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Old 09-21-2008, 12:30 AM   #61
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Finished the book. I concluded I knew everything they were preaching. However for someone being clueless it wouldn't be a bad read.


Peace
Speaking on behalf of the clueless, we'll find out. Just picked up a copy from my local Army library.
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Old 12-07-2008, 04:45 AM   #62
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{Bump} Pulling this one back up.

I am beginning to read STTE now.

In light of the events in the last few months how does the wisdom from the book and the ESPlanner stack up now?

Any cracks in its approach?
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Old 12-07-2008, 06:10 AM   #63
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{Bump} Pulling this one back up.

I am beginning to read STTE now.

In light of the events in the last few months how does the wisdom from the book and the ESPlanner stack up now?

Any cracks in its approach?
The software has two ways of figuring out portfolio "growth." One is the standard X% return with Y% inflation. It can be "historical" or user input. For more money, you can get the Monte Carlo version. I really don't see how this makes any great predictor of our recent meltdown.

The value of STTE is really philosophical. It shows how the young are capital poor but have a long amount of earning years ahead of them. They "need" the housing and "things" to go out into the world, marry and raise children. The old have fewer (or no) earning years ahead and are in the contraction phase. They are free to shed capital because it's no longer "needed" to raise their family.

The whole concept involves "consumption smoothing" and goes against the mantra that everyone needs to save 10% or more of their income for retirement from Day 1. They show that it is better for the workers entering the workforce to establish themselves financially before saving for retirement.

They also make a point out of showing the 80% of pre-retirement earnings needed for retirement spending is not correct for most people.
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Old 12-07-2008, 06:35 AM   #64
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The software has two ways of figuring out portfolio "growth." One is the standard X% return with Y% inflation. It can be "historical" or user input. For more money, you can get the Monte Carlo version. I really don't see how this makes any great predictor of our recent meltdown.
Yes. I did not thing the book was about specific investment advice... but illuminates the topic of risk in terms of maintaining a lifestyle and how to think about it and manage it.

I was thinking that this downturn may have affected how people think and are approaching FI and management of it. (e.g., It looked a certain way last summer... things look different now). Have your interpretation changed about the ideas put forward in the book.

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The value of STTE is really philosophical. It shows how the young are capital poor but have a long amount of earning years ahead of them. They "need" the housing and "things" to go out into the world, marry and raise children. The old have fewer (or no) earning years ahead and are in the contraction phase. They are free to shed capital because it's no longer "needed" to raise their family.

The whole concept involves "consumption smoothing" and goes against the mantra that everyone needs to save 10% or more of their income for retirement from Day 1. They show that it is better for the workers entering the workforce to establish themselves financially before saving for retirement.

They also make a point out of showing the 80% of pre-retirement earnings needed for retirement spending is not correct for most people.

I am in the transition stage of ER. We have what we have and I am endeavoring to better understand the spending phase.

I have been using about 100% of my earnings as a benchmark for income in ER (but not including DW's earnings). But we only spend about 60% of my earnings today and that includes paying the mortgage. We intend to have the house paid off when we ER. After the mortgage, we probably only spend about 45% of my current income.

Obviously we were in much better financial shape (on paper) 12 months ago. Last year, I was doing modest projections and was thinking, we have a surplus... So I was not looking too closely at the consumption side. But now our total portfolio is off by about 30% (much money), I am taking a closer look. I am doing more analysis using my method... But I suspect my method is lacking because it involve certain generalizations.

I am hoping the book will help me to think about things I have not considered.

One area I am coming to grips with is the idea of my goal. It took me a while to figure it out... but my goal is not to become rich (although I would like to )... My goal is to maintain my standard of living. To that end.... am I taking too much risk? Or am I forgoing spending on products and services that DW and I might otherwise purchase?

I am hoping the book will shed light on those concepts.



Did you think ESPlanner was a worthwhile purchase? Has it helped you in making decisions or show you where you need to adjust.
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Old 12-07-2008, 08:54 AM   #65
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Have your interpretation changed about the ideas put forward in the book.

I have been using about 100% of my earnings as a benchmark for income in ER (but not including DW's earnings). But we only spend about 60% of my earnings today and that includes paying the mortgage. We intend to have the house paid off when we ER. After the mortgage, we probably only spend about 45% of my current income.

Obviously we were in much better financial shape (on paper) 12 months ago. Last year, I was doing modest projections and was thinking, we have a surplus... So I was not looking too closely at the consumption side. But now our total portfolio is off by about 30% (much money), I am taking a closer look. I am doing more analysis using my method... But I suspect my method is lacking because it involve certain generalizations.

Did you think ESPlanner was a worthwhile purchase? Has it helped you in making decisions or show you where you need to adjust.
My ideas about money haven't changed since reading the book. I didn't think it was as much about money as spending patterns during a lifespan.

Since you are living on 45% of your income, why are you fretting about planning to have 100%? If anything, your spending will decrease as you age except for medical care. The type of medical coverage you have in retirement will determine by how much it will go up. I'd suggest establishing a realistic retirement budget and go from there.

At my low point I was down about 30% and now a little under 25%. I was FI before the fall and I'm still FI. I am glad I decided to put into fixed income a basic amount to assure I stay FI. For anyone going into ER I would recommend a similar approach. My AA was more driven by this dollar amount than any risk assessment.

As far as your SWR, I'm going to start a thread about Scott Burns' latest column if someone already hasn't.

I never bought the book. I checked it out of the library. I buy very few books.
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Old 12-07-2008, 01:15 PM   #66
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One of the interesting facts in the book is the lifetime value of a daily latte from $tarbucks. This is apparently equal to the price of a BMW 325i.

The concept of smoothing is interesting, However, I think the execution is difficult. When your children are young, and you are house poor and trying to save for college expenses, there is no way to spend then some of the excess funds you may have as an empty nestor at age 55. And, the parsimonious skills you develop to cope with those thin years create habits of non-spending that are difficult to change if life turns better for you later on.
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Old 12-08-2008, 03:14 AM   #67
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...

Since you are living on 45% of your income, why are you fretting about planning to have 100%? If anything, your spending will decrease as you age except for medical care. The type of medical coverage you have in retirement will determine by how much it will go up. I'd suggest establishing a realistic retirement budget and go from there.
...
I think we have a realistic budget. Plus assets and resources to cover our expenses. I am very confident that we have resources to cover the budget (even with this market decline). But we need to wait till 55 for certain resources to be available (i.e., my pension and Ret Healthcare).

If I were to express my concerns... it is more around contingency planning to ensure that we have planned appropriately.

Conversely, I do not want to hoard money that we could be spending.

Although, I know that executing the plan will require adjustments as things unfold.

I am reading the book now. I am hoping the time investment reading the book will yield some worthwhile insight. But I realize that it might just be a theoretical academic read that provides little practical value... or just restates already know common sense advice.
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Old 12-08-2008, 09:01 AM   #68
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why are you fretting about planning to have 100%? If anything, your spending will decrease as you age except for medical care.
I see this suggestion almost everywhere. Yet, it is not what I have observed in the older folks I know. Those living on fixed incomes that were forced to spend less, did indeed do so. Those with sufficient means seemed to spend more every year as they make greater use of services for things they no longer do themselves. Those that travel and used to be adventurous about finding hotels off the beaten path, now tend to stay in major cities and increasingly luxurious hotels. Instead of driving, they start to use more taxi or hired car services. I know folks with a small summer place. They used to do all the work there themselves, but gradually they started having a cleaning service help them, then a handyman for major repairs, now snow removal and opening/closing for the season. I'm glad they can still enjoy the place, but expenses are definitely rising, not falling, as they age.
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Old 12-09-2008, 04:52 AM   #69
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I see this suggestion almost everywhere. Yet, it is not what I have observed in the older folks I know.
You quoted me and it's based on my personal observation and Bernicke's study. I've watched both my father and my in-laws decrease spending as they aged.

In my father's case he retired broke and barely survived on his pension. When he died 14 years later, he had money in the bank, a paid off condo and had been supplementing one of my brother's lifestyle. As he got into the mid-70s he essentially stopped traveling and spent time with his buddies at a senior center. He read and watched movies a lot.

Everyone is different. There are cases where people are mountain climbing in their 90s and tour Europe twice a year. I think these are outside the norm.

When you plan for retirement, your spending pattern over the rest of your life can be a major consideration. It's almost as important as planning how long you expect to live so you'll have money left when you do die. If you plan on living to 100 with a 100% budget for every one of those years you need a larger nest egg than if you are willing to consider a lower desire for things and stuff as you age.
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