Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Feel Better About the USA - SWR in other developed countries.
Old 12-05-2010, 08:20 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,980
Feel Better About the USA - SWR in other developed countries.

This was on page three of another thread (thanks Chinaco), but I thought it might be interesting to Americans here. I did not realize how low the SWR for many other developed countries was/is compared to the 4% we all throw around. Note Spain (with equities), Italy, Belgium, France, Germany & Japan esp. You basically can't retire, as we know it, investing in your homeland in Japan (0.5% SWR!!!) and some other countries for all practical purposes. Sheeeeeeesh...

An International Perspective on Safe Withdrawal Rates: The Demise of the 4 Percent Rule?
Attached Images
File Type: jpg Picture1.jpg (79.6 KB, 33 views)
__________________

__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-05-2010, 09:36 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,739
Send a message via Skype™ to kcowan
As a Canadian, I am celebrating! Thanks for the link.
__________________

__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 12-05-2010, 09:38 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,649
What this shows (as was pointed out in the other thread) is that if you were in countries devasted by WWI and WWII or by civil war (Spain), and you were invested solely in stocks and bonds of that country you would have fared poorly. In other words, you got whacked by the blackest of black swans. What isn't addressed is how we should incorporate that news in our current day investing.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 12-05-2010, 09:51 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,158
Quote:
Originally Posted by kcowan View Post
As a Canadian, I am celebrating! Thanks for the link.
Me too!
__________________
Danmar is offline   Reply With Quote
Old 12-05-2010, 10:31 AM   #5
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,139
You Canucks best be cautious. This forum has a bad track record whenever someone exclaims "wheee!!"...
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 12-05-2010, 10:46 AM   #6
Full time employment: Posting here.
 
Join Date: Apr 2006
Posts: 925
Quote:
Originally Posted by donheff View Post
What this shows (as was pointed out in the other thread) is that if you were in countries devasted by WWI and WWII or by civil war (Spain), and you were invested solely in stocks and bonds of that country you would have fared poorly. In other words, you got whacked by the blackest of black swans. What isn't addressed is how we should incorporate that news in our current day investing.
International diversification?
__________________
If there's one thing in my life that's missing; It's the time I spend alone
Sailing on the cool and bright clear waters; There's lots of those friendly people
Showin me ways to go; And I never want to lose your inspiration
CoolChange is offline   Reply With Quote
Old 12-05-2010, 11:47 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
The USA is where most of the innovation occurs.
__________________
chinaco is offline   Reply With Quote
Old 12-05-2010, 12:42 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by donheff View Post
What this shows (as was pointed out in the other thread) is that if you were in countries devasted by WWI and WWII or by civil war (Spain), and you were invested solely in stocks and bonds of that country you would have fared poorly.
Yup. That's another way of saying what Bernstein did, that the best you can hope for through financial planning is an 80% success rate. But as I understand it, Bernstein pretty much plucked 80% out of thin air. From other data in the article referenced above, it looks like 66% is closer to the truth; at least as experienced by Europe in the 20th century.

Quote:
Originally Posted by donheff View Post
What isn't addressed is how we should incorporate that news in our current day investing.
Mine is a five part plan 1) A much lower than 4% WR 2) Flexible spending 3) Maintaining some marketable skills and contacts 4) International diversification and 5) Not worrying about the fraction of awful outcomes that can't be provisioned against.

Edit: In light of a conversation in that other thread, maybe I'll also add a part 6 . . . Don't worry about all the money that will be left unspent if the previous five bullet points end up being too conservative.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 12-05-2010, 02:21 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,739
Send a message via Skype™ to kcowan
Bogleheads :: View topic - The Demise of the 4% Safe Withdrawal?

Here is a discussion that had a head start and also has the author as a participant.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 12-05-2010, 02:24 PM   #10
Full time employment: Posting here.
Delawaredave5's Avatar
 
Join Date: Dec 2004
Posts: 606
I couldn't find when the article was written - anyone know ?
__________________
Delawaredave5 is offline   Reply With Quote
Old 12-05-2010, 02:33 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,980
Quote:
Originally Posted by Delawaredave5 View Post
I couldn't find when the article was written - anyone know ?
Data was 1900 - 2008 if that answers your question.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   Reply With Quote
Old 12-05-2010, 02:57 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,387
Quote:
Originally Posted by kcowan View Post
Bogleheads :: View topic - The Demise of the 4% Safe Withdrawal?

Here is a discussion that had a head start and also has the author as a participant.
Here is an example of the quality of that discussion:
Quote:
A quick scan looked like this "study" was about whether the 4% rule would work in foreign markets, and it appears that it wouldn't in most. Just one of many reasons to invest American.
This guy is either pretty funny, or pretty boneheaded.
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 12-05-2010, 03:11 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
A closer look at the study reveals the results are even worse than they first appear. . .

Quote:
Perfect foresight assumption. Much of the analysis provides a best-case scenario for increasing the SAFEMAX by assuming in each year for each country that the new retiree has perfect foresight to choose the fixed asset allocation that maximizes the withdrawal rate for the subsequent 30 years. Obviously the assumption is not realistic and artificially inflates the SAFEMAX, but even so, the traditional 4 percent withdrawal rule will still perform surprisingly poorly. This assumption avoids accusations that a poor-performing asset allocation was chosen to discredit the 4 percent rule. To provide some idea about this assumption, we will also include a brief discussion for how the results change for a specific portfolio mixed evenly between stocks and bonds.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 12-05-2010, 04:16 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,019
Quote:
Originally Posted by kcowan View Post
As a Canadian, I am celebrating! Thanks for the link.
I will not say "Whee" for fear of jinxing it!

I had always assumed that the SWR was highest in the US, due to the historically stronger equity markets there, and lower MERs. However, I wonder if the fact that USians have to budget extra for their healthcare in RE has something to do with Canada's higher SWR?
__________________
Meadbh is offline   Reply With Quote
Old 12-05-2010, 04:39 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by Meadbh View Post
However, I wonder if the fact that USians have to budget extra for their healthcare in RE has something to do with Canada's higher SWR?
In practice yes, but it's not factored into the study. Any benefit Canadians get from their health system would show up as a higher standard of living (less the extra tax burden) at a given WR. It wouldn't show up as a higher SWR.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 12-05-2010, 04:46 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,739
Send a message via Skype™ to kcowan
Quote:
Originally Posted by Meadbh View Post
I had always assumed that the SWR was highest in the US, due to the historically stronger equity markets there, and lower MERs. However, I wonder if the fact that USians have to budget extra for their healthcare in RE has something to do with Canada's higher SWR?
No I don't think so. That comes out of their SWR just like our higher MERs come out of ours. If you are paying 2% MER then your Canadian SWR is 2.4% net. The Bogleheads have that as an advantage, for sure.
__________________

__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
American Retired in UK Needing To Replace a USA ETF portfolio with USA Stocks/Bonds cvc8445 FIRE and Money 17 06-18-2010 01:41 PM
What Countries to avoid paying USA taxes? Dennis Life after FIRE 82 11-30-2008 03:35 PM
Is the 4% SWR applied to foreign countries? Leonardo FIRE and Money 6 03-10-2007 04:26 PM
Once You Developed Your Plan...Did You Tommy_Dolitte Young Dreamers 7 09-14-2004 05:00 PM

 

 
All times are GMT -6. The time now is 01:46 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.