NW-Bound
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 3, 2008
- Messages
- 35,712
It's a perennial talk here as well as on other financial sites about how a retiree's financial fate depends so much on when he starts his retirement. That explains the family of curves FIRECalc displays: many soar to the sky after 30 years, but some crash into a crater like a kamikaze plane.
OK, OK, enough lousy metaphorical prose, you say. What's the beef?
Many here have studied historical return data for stocks and bonds, but I only now get interested in this. What was the worst time for a retiree who had to live off his investments? The idea is that even though "history does not repeat, it rhymes", so perhaps we can watch out for signs of a similar period and take some actions, not preemptive as it is not possible, but sufficiently timely to perhaps save our buns.
It is most likely there have been numerous threads on this topic, but not since my time. So, I would appreciate some links if possible.
Meanwhile, I have made some runs with FIRECalc and also another similar simulator using historical data. Here's the result.
* Assumptions: Constant buying power WR. 50/50 portfolio. No other incomes.
* Result: a $1MM portfolio with an initial 3.5%WR got down to $165K in 30 years, if one started in 1966. It would not survive a 4%WR.
If one started in 1965, or particularly 1967, the results were a lot better. So, I looked at the investment returns and also inflation in the time frame 1965-1975, and did not really spot anything that stood out. How can this period be worse than the Great Depression? I am sure a more astute member would be able to enlighten me here.
Another related question which may be difficult to answer is that for people who were completely in CDs, how would they fare over the same period? Can we know?
OK, OK, enough lousy metaphorical prose, you say. What's the beef?
Many here have studied historical return data for stocks and bonds, but I only now get interested in this. What was the worst time for a retiree who had to live off his investments? The idea is that even though "history does not repeat, it rhymes", so perhaps we can watch out for signs of a similar period and take some actions, not preemptive as it is not possible, but sufficiently timely to perhaps save our buns.
It is most likely there have been numerous threads on this topic, but not since my time. So, I would appreciate some links if possible.
Meanwhile, I have made some runs with FIRECalc and also another similar simulator using historical data. Here's the result.
* Assumptions: Constant buying power WR. 50/50 portfolio. No other incomes.
* Result: a $1MM portfolio with an initial 3.5%WR got down to $165K in 30 years, if one started in 1966. It would not survive a 4%WR.
If one started in 1965, or particularly 1967, the results were a lot better. So, I looked at the investment returns and also inflation in the time frame 1965-1975, and did not really spot anything that stood out. How can this period be worse than the Great Depression? I am sure a more astute member would be able to enlighten me here.
Another related question which may be difficult to answer is that for people who were completely in CDs, how would they fare over the same period? Can we know?
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