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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 01:29 AM   #61
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by intercst
I'm 49 now and have been retired for 11 years. My retirement portfolio has grown five-fold over that time while my annual living expenses have increased a bit more than 50%. My annual withdrawal rate is about 1.5% of assets today.
Hmm, 16% annualized yield over 11 years, and that doesn't even take into account your withdrawal, so I assume your investments returned almost 20%/year. That beats the hell out of everybody, including Buffett, S&P 500, small/value, etc. How'd you do it?
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 01:34 AM   #62
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by eridanus
If it gets worse then the great depression, working won't be a solutution to low or negative returns -- more then 25% won't have a job.
The Great Depression was pretty bad as economic events go. One estimate I saw was that it was approximately a once-in-400-year magnitude event.

While there's a fair chance you might see such an event in your lifetime, it is not required to have a new worst-case SWR sequence. For example, a long sideways market (like the 70's) is almost as bad as a 3-year crash like the Great Depression, as far as retirement goes. If we have a secular bear market, ER's might be screwed. If we have less upward regression to the mean after a bear, retireees might be screwed. We don't need a depression to screw us.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 02:09 AM   #63
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by wabmester
Hmm, 16% annualized yield over 11 years, and that doesn't even take into account your withdrawal, so I assume your investments returned almost 20%/year.* *That beats the hell out of everybody, including Buffett, S&P 500, small/value, etc.* * How'd you do it?
I bought DELL and PFE in the early 1990's.

Up until I retired in 1994, my portfolio had only beaten the S&P500 by about 1.5% per annum. It didn't really take off until after I retired.

intercst
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 04:37 AM   #64
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by wabmester
The Great Depression was pretty bad as economic events go.* *One estimate I saw was that it was approximately a once-in-400-year magnitude event.

While there's a fair chance you might see such an event in your lifetime, it is not required to have a new worst-case SWR sequence.* *For example, a long sideways market (like the 70's) is almost as bad as a 3-year crash like the Great Depression, as far as retirement goes.* *If we have a secular bear market, ER's might be screwed.* *If we have less upward regression to the mean after a bear, retireees might be screwed.* *We don't need a depression to screw us.
Screwed by a bear? Arggggggggggggh! And what is a "secular bear".
One that eschews religious dogma? Sounds like a "Brinkerism".

JG
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 04:45 AM   #65
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by Eagle43
Nicely stated.* Projects that don't matter now?* Hmmmm.* or a few months or years later* Hmmmm.* Been there, done that.* I suspect most of us, retirees or still working, have also been or are currently* there.* That's the problem, IMHO.* Working doesn't bother me.* Irrelevance does.*
Death doesn't bother me. Work does.

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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 05:11 AM   #66
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by ex-Jarhead
Intercst:* I think you are making a big mistake by not following the
advice of the 30 year old government employee that suggested in no uncertain terms that you get back to work post-haste.

Incidentally, I think I've figured out how your retirement has been so successful.* *Cheap Green Fees in Texas.

Regards, Jarhead
Cheap green fees certainly help. I've been on an extended vacation in Connecticut since July. Green fees are about double Texas prices up here.

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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 06:40 AM   #67
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by Cut-Throat
I can accept volatility, assuming they smooth out over a 15-20 period.
Everyone seems to say that real returns going forward will be lower. I was just wondering what you or the article seems to think that real returns will be in the next 30 years. 1-2% real?
More than what to expect for future returns I would question people's real tolerance for volatility. We talk a big stick about being able to weather storms yet what have we lived through? 87? the early 90's road bump? the tech bubble burst? They have been minor blips. Most here had no sizable assets during 70's when real returns were negative for quite some time. All these successful ER's I read about have had an unprecedented bull market to work with. How does that go? "past results are not an indicator of future returns".

One thing I think Berstein hit square on the head was our real risk tolerance. His analogy was the plane crash drill versus the real thing. Everyone talks a big line until they are in one and then the machismo confidence goes out the window. I'm not talking some 1-3 yr market blip I'm talking 15 years of negative real returns on the S&P

He made one other good point that is relevent to people on these boards. He asked "how often do you check your portfolio?" If you check it often (who here could go 6 months without checking let alone 6 days) then your "real" (long term) risk tolerance is much less than you think. I would add that running Firecalc often is another sign of low risk tolerance.

BTW 1-2% real on AVG sounds great compared to a large portion of the 70's. My conclusion: ER's got nothin to do with productivity it's all about "real" risk tolerance.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 08:07 AM   #68
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Re: NEWSFLASH: Bernstein slams early retirement!!!

This is what I worked to explain some of this to my wife.* Trying to put 1,000 pages of reading on one page ain't easy. The columns may not line up very well.

Planning -

More activities early, more healthcare later, with near level spending until late life.

small total reit corp total bills* * * Past u.s. investor averages (up to 200 yrs)
* * * * *stock* * * * * * * bond
* * * * * *12* * * * * * * * * * * * * * * * *arithmetic return (overstates stock, bond differ)
* * * * * *-1* * * * * * * * * * * * * * * * * fluctuating return (true geometric -2)
* * * * * *-1* * * * * * * * * * * * * * * * * survivor bias (failed companies from old records)
* * * * * *10* * * * * * * * * * 6* * * * * * nominal return (tax deferred or paid from work)
* * * * * *-3* * * * * * * * * * -3* * * * * *inflation (varied considerably)
* * * * * *-2* * * * * * * * * * -1* * * * * *investing costs (commissions, trading)
* * 6* * * 5* * * 4* * * 3* * *2* * *1* * 5% saving net real return (more stock,* up +1)
* * * * * *-2* * * * * * * * * * -2* * * * * *international (and typical u.s. 25 yr +/- deviation)
* * 4* * * 3* * * 2* * * 1* * *0* * -1* * 3% saving net real return (more stock, up +1)
* * * * * * * * * * * * * * * * * * * * * * * * 2% developed world growth (and u.s.)
* * * * * *-2* * * * * * * * * * -1* * * * * *1% withdrawal net real return (more bond, -1)
* * * * * *-1* * * * * * * * * * -1* * * * * *0% withdrawal net real return after taxes

0% net real return after taxes in late life likely from ever more conservative portfolios.

Current fund pricing – yahoo finance, funds, holdings – past averages are mostly trivia
* * * * * * * * * * * tax deferred net real saving* * * * * * * *taxed net real withdrawal
Stock* * *(1/pe - cost) x weight = %* * * * * * * * * * * * * * * * - 2% - tax
Bond* * *(yield - inflation - cost) x weight = %* * * * * * * * *- 1% - tax
Actively managed funds may have investing costs twice the published expense ratios.

Dividing after tax fixed pensions and mixed portfolio annually over remaining IRS life expectancy, spending part and investing the rest, gives a historically conservative withdrawal that matches required minimum distributions from defined benefit plans.

Portfolio amounts over replacement used as reserve for large purchases & emergencies
Surviving spouse switches to single life expectancy withdrawal after the lesser SS ends.
Broad diversification tends to dampen spending swings from changing portfolio values.
Increasing percentage withdrawal uses capital maintaining spending level until late life.
SS may be a fully income taxed fixed pension with non-cola taxes and med B deducted.
Slowly declining spending in late life may remove need to adjust SS as a fixed pension.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 08:10 AM   #69
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Later I'll post GrandPa's carp bait recipe - its in the recipe box at home.

We had a boss who retired to go trout fishing in New Mexico. I gave him a copy of the carp bait recipe as a back up plan in case the trout retirment didn't work out.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 09:09 AM   #70
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by TargaDave
I would add that running Firecalc often is another sign of low risk tolerance.*
I ran it exactly once, just for grins

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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 09:24 AM   #71
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by TargaDave
More than what to expect for future returns I would question people's real tolerance for volatility. We talk a big stick about being able to weather storms yet what have we lived through? 87? the early 90's road bump? the tech bubble burst? They have been minor blips. Most here had no sizable assets during 70's when real returns were negative for quite some time. All these successful ER's I read about have had an unprecedented bull market to work with. How does that go? "past results are not an indicator of future returns".

One thing I think Berstein hit square on the head was our real risk tolerance. His analogy was the plane crash drill versus the real thing. Everyone talks a big line until they are in one and then the machismo confidence goes out the window. I'm not talking some 1-3 yr market blip I'm talking 15 years of negative real returns on the S&P

He made one other good point that is relevent to people on these boards. He asked "how often do you check your portfolio?" If you check it often (who here could go 6 months without checking let alone 6 days) then your "real" (long term) risk tolerance is much less than you think. I would add that running Firecalc often is another sign of low risk tolerance.

BTW 1-2% real on AVG sounds great compared to a large portion of the 70's. My conclusion: ER's got nothin to do with productivity it's all about "real" risk tolerance.
A lot of us have not been tested, especially we young dreamers. Right now, I check my balances about once a week, but when the market is getting pummeled, I just don't look. But my total portfolio is less than our annual gross household income, so who knows If I'd be able to do that when there are close to/above seven figures instead of barely six?
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 09:56 AM   #72
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by Laurence
A lot of us have not been tested, especially we young dreamers.* Right now, I check my balances about once a week, but when the market is getting pummeled, I just don't look.* But my total portfolio is less than our annual gross household income, so who knows If I'd be able to do that when there are close to/above seven figures instead of barely six?
No matter the value of the portfolio, when you are saving to live on income from it, looking is pretty hard NOT to do.

I lost everything (what little there was) to a divorce in 1991. I started from a negative net worth and tons of CC debt from ex-wife. I also started investing only after the debts were paid off so I feel like I started from scratch in about 1993 with a few shares here and a few there. Flash ahead to 2001 and my net worth was in the six figures. The market bubble cost me 30% of my investments and 401(k). I have made the 30% back and am gaining bit by bit each year. I am not an active investor like I used to be; more hold or adjust right now. My index fund investments have increased and I am still working on mortgages (my only debt). I check my after tax stuff a couple times a week but don't excited with the ups and downs for now. I am looking out 30+ years so I don't see the bumps that big a deal in the short run.

With 18 months, give or take, left before full ER, I am starting to move stuff around to generate income before SS. I plan on doing a 72(t) because of higher income needs right now (mortgages, college expenses, and travel plans) but expect to scale back in 5 years. Also, I don't want to get hit with a major tax bill by waiting to start taking my IRAs. I know, it is a really tough problem to have. 8) But tax containment is part of my overall plan. We have sliced and diced our expenses, income and taxes with real data and various projections on costs, taxes, inflation and market returns over the next 10 years and while we are not 100% we believe we can keep our standard of living and not work ever again unless it is on our terms.

It's good being FI.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 11:09 AM   #73
 
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by TargaDave
More than what to expect for future returns I would question people's real tolerance for volatility.* We talk a big stick about being able to weather storms yet what have we lived through? 87? the early 90's road bump? the tech bubble burst? They have been minor blips.* Most here had no sizable assets during 70's when* real returns were negative for quite some time.* All these successful ER's I read about have had an unprecedented bull market to work with. How does that go? "past results are not an indicator of future returns".

One thing I think Berstein hit square on the head was our real risk tolerance.* His analogy was the plane crash drill versus the real thing. Everyone talks a big line until they are in one and then the machismo confidence goes out the window.* I'm not talking some 1-3 yr* market blip I'm talking 15 years of negative real returns on the S&P

He made one other good point that is relevent to people on these boards.* He asked "how often do you check your portfolio?" If you check it often (who here could go 6 months without checking let alone 6 days) then your "real" (long term) risk tolerance is much less than you think. I would add that running Firecalc often is another sign of low risk tolerance.*

BTW 1-2% real on AVG sounds great compared to a large portion of the 70's.* My conclusion: ER's got nothin to do with productivity it's all about "real"* risk tolerance.
Dave

A lot of what you write is true and I have to agree with you. In fact a couple items you bring up are two of the four pillars of investing. 1.) History of the Markets and 2.) The emotional side of investing.

Knowing that markets will 'tank' and can tank for long periods of time is essential in staying the course. And then understanding that investors emotions will often do the wrong thing at the wrong time is also crucial in staying the course.

I do have to disagree with you on one large point however. I don't think being aware of your investments and running FireCalc is an indication that you'll change your your Investments when they go south. Hopefully they will change your spending. I think those of us who are aware of our investments and aware of History and our emotions would be most likely to stand there and Do Nothing. Time will tell however. I plan on doing nothing, also recognizing that as the market drops, so does the risk of being invested in it and the more likely that it will rise.

When looking at the period of 1966-82 - When the S&P 500 did nothing. It actually did quite a bit. It managed to stay even with Inflation (which was quite hefty during this period). One could say that for the last 5 years the S&P 500 has 'Lost' Money. So we are already in one of those sideways periods. Also Inflation was stated higher in the 70's than we state it today. So the S&P over the last 5 years is probably much worse than stated.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 11:31 AM   #74
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by wabmester
The Great Depression was pretty bad as economic events go. One estimate I saw was that it was approximately a once-in-400-year magnitude event.

While there's a fair chance you might see such an event in your lifetime, it is not required to have a new worst-case SWR sequence. For example, a long sideways market (like the 70's) is almost as bad as a 3-year crash like the Great Depression, as far as retirement goes. If we have a secular bear market, ER's might be screwed. If we have less upward regression to the mean after a bear, retireees might be screwed. We don't need a depression to screw us.
Someone asked on another thread "Where are the Bears?"
Looks like they are doing just fine right here. Great quote, "we don't need a depression to screw us." Just cheers me right up. Or is it just being realistic?
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 12:16 PM   #75
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by yakers
Someone asked on another thread "Where are the Bears?"
Looks like they are doing just fine right here. Great quote, "we don't need a depression to screw us." Just cheers me right up. Or is it just being realistic?
Well, I'm not a short-term bear who thinks they can time the onset of a bear market. Here is my stock-market belief system in a nutshell:

1) The stock market is basically a proxy for the economy. You're investing in GDP growth (whether you take that growth as earnings or dividends doesn't really matter).

2) The wonderful historical returns from the US stock market are a function of our growth spurts as a young aggressive country.

3) As a country, we're not as young, mobile, or hostile as we once were. Our future GDP growth and stock market returns will reflect this.

4) However, there will still be sectors that will grow faster than the overall economy. This is one area in which I strongly disagree with Bernstein -- I think you can still beat the market if you pick sectors, countries, and individual stocks that have good long-term growth characteristics. Of course, you're still making bets, but you don't have to implicitly make a bet on just US economic growth.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 02:35 PM   #76
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by TargaDave
One thing I think Berstein hit square on the head was our real risk tolerance.* His analogy was the plane crash drill versus the real thing. Everyone talks a big line until they are in one and then the machismo confidence goes out the window.* I'm not talking some 1-3 yr* market blip I'm talking 15 years of negative real returns on the S&P

He made one other good point that is relevent to people on these boards.* He asked "how often do you check your portfolio?" If you check it often (who here could go 6 months without checking let alone 6 days) then your "real" (long term) risk tolerance is much less than you think. I would add that running Firecalc often is another sign of low risk tolerance.*

BTW 1-2% real on AVG sounds great compared to a large portion of the 70's.* My conclusion: ER's got nothin to do with productivity it's all about "real"* risk tolerance.
I think you are exactly right. I've been retired a bit over 20 years, but I am well aware that they were mostly 20 years with wind at my back. One conceit that goes out the window real fast when you are actually retired is "a down market is just a buying opportunity." Well, it may be and it may not be, but unless you have an SWR of about 1%, or a federal pension, it won't necessarily look that way to us while we are in it. And don't forget, even if the main investor is a diehard, and would sleep in his car if necessary to hold on, remember he likely has a wife, who most likely would prefer a bed and some money to visit the grandkids.

I have posted this story here before, but it bears repeating I think. Back very near the final bottom in fall of 1974 I opened a brokerage account in downtown Seattle. I went in to talk with my rep-- BP was selling for $5, and I wanted to buy some. (I was employed, making good money, and just beginning to invest seriously).

In the cubicle next to me was an Eastern Washington wheat farmer crying. Now these guys live with daily risk, and they are not the crying type. But his life had been destroyed, at least as he saw it. He had retired, sold his farm, and "invested conservatively." Fat lot of good it did him. He was cooked, out of the game for good, and he knew it.

This event had a big effect on me. I know I am not as tough as he was, so I definitely want to use my imagination to try to preview various possibilities.

If I lost unrecoverable, large amounts of money, I would not only be sad, but I would feel like a real idiot. So when some young guy with various sources of income posts about how brave he is, I reflect that there is a time for all things and ol' mikey's time for bravery ain't when the S&P is at 1216.

And if the poster is not young, not truly rich, and not supported by some other income stream, I just think “Ride ‘em Cowboy! Send me a postcard when it is all over.”

Ha
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 03:24 PM   #77
 
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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In the cubicle next to me was an Eastern Washington wheat farmer crying. Now these guys live with daily risk, and they are not the crying type. But his life had been destroyed, at least as he saw it. He had retired, sold his farm, and "invested conservatively." Fat lot of good it did him. He was cooked, out of the game for good, and he knew it.
Mikey,

Obviously not conservative enough. I'd like to hear the guy's portfolio details!

Run FireClac with all the defaults(75% stock)* and assume retiring in 1962 - with your $650K.* At the end of 1974, you'd still have over $620K!* - And real Bigtime Inflation had not even kicked in by then. If the guy actually retired in 1973, he'd still have $450K at the close of 1974 ! - A 30% hit, bad?, yes but Hardly someone would have been cooked, if they did this! What he probably did that day was sold at the low point.

I'm sure this guy was crying but for a different reason than being conservatively invested!* - He was into something far risker than a diversified 75/25 stock portfolio, if he truly lost almost everything and really was 'cooked'.

Diversification is the message here. Not - Do not invest in the Stock Market! - Yes it has risk, therefore it has possible returns. No one is telling you that you have to be invested in the Market, but that does not mean that it rules it out for everyone else.
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 03:39 PM   #78
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by Cut-Throat
No one is telling you that you have to be invested in the Market, but that does not mean that it rules it out for everyone else.
Well, it isn't even ruled out for me. At present, I don't have much in diversified S&P stocks, though I do have some individual stocks that are also in the S&P. Overall, I have 50% fixed income, more than I have ever had in my entire investing life.

By the way, nothing I write should ever be construed as trying to influence anyone to do or not do anything. I see this as a free forum to share ideas. I see the behaviors that people follow as being entirely separate, and to some extent part of an interesting Darwinian experiment.

Then there is the sheer enjoyment of words. Never put much faith in those, ever.

Ha
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 03:47 PM   #79
 
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Re: NEWSFLASH: Bernstein slams early retirement!!!

Quote:
Originally Posted by HaHa
Well, it isn't even ruled out for me. At present, I don't have much in diversified S&P stocks, though I do have some individual stocks that are also in the S&P. Overall, I have 50% fixed income, more than I have ever had in my entire investing life.

By the way, nothing I write should ever be construed as trying to influence anyone to do or not do anything. I see this as a free forum to share ideas. I see the behaviors that people follow as being entirely separate, and to some extent part of an interesting Darwinian experiment.

Then there is the sheer enjoyment of words. Never put much faith in those, ever.

Ha

BTW - I Even ran the FIRECalc numbers with 75% stocks which are wayyyy to risky for me. I ran the numbers again with 50% stocks and the guy would still have had $520K at the end of 1974! - I've seen worse than this!

And like you, I am close to 55% stocks, but then again I am younger. The other is in Short Term Bonds and Fixed.

My gut cannot take individual stocks any more. I once took a $175K hit on one individual stock. And this was after I retired. Granted I did not lose money. I still made money after I sold. But the $175K did disappear from my balance sheet after I retired
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Re: NEWSFLASH: Bernstein slams early retirement!!!
Old 09-23-2005, 04:06 PM   #80
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Re: NEWSFLASH: Bernstein slams early retirement!!!

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Originally Posted by davew894
This seems like an easily quantifiable argument.* When I run firecalc on having $1,000,000 with a 4% withdrawal rate, many scenarios have my portfolio increasing many times the original investment, in spite of living on 4% withdrawals each year.* It's more than I'd ever have if I kept working, paying for non-deductible things like cars and gasoline for work and shouldering an enormous tax burden... all while working 60+ hours a week.*

Obviously, it's not a guarantee, but the odds are in favor of that kind of long-term asset growth living in the ultra-capitalist US society.*

To me, I cannot afford not to ER.
Give this man a Nobel Prize. He has just repealed entropy.

Ha
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