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Old 01-27-2009, 11:05 AM   #21
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Mine did too. In fact, they drummed into me the idea of not touching one's anything.

Ha
That too.
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Old 01-27-2009, 12:10 PM   #22
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We can't help spending less than our 4% + Inflation allowance each year, due to the current market conditions, but my spreadsheet keeps track of the how much less. That amount goes in to the fun money column, to be spent in better times.
I retired in Sept. '08 but added the inflation rate to the 4% amount for '09. I expect a tax refund which will be about a month and a half PF withdrawal. I'll keep that amount and some other odd additions and savings as an emergency fund.
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Old 01-27-2009, 12:34 PM   #23
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I retired in 2000 and began a 4% WD rate. With the recent market downturn I am at 6% WD. Beginning next year I will collect SS and my WD rate will drop to 3.5% if my balance stays the same.

Going forward, I estimate I'll be around for another 25 years max, so if the market rebounds, I will have no problem taking a 5% WD in good years.
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Old 01-29-2009, 01:55 PM   #24
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The logic that the percentage should be adjusted with valuations is correct, but the idea that shares are currently cheap is wrong.

4% is the rate for someone who retires in an average year. Starting in the early nineties and ending last year, shares have been overvalued, so a valuation-adjusted rate for people retiring during that period would have been less than 4%. We are back at average valuations now, so 4% (not more) is the right figure now.
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Old 01-29-2009, 02:02 PM   #25
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The logic that the percentage should be adjusted with valuations is correct, but the idea that shares are currently cheap is wrong.
Depends on how you value the market.

Relative to historical levels, the 100-year trend line and some P/E measures, stocks are roughly at "fair value," down from "horrifically overvalued" 9 years ago.

But relative to current interest rates, stocks are very cheap. A 6% earnings yield looks a lot cheaper with 3% Treasuries than with 8% Treasuries.

In reality, anyone can cherrypick their favorite metric to make valuations look either insanely cheap or wickedly overvalued.
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Old 01-29-2009, 02:41 PM   #26
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Depends on how you value the market.

Relative to historical levels, the 100-year trend line and some P/E measures, stocks are roughly at "fair value," down from "horrifically overvalued" 9 years ago.

But relative to current interest rates, stocks are very cheap. A 6% earnings yield looks a lot cheaper with 3% Treasuries than with 8% Treasuries.

In reality, anyone can cherrypick their favorite metric to make valuations look either insanely cheap or wickedly overvalued.
My bible on the subject of valuation is "Valuing Wall Street." The book presents a thorough argument that there are two valid methods for valuing the stock-market, the q ratio and cyclically-adjusted PE's. They also review and demolish the arguments for alternative methods. If I recall correctly, they are particularly scathing about the idea that a comparison with bond interest rates tells you anything at all. (I think this valuation method falls into the category of what they sarcastically refer to as "stock-broker economics," completely spurious arguments whose only purpose is to convince people to buy shares. At different times different "stock-broker economics" arguments are deployed for that purpose. In fairness, I will say that I have seen such arguments deployed in serious newspapers, such as the Financial Times.)

Cyclically-adjusted PE is saying shares are fairly valued. Somewhat worryingly, revised figures recently released by the US federal government have caused the authors of "Valuing Wall Street" to revise their q ratio estimate to put shares at still 30% overvalued. Obviously the two measures should agree, so there is a fair margin of error involved. Still, what's a 30% discrepancy, when seen against the backdrop that shares were heading toward 300% overvalued in 2000?
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Old 01-29-2009, 03:02 PM   #27
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SEC yield(usually 3% minimum) of my portfolio in 'perceived hard times' and 5% variable when it's bon temps rolliere and party til you puke.

16th year of ER and not getting any younger.

Dat's kinda 4% give or take a warm hand grenade - or horsehoe.



I always thought it was a scream where these cats use computers/spreadsheets and deep analysis to come up with 4% - which just happened to be close to old thirty year portfolio's div/interest aka SEC yield in modern speak.

Heck - the Norwegian widow had that figured in 1948 - longhand, no 2 pencil using the back of an envelope waiting for her dividend checks by the mailbox.

Of course - after 1970 - we had pssst Wellesley.

heh heh heh -
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