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Old 09-02-2009, 04:35 PM   #1
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More 4% vs. 5% Discussions

Since we seldom have any discussions about 4% SWR here, I thought that this was an interesting piece from yahoo today.

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What he concluded was that the overall market’s price-earnings ratio — taking the current price for the Standard & Poor’s 500-stock index divided by the average inflation-adjusted earnings for the past 10 years before the date of withdrawal — was predictive enough to produce guidelines. Then he came up with the following suggestions for a portfolio of 60 percent stocks and 40 percent bonds meant to last through 30 years of retirement.
If the ratio was above 20, indicating that stocks were overvalued, than a 4.5 percent withdrawal rate was prudent given that the stock market was likely to fall. But if it was between 12 and 20 (the historical median is roughly 15.5), a 5 percent rate was safe, tested against every historical period for which data was available. And if it was under 12 — a level it almost got to earlier this year — a rate of 5.5 percent would work.
The most recent figure was 17.67, which suggests a 5 percent withdrawal rate for current retirees. It had been above 20 until October 2008.
how-retirees-can-spend-enough-but-not-too-much.html: Personal Finance News from Yahoo! Finance
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Old 09-02-2009, 05:47 PM   #2
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The thread on the original NYT article is here.

Personally, I am always leary of discussing anything relating to P/E 10 for fear that that H*c*us or his buddy JWR will suddenly appear...
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Old 09-02-2009, 07:04 PM   #3
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Personally, I am always leary of discussing anything relating to P/E 10 for fear that that H*c*us or his buddy JWR will suddenly appear...
They've conditioned us to flinch in a Pavlovian reflex to any discussion involving that term, no matter how appropriate it is!
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Old 09-02-2009, 07:39 PM   #4
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Originally Posted by clifp View Post
The thread on the original NYT article is here.

Personally, I am always leary of discussing anything relating to P/E 10 for fear that that H*c*us or his buddy JWR will suddenly appear...
Eh, I think that I am about ready to pound the jeebus out of ***** again, assuming he has not been dragged off to the looney bin yet.
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Old 09-03-2009, 09:55 AM   #5
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I for one am bored and would love to see the Brewer / Hcs throwdown match of the century. Just for old times sakes.
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Old 09-03-2009, 01:32 PM   #6
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Please, folks, how quickly we forget!!!

***** is capable (and regularly does) type pages and pages of his characteristic blather. "Discussing" anything with him is impossible. Arguing with him is like arguing with a 1-hour newscast on the radio. It's all 1-way. One of the good things about this board is the *****-lessness.
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Old 09-03-2009, 02:01 PM   #7
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Yeah, and it is possible that he would be shot on sight here. So the likelihood of ***** bothering us is probably not high.
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Old 09-03-2009, 03:17 PM   #8
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This article in the current Journal of Financial Planning discusses the issue as it relates to retiring into various points in secular bull and bear market cycles. Have to read carefully to fully understand the assumptions and some of the results seem weird but there it is anyway.

Market Cycles and Safe Withdrawal Rates
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Old 09-03-2009, 03:29 PM   #9
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My plan is to roll a six sided dice each year. That will be the percentage I use. This and more if you sign up for my newsletter.
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