is possible" so 2000 could still be a failure point over 30 years, but exactly where did Kitces suggest that's more probable than historic real returns? Or that 2000 retirees have more reason to be concerned than their predecessors? He seemed to conclude that while no one can project 30 years, 2000 and 2008 still haven't broken the rule so far, real or inflation adjusted. From your link:
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The bottom line, though, is simply to recognize that even market scenarios like the tech crash in 2000 or the financial crisis of 2008 are not ones that will likely breach the 4% safe withdrawal rate, but merely examples of bad market declines for which the 4% rule was created. In turn, this is an implicit acknowledgement of just how conservative the 4% rule actually is, and how horrible the historical market returns really were that created it. In the end, this doesn’t necessarily mean that the 4% rule is ‘sacred’ and that some future market disaster couldn’t be bad enough to undermine it (and of course, it can/should still be adopted for individual circumstances like a longer/shorter time horizon, the impact of taxes, the impact of fees and other investment costs, etc.). But when the Great Depression and the stagflationary 1970s couldn’t break it, and the crash of 1987 and even the global financial crisis of 2008 were just speed bumps, it will take a lot to set a new safe withdrawal rate below 4%!
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Old 08-25-2015, 03:24 PM   #42
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Originally Posted by mathjak107 View Post
here is kitces workup on the subject


https://www.kitces.com/blog/how-has-...sis/#more-7856
From the article, it appears to me kitces doesn't think 2000 retirees will have it worse than 1966 retirees and for now, they're just on par with 1929 retirees.
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Ultimately, the key point here is simply to recognize that the 2000 retiree is merely ‘in line’ with the 1929 retiree, and doing better than the rest. And the 2008 retiree – even having started with the global financial crisis out of the gate – is already doing far better than any of these historical scenarios! In other words, while the tech crash and especially the global financial crisis were scary, they still haven’t been the kind of scenarios that spell outright doom for the 4% rule.

Which means even the 2000 retiree isn’t yet below the ‘critical threshold’ that couldn’t simply be guaranteed for life, if depletion was a concern. In addition, a growing base of research suggests that retiree spending in real dollars tends to decline in later years – i.e., spending increases for retirees in their 70s and 80s don’t even keep pace with inflation – which means in practice a 2000 retiree today is probably even better off and spending even less as a current withdrawal rate than these calculations would suggest.
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Old 08-25-2015, 03:37 PM   #43
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i agree , if you already won the game why keep playing .

boy if i could live on 2% withdrawals i would be in cd's , short term bonds , tips and maybe 15% equity's .

but i can't , but if i could ha ha ha .

the problem i have is it isn't percentages that get me it is dollars .

being down 10% when you are still accumulating money may barely be a blip in dollars compared to when you are at your peak in savings .

a 100k swing in one day is not even comprehensible to me at this stage after yesrdays ride .

i am realizing i want to reduce this ride .

I feel for any very recent retirees. I was VERY acutely aware of my finances the first year in. And I had no reason as I live off a pension. But even then it was worrying about my stash and whether I would actually GET that monthly check for not working. On the good side though Math you do have SS around the corner as a ballast.
I decided I was going to bail quite a bit out of my Total Stock and then realized I forgot I would lose a 2k income tax credit if I did, so I just sold 10k worth to keep me under the number. And I thought I was going to sell and gain back some today then the turd market went negative at the end of the day so I lost more.


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Old 08-25-2015, 04:16 PM   #44
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Interesting, for me, suboptimization of a very conservative AA (say 30/70) would bother me a lot more than the volatility of a more aggressive AA (like 70/30).
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Old 08-25-2015, 05:31 PM   #45
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Sorry, Mathjak107, gallows humor here, but this correction does seem auspiciously timed with your retirement. I'd start feeling a little paranoid myself!

Chances seem good to me that this will remain just a correction, and be a fleeting event, but then, what do I know?

Of course, I retired in August of 1999.
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Old 08-25-2015, 09:48 PM   #46
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mathjak107 referenced an article by Michael Kitces, a detailed review of the 4% rule compared to four other bad market sequences.

Today I listened to a Podcast interview of Dr. Wade Pfau. He mentioned his work with Michael Kitces on a rising glide path investment strategy where you start at 30/70 (stocks/bonds) and raise your equity exposure gradually up to 60/40.

This strategy mitigates the impact of poor early market returns.

Check out their work on this topic.
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Old 08-25-2015, 10:10 PM   #47
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Originally Posted by Sycamore View Post
mathjak107 referenced an article by Michael Kitces, a detailed review of the 4% rule compared to four other bad market sequences.

Today I listened to a Podcast interview of Dr. Wade Pfau. He mentioned his work with Michael Kitces on a rising glide path investment strategy where you start at 30/70 (stocks/bonds) and raise your equity exposure gradually up to 60/40.

This strategy mitigates the impact of poor early market returns.

Check out their work on this topic.
We have had several discussions on that very investment strategy - when it was first published, and several since.
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Old 08-25-2015, 10:24 PM   #48
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here is kitces workup on the subject

https://www.kitces.com/blog/how-has-...sis/#more-7856
Thanks for a very good article!

Regarding the Year 2000 retiree, it is shown that a $1M portfolio of 60/40 AA and a WR of 4% would result in about $900K nominal at this point 15 years later. However, the cumulative inflation is 41% (according to another source), and the author acknowledges that when he says that the inflation adjusted WR has grown to 6.2% of current portfolio value.

Now, if the retiree can just keep up with inflation, he will deplete his stash in 100%/6.2% = 16 years. So, he might just make his 30-year retirement, having spent 15 years of it already.

If our retiree is an early retiree one, and wants to live more than 16 years, he will hope to beat inflation, or cut back his spending. Or can he buy an annuity?

I did a quick look, and for his $900K at this point, he can get a joint annuity that pays $48.9K/yr if the couple is 60 year old, or $55.6K/yr if they are both 70. The 2nd number is still lower, but closer to the inflated 4% initial WR ( 1.41 x $40K = $56.4K ).

PS. I forgot to mention that the annuity is not COLA'd, so does not look too good.
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