Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: PBS Frontline - Can You Afford to Retire?
Old 05-18-2006, 12:52 PM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Originally Posted by justin
So in other words you don't use FIREcalc to estimate a safe withdrawal rate?

Most here assume 4% SWR to be very safe. I would posit that the 3% fixed SWR plus 2% variable SWR is similarly safe. Now if you don't believe that 4% SWR is safe, that is a different discussion that has been discussed here before. Based on historical market returns over the last century or so, and assuming the future is no worse than the past, 4% is "safe".
Justin,
Yes, I use FIREcalc to estimate a safe withdrawal rate. I use the new version which allows use of a % of the portfolio every year, with a "floor" reduction amount of a specified percent of last year's withdrawal (aka "ESRBob's 95%" method). I believe it makes a lot of sense and that it better replicates the way folks will really behave in retirement.
To me, taking a fixed amount and adjusting for inflation each year, irrespective of the remaining value of the portfolio, is not a prudent way to manage my withdrawals. Yes, it is good to know that 4% fixed at the begenning and adjusted only for inflation has historically worked. But I'm much more comfortable adjusting withdrawals as I go based on how my account is doing so I don't get into a hole from which recovery is impossible. To me, taking a fixed amount and adjusting for inflation (even 3% , then a variable rate of a percent or two) would be like setting off on a 500 mile cross country flight, setting a course, and then not looking out the window again or crosschecking other sources. "Okay, I set the right course and stayed directly on it, the book said that with the winds others have experienced before that this course would have worked 95% of the time." After flying the required time, I just don't think I'd magically see the airport right off the nose. I'd be much more comfortable checking my progress against a map every few miles and adjusting as required.

I do think your use of the variable component with a smaller fixed withdrawal has an advantage over the straight fixed withdrawal, but I wouldn't go with any fixed amount--the effects of an error in its size , compounded over decades, will be huge. If (as some folks do) we accept this problem and say we'll reset the fixed amount every few years (based on the existing portfolio size--just like you do the first year), then why not go all the way and re-adjust it every year for this same reason?

I think we've probably killed this issue.
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: PBS Frontline - Can You Afford to Retire?
Old 05-18-2006, 03:17 PM   #42
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
Re: PBS Frontline - Can You Afford to Retire?

Sam
Nice post explaining well the downside of withdrawing a fixed % during bad year. I am currently looking at what I will do when in retirement so my decision is not made.

The drawback of the yearly adjustment to current value is that your postfolio will not be growing as fast compared to the fixed method. ie if you widthdraw during good years the subsequent lean years could be a lot leaner.

We historically know that most years will be good years and the fixed SWR lends to a much higher portfolio value over time. So after 10 years of growth what the Heck a down year will not matter.
If you got used to spend a lot, go into a long term debt situaiton while withdrwaing to your current portfolio value that's another story...

A good solution is to use minimum of the initial or current value or a hybrid solution.

__________________

__________________
perinova is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-18-2006, 08:33 PM   #43
Recycles dryer sheets
obryanjf's Avatar
 
Join Date: May 2005
Location: Owensboro, KY
Posts: 138
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Originally Posted by perinova
The drawback of the yearly adjustment to current value is that your postfolio will not be growing as fast compared to the fixed method. ie if you widthdraw during good years the subsequent lean years could be a lot leaner.

We historically know that most years will be good years and the fixed SWR lends to a much higher portfolio value over time. So after 10 years of growth what the Heck a down year will not matter.
I would state it a bit differently, Using 4% Fixed and 4% Hybrid, the fixed leads to higher terminal values because the hybrid enables increased withdrawls when the markets are good, which has an upward bias over the long term. The fixed withdrawls are locked in at retirement time with no feedback from the portfolio growth. More consumption now equals less later.

However we seem to be to be talking about 4% Fixed and ~5% Hybrid which is apples and oranges in terms of terminal values and purchasing power risk, but nearly similar in terms of success rates. In this case the Hybrid allows higher absolute withdrawls with the trade off being the on average lower terminal value (less estate for kids). Works for me.

I'll bore you with another and perhaps final graph.

job


__________________
obryanjf is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-18-2006, 10:24 PM   #44
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
Re: PBS Frontline - Can You Afford to Retire?

This is GREAT graph showing the paradoxal tread-off we are facing:
higher portfolio values but higher risk of failure - or the opposite.
The Guyton and Hybrid methods are a middle of the road solutions.

Another interesting feature can be the average consumptyion vs the withdrawal rates. As the variable withdrawal rate increases, above a certain point, the average consumption is actually lower over the considered 40 years.

I had graphed this in he past using historical data. I had found the optimum consumption with the Variable rate only around .5% and the fixed portion could be adjusted depending on the desired safety. My computations are certainly not as sofisticated as yours so I might not right about that.
If someone has an idea about this optimum value please chime in.
__________________
perinova is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-18-2006, 11:20 PM   #45
Recycles dryer sheets
Papi's Avatar
 
Join Date: Jan 2006
Posts: 90
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Originally Posted by Nords
Well, your productivity will never rise if you're still programming in C++.* Although it's nice to see that not all the COBOL & C++ programmers have left us...
Nords, you have been ER'd too long C++ is probably still the top programming language. I don't know about Cobol, don't even know anyone that uses it. I have many engineer buddies around the US and they all have jobs using C++. Only a couple use Java. Were you a Cobol programmer in a past life?

As for productivity, mine went through the roof in 1989 when the company I was with switched from C to C++. But in all honesty, it is the engineer that dictates the productivity, not the programming language.
__________________
Here's to FIRE http://www.bloodydecks.com/forums/im...s/beerchug.gif
Papi is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-19-2006, 06:46 PM   #46
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Originally Posted by Papi
Nords, you have been ER'd too long* * C++ is probably still the top programming language.* I don't know about Cobol, don't even know anyone that uses it.* I have many engineer buddies around the US and they all have jobs using C++.* Only a couple use Java.* Were you a Cobol programmer in a past life?
As for productivity, mine went through the roof in 1989 when the company I was with switched from C to C++.* But in all honesty, it is the engineer that dictates the productivity, not the programming language.
No C++ experience, C & LISP quenched my thirst for higher education.

I know COBOL from Monterey and the legendary Grace Hopper stories but I don't have any programming experience in that one. My sister-in-law has been programming COBOL for over 20 years (I think she's 45 now). She has lifetime employment with BG&E (or whatever the company is called now), although I sure hope that's not the code controlling their utility distribution grid. During 1999 she was sent home with a laptop, a free broadband login, and an expense account-- and told not to come back to work until the company was Y2K compliant. Best year she ever had.

I just wonder how much of what has been optimized for C++ compilation can be done even more quickly in PHP or Java or other modern languages. I'm still pissed at DoD for having to learn Ada...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-20-2006, 11:50 AM   #47
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,631
Re: PBS Frontline - Can You Afford to Retire?

Ha! I learned assembly (8086), Fortran, and Cobol in college. I did sign up for an Ada class, but it was cancelled.
__________________
Bimmerbill is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-20-2006, 11:56 AM   #48
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,631
Re: PBS Frontline - Can You Afford to Retire?

Oh, and I finally watched Frontline last night, thanks Tivo!

I thought it was a good program. I found the comments about the best paid people earning the best returns (% wise), and the worst paid people earning the worst returns very interesting.

Wonder why? It can't be all education. Maybe interest in financials?
__________________
Bimmerbill is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-20-2006, 01:53 PM   #49
Full time employment: Posting here.
Arif's Avatar
 
Join Date: Jun 2005
Posts: 761
Re: PBS Frontline - Can You Afford to Retire?

For those that are out of the country and don't get PBS or just happened to miss the program it is on their website at: http://www.pbs.org/wgbh/pages/frontl...tirement/view/

I did find the historical portion about how the companies transitioned more and more of the burden onto the employee. I think most folks are unrealistic as for what they want the company to do for them (not counting the promises made by the company) for instance, IIRC they had a survey and overwhemingly the employees would rather the company handle their 401k. Let me get this straight, the same folks who bankrupt the company would be the entity of choice to manage something as important as their retirement funds.

When I was in the Army we invested 50% of our income. Not because our pension might not be there after 20 years but because stuff happens and I like to have choices. If we said "shoot uncle sam will give us a pension we don't have to worry about it" we would still be working fulltime now. Nothing like options.
__________________
You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes.
Arif is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-20-2006, 08:15 PM   #50
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,487
Re: PBS Frontline - Can You Afford to Retire?

just an observation: retirement as we know it (or would like to have it) is a relatively recent phenomenon. is there any reason to believe it is an inalienable right?
__________________
d is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-20-2006, 08:36 PM   #51
Recycles dryer sheets
perinova's Avatar
 
Join Date: Apr 2006
Posts: 424
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Originally Posted by d
just an observation: retirement as we know it (or would like to have it) is a relatively recent phenomenon. is there any reason to believe it is an inalienable right?
In the course of human development people asked the same question about health, human rights, right to shelter, to security etc... The question are answered when wants became needs. Is being connected to running water and electricity an inalienable right?

Even more complex: How about access to education?

Today one might answer unquestionably that retirement is an inalieable right when you are not able to hold a job any more due to frail physicla health or diminished mental ability. If you are still able: retirement is for those who can afford it just a nice vacation or an expensive bottle of wine.
__________________
perinova is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-20-2006, 11:47 PM   #52
Thinks s/he gets paid by the post
SteveR's Avatar
 
Join Date: Jul 2005
Posts: 2,803
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Originally Posted by d
just an observation:* retirement as we know it (or would like to have it) is a relatively recent phenomenon.* is there any reason to believe it is an inalienable right?
I earned my retirement the old fashioned way. I worked for a mega corp. for over 32 years while saving both inside my 401k plan and outside of it in about equal amounts. Were it not for my ex-wife taking half my retirement benefits, I would already be in ER. My "right" to retirement is being FI. I earned my ticket to ER by saving, investing and through debt self control. Nobody owes me anything. SS is a tax and I have been paying lots of taxes all my life with no expectation of every getting a direct monetary reward from them. And yes, I do know about funding of road, public schools, national defence etc. that I "enjoy" the rewards of each day. I am talking about food stamps, welfare, free medical, etc. that I will never see. I don't bedgrude those that truly need these things and I am truly thankful I am FI so I don't have to suck on the public teat.

I just don't see a paid retirement as an inalienable right....you work for it.
__________________
Work? I don't have time to work....I'm retired.
SteveR is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-27-2006, 10:30 AM   #53
Recycles dryer sheets
 
Join Date: Mar 2005
Posts: 75
Re: PBS Frontline - Can You Afford to Retire?

Anyone notice the COBOL adds at the bottom of the page?
__________________
Chris24 is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-31-2006, 08:39 AM   #54
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,137
Re: PBS Frontline - Can You Afford to Retire?

The Frontline documentary seems to have created some debate on whether the program "...work to shock nonsavers into action or does it freeze them in the headlights?"

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-31-2006, 08:46 AM   #55
Thinks s/he gets paid by the post
maddythebeagle's Avatar
 
Join Date: Jun 2005
Posts: 2,450
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Anyone notice the COBOL adds at the bottom of the page?
yep, those ads sure are smart. Maybe we should change the subject and talk about porn and see what we get
__________________
- Hurry! to the cliffs of insanity!
maddythebeagle is offline   Reply With Quote
Re: PBS Frontline - Can You Afford to Retire?
Old 05-31-2006, 09:32 AM   #56
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: PBS Frontline - Can You Afford to Retire?

Quote:
Originally Posted by REWahoo!
The Frontline documentary seems to have created some debate...
Spouse spent a lot of time on travel discussing ER with a fence-sitting shipmate and then returned home to watch that Frontline show. She doesn't obsess get as much exposure to these topics as I do but she knows the basics, and she was alternately fascinated & disgusted at their portrayal of the 401(k) system. To her the scariest parts of the show weren't about UAL but the level of worker ignorance, followed by the degree to which the 401(k) system wastes its assets on expenses.

Sounds like automatic enrollment in a target-retirement fund is the best default for those who don't (or can't or won't) help themselves.

Otherwise the show hasn't come up for discussion. It never occurred to anyone that it'd be an important-enough topic to watch.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I want to retire..but can I afford it? mikeL Hi, I am... 20 04-24-2008 12:54 PM
500 search phrases for 2006 dory36 Other topics 2 01-16-2007 08:00 AM
PBS Frontline Show - Can You afford to Retire dex FIRE and Money 2 01-13-2007 07:38 AM
PBS FRONTLINE. *American troops in Iraq newellcr Other topics 0 02-18-2005 09:35 AM

 

 
All times are GMT -6. The time now is 10:08 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.