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Old 09-20-2010, 04:00 PM   #21
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Have people noticed that if you look at FireCalc a 100% stock allocation at a reasonable withdrawal rate of around and under 4% is "safe"? The analysis shows that an investor who does not panic and sell stocks after a crash can certainly survive a retirement at 100% equities even with crashes along the path.

An investor who is 100% bonds cannot survive a retiremement at 4% WR with high likelihood of success. TIPS allocations and annuitization can change that equation.

Just asking.
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Old 09-20-2010, 04:06 PM   #22
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Originally Posted by dbr View Post
Have people noticed that if you look at FireCalc a 100% stock allocation at a reasonable withdrawal rate of around and under 4% is "safe"? The analysis shows that an investor who does not panic and sell stocks after a crash can certainly survive a retirement at 100% equities even with crashes along the path.

An investor who is 100% bonds cannot survive a retiremement at 4% WR with high likelihood of success. TIPS allocations and annuitization can change that equation.

Just asking.

Yep, that's historically true. The future may or may not be different.

But even so, it's that "does not panic" thing that will get ya.
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Old 09-20-2010, 06:18 PM   #23
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Originally Posted by kyounge1956 View Post
It's a U.S. Savings Bond, Series I, which has an inflation-adjustment feature.
Note to kumquat: Canadian equivalent = Real Return Bond (RRB).

Real Return Bonds
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Old 09-20-2010, 09:04 PM   #24
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The analysis shows that an investor who does not panic and sell stocks after a crash can certainly survive a retirement at 100% equities even with crashes along the path.
I can walk along a girder placed on the ground. Would I be able to walk along a girder 500 feet up in the air? One more area where theory often diverges from reality.

Ha
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Old 09-21-2010, 05:19 AM   #25
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Have people noticed that if you look at FireCalc a 100% stock allocation at a reasonable withdrawal rate of around and under 4% is "safe"? The analysis shows that an investor who does not panic and sell stocks after a crash can certainly survive a retirement at 100% equities even with crashes along the path.

An investor who is 100% bonds cannot survive a retiremement at 4% WR with high likelihood of success. TIPS allocations and annuitization can change that equation.

Just asking.
You said it... analysis, but there is a level of uncertainty.

Survive vs increasing the probability of maintaining a certain lifestyle.

Besides... the post was not suggesting 100% fixed.

I don't think anyone is counting the US stock market out in this thread... it is about managing risk. Why manage the risk? Because the impact to one's lifestyle could be significant.

Why do we FIRE oriented investors invest in securities?? To look at a statement and count our money, or to marvel at how much it grown? And conversely shriek in horror when the valuation is halfed?

I don't think so... I believe most FIRE oriented investors have a goal to build wealth and eventually use it to maintain a lifestyle with some level of confidence.


The mechanics of rebalancing between stocks into bonds and back again between bull and bear markets helps to achieve that during accumulation and decumulation.
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Old 09-21-2010, 06:46 AM   #26
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Knowing I'll never get the right balance of stocks and bonds etc at any one period for optimal return, I have told myself before FIRE to have at least 2 things :-

1. excess cash as buffer i.e. if you think 1 million is the number for you, then make sure you have mcun more. How much more will be a balance of how much longer you want to work and how soundly you want to sleep after FIRE.
2. have at least 2 lifestyles you can accept after FIRE - one which is your ideal and the other which you can accept to downgrade to if the numbers don't work.
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Old 09-21-2010, 08:21 AM   #27
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The vast majority of "broken retirement dreams," among people I know, are due to crashed real estate, not to stocks.
Kind of interesting...

I suspect the avg Boomer is, if anything, real estate rich and stock/bond/cash poor

However, I suspect most Boomers bought their homes/real estate pre-crash so you would think despite drop they would still be able to walk away ok

Maybe it is the dual factor of real estate price drop + unable to liquidate expensive homes

This is, of course, assuming they didn't go bonkers with the equity they had in their homes
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Old 09-21-2010, 08:24 AM   #28
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I will toss out three items, once of which I have fully licked, another I am part of the way there, and a third I am still struggling with:

- excess concern about tax implications: there are a lot of investors who spent more time worrying about avoiding cap gains taxes than making a return. After I lost a couple of small sums waiting for ST gains to go LT, I now sell when it is time to sell, taxes be damned.

- risk tolerance shifts over time: I went into the recent downturn investing as if I was still 26, not a decade older with kids, a mortgage and a volatile employer. It all worked out in the end due to my belt and suspenders approach to emergency cash and some luck, but I have had to become more disciplined and push back on my gunslinging impulses on a regular basis. This is still a work in progress ("hello, my name is brewer and I am a riskaholic"), but I am getting there.

- excess concentrations: I think this is a common bad habit of stockpickers. I have developed two outsized positions due to appreciation of stuff I bought at the bottom. I cannot quite bring myself to sell off just yet, but I know this is a problem and I will be addressing it in the medium term.
Both of those apply to me

The only change I have made thus far has been include more index funds/etfs

Haven't really jumped into bonds yet

I also got whacked but made a real good comeback off the bottom. I think our biggest issue is if something is working it's hard to tweak it. Of course, stuff works until it doesn't, right?
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Old 09-21-2010, 09:48 AM   #29
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If I had a pension that provided a substantial (but less than 100%) coverage of my retirement expenses, then 100% equities allocation for the portfolio might be prudent. As has been pointed out, the pension is like a bond (maybe a junk bond depending on employer's solvency lol...).
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Old 09-21-2010, 11:17 AM   #30
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Kind of interesting...

I suspect the avg Boomer is, if anything, real estate rich and stock/bond/cash poor.
I belive we ran a poll on this (RE equity vs. saving/investments ratio).

Being an early boomer, I can only speak for myself.

My/DW's home is less than 10% of our gross net worth, when combined with our savings/investments.

Average? I have no idea...
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Old 09-21-2010, 01:57 PM   #31
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right, as expected, I'm sure the poll results here would be opposite of john/jane boomer
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Old 09-21-2010, 02:58 PM   #32
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Originally Posted by Moscyn View Post
Knowing I'll never get the right balance of stocks and bonds etc at any one period for optimal return, I have told myself before FIRE to have at least 2 things :-

1. excess cash as buffer i.e. if you think 1 million is the number for you, then make sure you have mcun more. How much more will be a balance of how much longer you want to work and how soundly you want to sleep after FIRE.
2. have at least 2 lifestyles you can accept after FIRE - one which is your ideal and the other which you can accept to downgrade to if the numbers don't work.
I think you've put my FIRE approach into words. (1) I'm way low on equities but have countered that with having "way more" cash than I need (assuming other than run away inflation). (2) I already have the secondary life-style staked out (and it's not a bad life-style - just not the one I've dreamed of and am living now). By the grace of God, I'll never have to test either of these approaches - but they are in place, just in case... YMMV
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