Book by Ben Stein and Phil DeMuth

I just finished reading "Yes, you can still retire comfortably" by Ben Stein and Phil DeMuth. As many of you may know, Ben Stein is a very smart guy who has a serious side as well as his TV/movie persona. Some time ago, he wrote another good book called "Financial Passages," which I still have on my bookshelf.

Lots of good advice. Most interesting to me is the section on withdrawal algorithms. The Stein-DeMuth algorithm is as follows: Compute an SWR, and withdraw this amount, adjusted yearly for inflation, for five years. At the end of the five year period, compute another SWR, and keep this one for the next five years, adjusted yearly for inflation. Some special provisions apply for retirements that get off to a bad market start.

The five-year reset introduces an element of feedback into the WD plan, as in Mr. Hebeler's algorithm callled "retirement autopilot," and the variations of the Hebeler algorithm that appear on his analyze.now web site.

The appendix to Stein and DeMuth shows how various WD algorithms worked for retirements that began in particularly difificult years including, for example, retirements that started in 1929. Also discussed were the performances over the same periods of the Galeno algorithm, one of the Gummy algorithms, and a number of others.

The feedback mechanism, whether it be Stein-DeMuth's or Hebeler's, seems to provide a little more security, and a little more juice, than straight SWR for N years.

In any case, I really enjoyed this new book . . .

HH

Whoops -- the web site for "autopilot" is analyzenow.com . . .

[shiny]

Setting different bugets for time periods does sound interesting. For example, if you thought you might do some part time work for a few years, then sell you house and travel for a few years, then buy a house, etc. etc.

Are those the types of things the book addresses, or is the SWR more based on how the market performs?

Based on market performance. Say you have 1,000,000 at the beginning of retirement, and determine, from charts in the book for a 50% stock 50% bond portfiolio, and a desire for 100% survivability over a 45-year lifespan, that you can draw out about 30,000 per year, for the first five years, adjusted for inflation in years 2-5. At the beginning of year 6, now with a 40-year life expectancy, and a portfolio of, say, 1,200,000, you might wd 3.1%, or 37,200 per year (adjusted for inflation in years 7-10), and so forth. On the other hand, if the portfolio were down to $900,000 at the beginning of year 6, the WD for years 6-10 would be 3.1% of 900,000, or 27,900 for years 6-10, adjusted for inflation in years 7-10. Hebeler's method does a year-by-year adjustment based on then-current portfolio value, with some smoothing, to minimize the abruptness of drops if the portfolio goes down.

HH

[TargaDave]

I've gotten through about half the book and also think the topics on withdraw strategies-algorithms are the most interesting. BTW they have a web site where they update their market value indicators (under the graphs tab). I don't think you can get much of a clear read from the current outputs but maybe that's just a trait of the current market, or the fact that those sorts of charts are futile 90% of the time.

http://www.stein-demuth.com/index.html#