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Re: Conundrum
Old 03-17-2005, 08:14 PM   #21
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Re: Conundrum

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There's also a third method called the "Pay Out Period Reset (POPR) Method.

http://www.retireearlyhomepage.com/popr.html

intercst
You say in that article that "Adopting this practice greatly reduces the likelihood that you'll have a large net worth at the end of the pay out period."

Isn't another way of saying that, adopting this practice greatly increases the likelihood that you'll have a negative net worth at the end of the pay out period?

If so, that may be a viable method, but also the most risky of the three methods.
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Re: Conundrum
Old 03-17-2005, 09:11 PM   #22
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Re: Conundrum

Quote:

You say in that article that "Adopting this practice greatly reduces the likelihood that you'll have a large net worth at the end of the pay out period."

Isn't another way of saying that, adopting this practice greatly increases the likelihood that you'll have a negative net worth at the end of the pay out period?

If so, that may be a viable method, but also the most risky of the three methods.
Only if you happen to retire at the start of a 30-year period that's worse than the Crash of 1929 and the Great Depression. As long as the future isn't worse than the past, the POPR allows you to maintain a withdrawal rate that was 100% survivable in all past periods, yet increase your withdrawals beyond the rate of inflation if your portfolio grows in value.

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Re: Conundrum
Old 03-18-2005, 03:07 AM   #23
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Re: Conundrum

Only if you happen to retire at the start of a 30-year period that's worse than the Crash of 1929 and the Great Depression.

What intercst means here by the phrase "a 30-year period that's worse" is a 30-year period that provides the stock investor worse returns. In order to determine what sort of return is likely, you need to look at two factors: (1) the possible returns sequences (you might get a lucky one, an average one, or an unlucky one); and (2) the retirement starting-date valuation level--even an unlucky returns sequences won't do too much harm if you start at low enough valuations, and even a lucky sequence may not help enough to pull you through if you start at extremely high valuations.

The intercst response begs the question. What we need to know is, What are the odds that the returns experienced from investors retiring today are going to be bad enough to cause busted retirements for those following the Pay-Out Reset Method recommended in the REHP study? The historical data says that, in the event stocks perform in the future as they have in the past, the odds are high.

It is possible that those using the REHP study will not experience busted retirements. But the odds that they will go bust are high in the event that stocks perform in the future as they have in the past. That's why Bernstein says that anyone using a conventional methodology SWR study to plan a retirement beginning today would be well-advised to "FuGeddaboutIt." The REHP study identifies what might fairly be termed the High-Risk Safe Withdrawal Rate (HRSWR).

That's not the same thing as the plain old Safe Withdrawal Rate (SWR), which is what intercst thought he was calculating when he prepared the study. It's something very different indeed. It's the opposite.
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Re: Conundrum
Old 03-18-2005, 05:13 AM   #24
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Re: Conundrum

Pssst - Wellesley

Hint - I own seven of their top ten stocks. Get a copy of Ben Graham's Intelligent Investor. Make sure you understand what 'your portfolio' is producing in income(divs/interest).

Then you can SWR, slice and dice, spreadsheet, debate to your hearts content.

Remember this - once you retire - real money is real money.

You never know - heck, like electricity, this computer, spreadsheet, retirement calc thing ala SWR or whatever may catch on.

Meanwhile - I'll stick with the Norwegian widow, De Gaul, and perhaps Bogle(still a rookie but he has promise).
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Re: Conundrum
Old 03-20-2005, 07:51 AM   #25
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Re: Conundrum

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If you are complete pessimist, though - you should not spend any money at all, until you are safely dead
Cutthroat: I think I'd rather spend it all to the point of becoming a burden to my children, and giving them an important "character building" lesson
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