Here are some quotes from prior posts in this thread alone: ......
But that is a lot of "ifs".
But what probability would you assign to the stock and bond market future being exactly like the past? 100%, 80%, 50%, 20%? Did Japan have a long term stock meltdown before they had a long term stock meltdown?
Is there zero chance that a large equity portfolio might underperform a more conservative portfolio?
Well, aren't there a lot of 'ifs' in any outlook for the future? Aren't there just as many 'ifs' relying on fixed income? Inflation, interest rates, bond defaults? And the biggest 'if' for many would be 'if' I can save ~ 1.8X more money (before I die or get too old to enjoy retirement)? Of course there is a chance that a 75/25 AA could under-perform a 0/100 AA over a 35~45 year period. But history shows the 0/100 AA portfolios to fail at a much higher rate than 75/25 - maybe I should not expect that to continue, but why would I expect it not to continue?
And let's remember, when looking at FIRECalc results, we are dealing with the
failures, the very
worst times in history. There seems to be a feeling that 'bad times' mean bad outcomes for stock investors, but it is these periods where stocks helped. So it isn't really a matter of whether 0/100 AA ever outperformed a 75/25 AA - the question is which held up better in bad times.
Also I am trying to reconcile the above statements based on Firecalc vs. Bill Bernstein calling stocks in retirement "nuclear toxic", Rob Arnott's article and charts on the biggest urban legend in finance, and Robert Powell's article on sequence of returns risk in retirement -
....
This article and the others I mentioned make a lot of sense to me.
Well, I didn't read every word, but I found there was some (odd to me) 'framing' of the scenarios. It looks like Bernstein's 'toxic' comment is tied to the comment of selling at the bottom during a crisis. Well, if you think your mindset would have you selling at the bottom, then you probably shouldn't own a high % of equities. But as we've pointed out, history indicates you'll need to start with a lot more money. But this might be the right choice for some.
He's also framing things in terms of 4%-5% WR. That seems odd if we are having a conversation about 'conservative' strategies. And where does this come from?
So if you have a long series of bad returns, plus you're withdrawing 4% or 5% of your portfolio to live on it, then in 10 to 12 years, you may not have anything left.
Using the extreme end of his numbers, a FIRECalc run shows zero failures in 12 years @ 5% WR and 75/25 AA, or even 100/0 AA for that matter. Even a 6.1% WR and 75/25 had zero failures in 12 years. Where is he getting these numbers?
And if you think he doesn't 'trust' history, how about this:
It's true that real yields right now are historically low, but as a student of financial history I have to believe that's not going to last forever.
I'm not impressed if he ignores history to make a point, and then uses history to when it suits him.
So after writing all this, I guess I'm actually confused about just what it is you are trying to say. I have a feeling we actually agree on a lot, but the words are getting in the way. Maybe a direct question will clear it up:
Are you saying that over a 35-40-45 year period, that at a given WR, you expect a 0/100 AA to fail fewer times than a 75/25 AA?
But if you are agreeing that a 0/100 also means you need to drop the WR considerably to remain 'safe', OK, but that is not apples-apples, and then there are some interesting numbers that can be compared.
OK, I looked back at an earlier post from you where you talked abut reducing expenses, or having different sources of income, including employment. Well sure, any money you don't pull from the portfolio will help the portfolio survive. But that has nothing to do with whether a portfolio with a given WR can be expected to survive better with 0/100 or 75/25.
OK, one more comment to maybe help with communication. I
do not consider a 0/100 AA to be 'conservative', for the very fact that it historically it won't survive even a relatively modest WR over a long period. I do consider lowering your WR% (either by cutting expenses, other income sources, or with a larger portfolio) to be conservative.
-ERD50