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03-04-2014, 06:14 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 2,857
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From a quick read of the article, it sure looks like are cherry picking data to make a point.
Bengen used a 60/40 portfolio, why did they use 55/45? And why a fixed 3% for inflation over the same timeframe? Did the Bengen study do the same?
From the article:
If you had retired Jan. 1, 2000, with an initial 4% withdrawal rate and a portfolio of 55% stocks and 45% bonds rebalanced each month, with the first year's withdrawal amount increased by 3% a year for inflation, your portfolio would have fallen by a third through 2010, according to investment firm T. Rowe Price Group. And you would be left with only a 29% chance of making it through three decades, the firm estimates.
__________________
Eat, Drink and Be Merry.
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03-04-2014, 09:36 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Posts: 7,422
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I thought the second article was going to be tied to some service when they mentioned annuities.
But it's really not, like the first one which is referring to a JPM plan.
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03-04-2014, 10:14 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Jun 2007
Posts: 2,657
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Read all the articles, but it looks like this JPM scheme amounts to: You need to use an adviser to increase the risk in your portfolio, then you take out more than 4% on a sliding scale based on age, while absolutely counting on your adviser to zig and zag through any investment issues to maintain this high withdrawal rate. And the advisers better be very very good at what they do, because in addition to the high withdrawal rate you will pay the advisers a 2% fee.
A masterpiece of adviser marketing. "Better let us take care of all your complicated money. We're the experts." Really makes me mad to see such duplicity passed off as if it were useful factual journalism.
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03-05-2014, 08:04 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by growing_older
Read all the articles, but it looks like this JPM scheme amounts to: You need to use an adviser to increase the risk in your portfolio, then you take out more than 4% on a sliding scale based on age, while absolutely counting on your adviser to zig and zag through any investment issues to maintain this high withdrawal rate. And the advisers better be very very good at what they do, because in addition to the high withdrawal rate you will pay the advisers a 2% fee.
A masterpiece of adviser marketing. "Better let us take care of all your complicated money. We're the experts." Really makes me mad to see such duplicity passed off as if it were useful factual journalism.
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+1
The paper is here: https://www.jpmorganfunds.com/cm/Sat...=1323375360677
They compare their strategy to a pure 4% rule (i.e. no flexibility in withdrawals) and to a pure RMD rule.
Guess what, they conclude that if you stop occasionally and re-think what you're doing based on actual results, you can probably do better.
Scanning the paper, I did not see any comments on their assumptions regarding fees. People here would be interested in know how a DIY program that uses very low load funds would compare to JPM's program that probably has higher fees.
That said, some of us may want to look at the JPM paper and see if there are some ideas that we would want to include in our DIY approach. When I do that, I think that most of the ideas have already been discussed here, but it does provide an overview of some issues.
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03-05-2014, 09:00 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,362
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In my working days, we'd go through times when we'd say: "gee, they're talking layoffs at work...maybe we should delay that car/boat/vacation/renovation purchase until things pick up again".
Other times, we'd say: "Hey, got a big bonus in the wings...let's party".
That is sort of how we apply/modify the 4% rule.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
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03-05-2014, 09:22 AM
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#7
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Gone but not forgotten
Join Date: Jul 2012
Location: Peru
Posts: 6,335
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I don't do Investment, so Withdrawal is my game. Not a %, but whatever I need.
Just received a free bonus while waiting for DW at the dentist office. The March issue of Money Magazine... read the whole thing, and was very impressed.
A comprehensive analysis of "The New Retirement"... from asset allocation, to SS to a history of where the retirement money comes from, and predictions of where it should be in the future... both sides of the equation.
Also... lots of stuff about couples attitudes to retirement. VERY interesting.
One of the paragraphs mentioned a multi year recent history of the Vanguard Funds, with a return of 1.9% vs. 2.3% of DIY investing... but who knows?
Really worthwhile for me... Would be worth buying if I didn't get it for free...
here's a link:
Have enough money for the retirement life you want - Feb. 26, 2014
The magazine has charts and more info than the online recap.
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03-05-2014, 09:30 AM
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#8
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Recycles dryer sheets
Join Date: Jul 2013
Posts: 129
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How about the lesser of 4% or
Using your nest-egg balance as of Dec. 31 of the previous year, you would look up your age in the IRS table and divide your account balance by the life expectancy given for that age
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03-05-2014, 09:55 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2013
Posts: 9,358
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Wouldn't I bonds or a TIPS ladder even at zero real provide a 30 year safe withdrawal rate of 3.3%? I am not sure why people who weren't expecting more than 4% SWR wouldn't just do that instead of riskier and commission laden investments, but maybe I am missing something, looking at too short of a time horizon or have misplaced faith in the safety of government bonds.
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03-05-2014, 10:23 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Nov 2006
Location: Bossier City
Posts: 2,183
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Quote:
Originally Posted by marko
In my working days, we'd go through times when we'd say: "gee, they're talking layoffs at work...maybe we should delay that car/boat/vacation/renovation purchase until things pick up again".
Other times, we'd say: "Hey, got a big bonus in the wings...let's party".
That is sort of how we apply/modify the 4% rule.
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Pretty much how mine will go, I would imagine.
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03-05-2014, 10:52 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by daylatedollarshort
Wouldn't I bonds or a TIPS ladder even at zero real provide a 30 year safe withdrawal rate of 3.3%? I am not sure why people who weren't expecting more than 4% SWR wouldn't just do that instead of riskier and commission laden investments, but maybe I am missing something, looking at too short of a time horizon or have misplaced faith in the safety of government bonds.
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The JPM paper is talking about withdrawals rates above 5.0%.
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03-11-2014, 03:42 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2005
Posts: 6,115
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Quote:
Originally Posted by Refresher
How about the lesser of 4% or
Using your nest-egg balance as of Dec. 31 of the previous year, you would look up your age in the IRS table and divide your account balance by the life expectancy given for that age
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why bother with the irs tables. just use bob clyatts method.
look at your balance each year and take either 4% or if markets fell take 5% less then you did the year before, which ever is greater.
nice ,simple , and dynamic .
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03-11-2014, 05:45 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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For me, now that I am comfortably in retirement, I believe I will continue to be fixated on this kind of puzzle while in reality I will spend what I want and my portfolio will continue to grow.
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03-11-2014, 06:44 AM
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#14
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Full time employment: Posting here.
Join Date: Nov 2008
Posts: 728
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Boy I agree on the value of money magazine....get it for almost free.....I think it is 800 Delta frequent flyer miles. I have to add Warren Buffet's plan for his widow some day, which he guessed she would be about 70 when she becomes a widow.......her portfolio would be about 90% S&P 500 index fund.....didn't say what the other 10% would be. Now I know he would leave her enough to handle downturns but.......isn't simple better? And, why pay 2% when a simple solution would do. Also, WSJ had a story in their weekend edition, business section about high fees....they are going down.....it was on the front page.....sorry I didn't save it to give more info but they talked about a provider that built portfolios averaging .14% designed for the individual based on age, portfolio size etc. My good news is that we have enough....to live modestly on what we have invested conservatively......good day to all!
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03-11-2014, 07:07 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 1,743
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Quote:
Originally Posted by jerome len
Boy I agree on the value of money magazine....get it for almost free.....I think it is 800 Delta frequent flyer miles. I have to add Warren Buffet's plan for his widow some day, which he guessed she would be about 70 when she becomes a widow.......her portfolio would be about 90% S&P 500 index fund.....didn't say what the other 10% would be. Now I know he would leave her enough to handle downturns but.......isn't simple better? And, why pay 2% when a simple solution would do. Also, WSJ had a story in their weekend edition, business section about high fees....they are going down.....it was on the front page.....sorry I didn't save it to give more info but they talked about a provider that built portfolios averaging .14% designed for the individual based on age, portfolio size etc. My good news is that we have enough....to live modestly on what we have invested conservatively......good day to all!
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Buffet said for the 10% his widow would be in bonds so she does not have to sell stocks on a downturn.
I guess I would be OK with $5.8 billions to wait out a market upturn.
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03-11-2014, 07:54 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Jun 2007
Posts: 2,657
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Quote:
The JPM paper is talking about withdrawals rates above 5.0%.
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There have been discussions of methods like this. The 4% was settled on as a Safe Withdrawal Rate because it worked in all the historic periods studied. But in a very large subset of historic period, higher withdrawal rates do just fine. If you don't miond rolling the dice, you can start with a higher withdrawal rate, and maybe you will do fine, or maybe you will see you are NOT doing fine and need to tighten your belt considerably. JPM in not original in coming up with this idea. They are promoting it as a way to get business because they claim they will provide guidance in how best to know how high you can go and how quickly and how much you must tighten your belt when needed. For an annual management fee, of course.
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03-11-2014, 08:33 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by mathjak107
why bother with the irs tables. just use bob clyatts method.
look at your balance each year and take either 4% or if markets fell take 5% less then you did the year before, which ever is greater.
nice ,simple , and dynamic .
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The paper will say that this method usually leaves an awfully lot on the table.
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03-11-2014, 05:37 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2005
Posts: 6,115
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i don't think so ,only because if you are getting on in age and you see to much money accumulating you will find a way to spend it .
you give a bunch of 80 year olds an extra million bucks i guarantee you they will have no trouble spending it.
what they wouldn't spend on themselves would be spent on kids and grandkids.
no one just spends like a robot.
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03-12-2014, 08:52 AM
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#19
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Full time employment: Posting here.
Join Date: Feb 2008
Posts: 920
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Quote:
Originally Posted by mathjak107
i don't think so ,only because if you are getting on in age and you see to much money accumulating you will find a way to spend it .
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So you are basically saying to just use Clyatt's method... except when it seems like you shouldn't use it.
How is that any different than the people saying they'll take a dynamic approach to spending based on stock market performance? Seems like both are part rule based with a dash of adjustment based on reality and common sense.
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03-12-2014, 10:25 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by mathjak107
i don't think so ,only because if you are getting on in age and you see to much money accumulating you will find a way to spend it .
you give a bunch of 80 year olds an extra million bucks i guarantee you they will have no trouble spending it.
what they wouldn't spend on themselves would be spent on kids and grandkids.
no one just spends like a robot.
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It sounds like you'd advise periodically stopping and reviewing your situation. In particular consider your reducing life expectancy as you grow older. And then adjust your spending accordingly.
I think that's what the paper is recommending.
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