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Old 07-07-2013, 10:51 AM   #21
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Originally Posted by audreyh1 View Post
No (and I think you mean withdrawal rate)
Yes, withdrawal rate is a more appropriate term than rate of return, because, assuming 3 percent average inflation, then the rate of return would need to be approximately 7 percent in this scenario.

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Old 07-07-2013, 03:56 PM   #22
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Originally Posted by obgyn65 View Post
please can you explain why it needs to be a separate concept ? I am not trying to be contradictory or argumentative, just would like to understand your viewpoint better. Thanks.

I see what Ed means. Your investment stash (long term) is what your asset allocation is made of. Your cash/emergency fund/cash reserves or whatever you may call it are funds that will probably be spent prior to your investmants (AA) are put into play as far as an income stream goes.

They are separate in how you handle them (think short term/long term) and how long you will own them.

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Old 07-07-2013, 04:20 PM   #23
Recycles dryer sheets
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Originally Posted by nico08 View Post
I was just wondering if you use the amount that you have as emergency money/short term living expense money in the total investment amount that you use to estimate your four percent
I count the family assets held at Vanguard and Fidelity as our "portfolio" being tapped for living expenses. That amount includes the emergency short-term bond fund, and a five year TIPS ladder held through Vanguard we would consume in a market crash. That "portfolio" is currently roughly 60% equities and 40% cash/bonds managed on a "total-return" basis.

I exclude the cash (normally less than 0.5% of net worth) in our local credit union mainly for simplicity, and to make day-to-day portfolio value comparisons easier.

I also have a separate "portfolio" total which also includes some unimproved land we own, since I expect to sell that lot eventually and deposit the proceeds at Vanguard. I keep it separate because it is difficult to value and could easily take a year to sell. That is the only physical thing I include in a "portfolio" calculation. I exclude all other things because they provide us with services such as shelter and transport instead of cash. Though I will include them in my "net worth" calculation.

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