haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I saw this guy Cotton mentioned in another thread and Googled him. Here is an interesting vignette which to me illustrates very well the complete absurdity of this entire SWR concept. Clearly FAs, no matter how they are compensated or how they present themselves, are mainly salespeople. If they were not FAs they would not likely be actuaries, they would be selling something else. Likewise with the academics in FA programs. Their main job is to come up with plausible, believable, and hence saleable stories to tell clients.
Wade Pfau's Retirement Researcher Blog: Dirk Cotton: Statisticians Make the Worst Clients
People here know this, although they usually do not hold it on page one of their memory bank. When members say, "of course if markets are very bad, no one would just go on spending as before", they are implicitly rejecting the SWR mantra. It however remains a talisman to allow a leap of faith, which is basically what early retirement is.
SWR usually works, I would guess, because it suggests a withdrawal rate that is more or less reasonable for moderate conditions, and conditions are usually not extreme.
But then, anything usually works as evidenced by the fact that we see very few oldsters pushing their shopping carts along looking for some hidey-hole to survive another night. An older person who has a modest income (usually solely SS) and is not a raving psychotic, or who does not insist on smoking or drinking in his room can find a short waiting list for subsidized senior housing that can be pretty attractive.
I know we need SWR as a handy shortcut and supporting fiction, but I really cannot see anything wrong with the retiring statistician's critique. To me, the only condition in which the constant % of starting portfolio value (SWR) withdrawal idea makes any sense at all is if someone retires under normal or only somewhat advanced PE10 or other valid valuation metric, and the world appears to be progressing as it has over the last 1.25 centuries.
In fact however, we know that many more people retire at peak valuations because that is when they achieve "their number". And we also know that current economic conditions are not the average of the past 1.25 centuries. History just is not that way very often.
Ha
Wade Pfau's Retirement Researcher Blog: Dirk Cotton: Statisticians Make the Worst Clients
People here know this, although they usually do not hold it on page one of their memory bank. When members say, "of course if markets are very bad, no one would just go on spending as before", they are implicitly rejecting the SWR mantra. It however remains a talisman to allow a leap of faith, which is basically what early retirement is.
SWR usually works, I would guess, because it suggests a withdrawal rate that is more or less reasonable for moderate conditions, and conditions are usually not extreme.
But then, anything usually works as evidenced by the fact that we see very few oldsters pushing their shopping carts along looking for some hidey-hole to survive another night. An older person who has a modest income (usually solely SS) and is not a raving psychotic, or who does not insist on smoking or drinking in his room can find a short waiting list for subsidized senior housing that can be pretty attractive.
I know we need SWR as a handy shortcut and supporting fiction, but I really cannot see anything wrong with the retiring statistician's critique. To me, the only condition in which the constant % of starting portfolio value (SWR) withdrawal idea makes any sense at all is if someone retires under normal or only somewhat advanced PE10 or other valid valuation metric, and the world appears to be progressing as it has over the last 1.25 centuries.
In fact however, we know that many more people retire at peak valuations because that is when they achieve "their number". And we also know that current economic conditions are not the average of the past 1.25 centuries. History just is not that way very often.
Ha
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