Fear to spend

[MasterBlaster]

TAl:

Well I'll certainly take a look at your post when you find it, but I am nearly certain that the early retirement years are the ones that make or break the retirement stash bank.

[TromboneAl]

OK, here it is:

http://www.early-retirement.org/foru...tml#post745715

The basic flaw is comparing two people who start their retirement, at different periods, with the same amount of money. If your example compares two people who had the same amount, on a given date, but retired at different times, the results will be more valid.

Here's the original plot. The x axis is years from retirement.



Now, let's get rid of Betty, and replot it so the x axes are properly lined up:


Now the x axis starts at 1973. I've shifted Bob's line over, because he retired in 1975.

Now to extrapolate to see how much Bob had in 1973. Bill went from 750 K in 1973 to about 400K in 1975. So Bob must have had 1.4 Million in 1973 (750/400 * 750). The dotted green line shows that.

[haha]

And your take from this is that adequate capitalization separates success from failulure, given same external market experience?

[MasterBlaster]

Al:

I don't buy your premise. Note that all of the participants start with the same $750k and take a non-safe $35k annual distribution indexed to inflation.

The question isn't so much what that same stash would have been worth following a bear or bull market. The question is... I have $750k and will retire now, So how much can I take each year from my stash.

[TromboneAl]

That's an important question, but the one we're dealing with is "Am I screwed if the market takes a downturn right after I start my retirement?"

I think the answer is "Yes, but not as much as the examples imply." True, when you are withdrawing assets you are more vulnerable to declines, but if you retire right at the peak, you got the benefit of the preceding run up in prices.

Or let's say you're in the midst of the downturn. From the typical examples, you might conclude that you should wait before retiring. Perhaps you should, but realize that you will be retiring with a smaller amount if the downturn continues.

[haha]

Quote:

Originally Posted by TromboneAl That's an important question, but the one we're dealing with is "Am I screwed if the market takes a downturn right after I start my retirement?" I think the answer is "Yes, but not as much as the examples imply." True, when you are withdrawing assets you are more vulnerable to declines, but if you retire right at the peak, you got the benefit of the preceding run up in prices. Or let's say you're in the midst of the downturn. From the typical examples, you might conclude that you should wait before retiring. Perhaps you should, but realize that you will be retiring with a smaller amount if the downturn continues.

This is only true if you believe in the magic of price quotations.

[NW-Bound]

Quote:

Originally Posted by TromboneAl Or let's say you're in the midst of the downturn. From the typical examples, you might conclude that you should wait before retiring. Perhaps you should, but realize that you will be retiring with a smaller amount if the downturn continues.

Yes. And if a retiree could make do with 4% of the smaller portfolio value, he would feel a lot safer than if he had started out high-hog with 4% of his portfolio value at the top of the market.