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07-09-2014, 07:42 AM
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#42
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 1,085
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Quote:
Originally Posted by Huston55
Does that mean you only have a 4% chance ( 0.4x0.1 ) of having to worry about it?
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That's how I would look at it.
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07-09-2014, 07:59 AM
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#43
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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Red vs. Blue
Couldn't restrain myself, so what I did is plot the Market Cap / World GDP ratio in blue (left axis) and overlay it with the global stock market return in red (right axis) for three years afterwards.
I was surprised with the results. Note that right y-axis is inverted.
Not a perfect match, but it does rhyme.
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07-09-2014, 10:36 AM
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#44
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Thinks s/he gets paid by the post
Join Date: Apr 2013
Location: Ormond Beach
Posts: 1,407
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Quote:
Originally Posted by ejman
With the extensive LBYM training most of us had to get thru to obtain the ER badge I suspect the great unwashed majority at this forum (moi included) would have absolutely no trouble adjusting the withdrawal rate way down if conditions require it. I'm probably not the only one here that basically looks at the 4% rule as THE TOP of my allowable withdrawal range.
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That is exactly the way I look at it. 4% is WAY more than I spend now, and I could easily go lower than what I spend today if market conditions require it.
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07-10-2014, 04:00 AM
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#45
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2005
Posts: 6,192
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4% is a hypothetical amount in a lab like gas milage ratings used to be. they are a constant for comparing scenerios.
in the real world it has been found retirees do not need yearly inflation adjusting. retiree spending is more smile shape.
early years have lots of going and doing , then a fall off by a lot happens for a while and by 80 we ramp up again with healthcare costs.
historically 6.50% was the average safe withdrawal rate if the 2 worst time frames were eliminated.
once you remove the constant inflation adjusting and couple that with dynamic spending the picture is very different in the real world.
michael kitces thinks we need anywhere from 10-30% less savings then we predict using the 4% rule because of the drop in spending and lessening effect of needing constant inflation adjusting.
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07-10-2014, 05:41 AM
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#46
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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Quote:
Originally Posted by Totoro
Couldn't restrain myself, so what I did is plot the Market Cap / World GDP ratio in blue (left axis) and overlay it with the global stock market return in red (right axis) for three years afterwards.
I was surprised with the results. Note that right y-axis is inverted.
Not a perfect match, but it does rhyme.
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Why 3 yrs afterward? Is it just to make the curve fit or, is there a real relationship tied to that timeframe?
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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07-10-2014, 06:22 AM
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#47
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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Quote:
Originally Posted by Huston55
Why 3 yrs afterward? Is it just to make the curve fit or, is there a real relationship tied to that timeframe?
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I just thought that three to five years is a reasonable timeframe for tactical asset allocation purposes (aka market timing ).
Since you asked, this is what five year looks like
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07-10-2014, 10:14 AM
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#48
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,495
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Quote:
Originally Posted by haha
Buffet has become a cheerleader for the market and for bureaucracy. THE S&P is overvalued by his own stated favorite measure, the ratio of stock prices to GDP.
Ha
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Exactly. Which is why I said, "who to believe?". Otar's work seems to validate the 4% rule, based on his sustainable withdrawal rates. Of course he uses market history (" afcasting") in all his calculations. Although he has his own calculator, in some of his statements he appears to have no issue with FIRECALC, perhaps even endorses it.
Even after reading Pfau's papers and blog, I still have trouble with using valuations as a type of forecasting. Who knows? Perhaps I'm a diehard Boglehead. That, and since my WR is around 2.6%, I'm not going to worry about valuations or try to time the market in any way. FIRECALC shows at minimum I'll have 6 figures end of PF life. I agree with Otar the best defense against the uncertainties of retirement is to maintain withdrawals below the PF SWR.
The other defense is to just never stop working, and I think I'll pass on that.
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