Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Guyton review of 2008-2009 wrt SWR
Old 10-03-2010, 08:50 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Guyton review of 2008-2009 wrt SWR

We have discussed Guyton's safe withdrawal articles in the past. Here he reviews safe withdrawal rate stuff for 2008-2009:
Back to School: Past, Present, and Future (link should work until Nov 1st).

I'm not sure this article says anything important to folks here, but here's a quote:
Quote:
...However, TIPS fell 8 percent as inflation expectations evaporated, and emerging market, corporate high yield, and convertible bonds plummeted 18 percent, 25 percent, and 31 percent, respectively.
...
Clearly, the length (in years) of a portfolio’s fixed-income cushion was highly dependent upon its holdings: a bond is not a bond is not a bond in times of severe economic distress. Moreover, there was virtually no chance to change the quality of these horses in the middle of the stream. Things happened too fast.
__________________

__________________
LOL! is offline   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 10-03-2010, 09:02 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Nice article.

In the "lesson's learned" category, I put this:

Quote:
Be that as it may, it seems significant that our body of knowledge regarding safe withdrawal rates routinely assumes fixed-income holdings (and, hence, the length of the fixed-income cushion) made up almost exclusively of the types of bonds that hold up best under severe economic systemic risk. This suggests that distribution portfolios with fixed income positions that vary noticeably from those modeled in past research may not enjoy the degree of sustainability that their creators are assuming.
Pre-crisis, I had spent countless hours making sure my equity investments were as diversified as possible. It wasn't until the poo hit the fan that I noticed nearly all of my "safe" investments were in the muni bonds of one state. All of a sudden, my safe portfolio didn't look so safe. In the thick of it, I was actually more concerned about my fixed income holdings, knowing that defaults in that portfolio would never be recovered. Whereas I fully expected my equity portfolio to bounce back at some point.
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 10-03-2010, 09:27 AM   #3
Thinks s/he gets paid by the post
Onward's Avatar
 
Join Date: Jul 2009
Posts: 1,664
Good read. Can someone point me to a description of the "guardrail" withdrawal policies that he mentions?
__________________
And if I claim to be a wise man, it surely means that I don't know.
Onward is offline   Reply With Quote
Old 10-03-2010, 12:39 PM   #4
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,846
Quote:
Originally Posted by Onward View Post
Good read. Can someone point me to a description of the "guardrail" withdrawal policies that he mentions?
This is one of his papers that discusses the "guardrails":

http://spwfe.fpanet.org:10005/public...al%20Rates.pdf
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 10-03-2010, 12:41 PM   #5
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Guyton/Klinger paper that spoke of decision rules for SWR
http://www.bobsfinancialwebsite.com/...awal_Rates.pdf

Thanks for posting the link - great reading. While he may be accused of data-mining, I think the SWR rules are a good way of taking the emotion out of varying your withdrawal rate based on portfolio & market conditions.

I use a simpler 4% of portfolio value, but also calculate the withdrawal based on Guyton's rules. In case I need to go over 4%, I plan to stay within the dynamic withdrawal rate specified by Guyton/Klinger decision rules.

I shared my spreadsheet on this forum. Please check it thoroughly before use. I haven't looked at the calculations in ages.

Spreadsheet to ease SWR calculations using Guytons Decision Rules
__________________
walkinwood is offline   Reply With Quote
Old 10-03-2010, 02:12 PM   #6
Thinks s/he gets paid by the post
Onward's Avatar
 
Join Date: Jul 2009
Posts: 1,664
Quote:
Originally Posted by walkinwood View Post
Guyton/Klinger paper that spoke of decision rules for SWR
Interesting paper. There are a few too many rules for my taste, but I could see it being useful to someone who absolutely needed to start with a 5+% withdrawal rate.
__________________
And if I claim to be a wise man, it surely means that I don't know.
Onward is offline   Reply With Quote
Old 10-03-2010, 03:02 PM   #7
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by Onward View Post
Interesting paper. There are a few too many rules for my taste, but I could see it being useful to someone who absolutely needed to start with a 5+% withdrawal rate.
Or, for those who are uncomfortable with the 4% SWR, these rules allow for a larger safety margin. I fall into this category.
__________________
walkinwood is offline   Reply With Quote
Old 10-03-2010, 03:33 PM   #8
Thinks s/he gets paid by the post
Onward's Avatar
 
Join Date: Jul 2009
Posts: 1,664
Quote:
Originally Posted by walkinwood View Post
Or, for those who are uncomfortable with the 4% SWR, these rules allow for a larger safety margin. I fall into this category.
Ah. yes.

Have you considered/rejected the Work Less Live More system? As I recall, it's simpler but has a withdrawal-rule and cap-preservation policy similar to Guyton's, with comparable swr's.
__________________
And if I claim to be a wise man, it surely means that I don't know.
Onward is offline   Reply With Quote
Old 10-03-2010, 05:10 PM   #9
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by Onward View Post
Ah. yes.

Have you considered/rejected the Work Less Live More system? As I recall, it's simpler but has a withdrawal-rule and cap-preservation policy similar to Guyton's, with comparable swr's.
My SWR is loosely based on the 4%/95% SWR methodology. In a discussion on this forum, ESRBob recommended against using the 95% backstop early in retirement (in my case it would have been triggered in the 2nd year!). So, we managed with 4% of a much lowered portfolio for 2009.

I keep track of what the Guyton SWR formula would recommend for SWR, but haven't used it to determine my withdrawal for the year.
__________________
walkinwood is offline   Reply With Quote
Old 10-03-2010, 08:05 PM   #10
Full time employment: Posting here.
Dog's Avatar
 
Join Date: Apr 2006
Posts: 781
Yikes...I will probably have to hire someone to step me through this phase. The article(s) couldn't hold my attention. Maybe when I get to that phase of my life?
__________________
Dog is offline   Reply With Quote
Old 10-03-2010, 08:12 PM   #11
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by Dog View Post
Yikes...I will probably have to hire someone to step me through this phase.
When you're ready to research it, about 50 of the posters here will walk you through it for free...
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords 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
FIRECalc calculations for 2008 and 2009 bigfoot FIRE and Money 8 07-15-2010 12:04 PM
2008 in review harley Other topics 1 12-30-2008 12:04 AM
6% Guyton SWR; reflux obryanjf FIRE and Money 8 04-03-2006 08:48 PM
New SWR paper by Guyton & Klinger LOL! FIRE and Money 15 03-05-2006 12:06 PM
Guyton~ Is SWR too safe? mickeyd FIRE and Money 5 01-23-2006 03:45 PM

 

 
All times are GMT -6. The time now is 05:30 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.