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Old 10-06-2011, 01:35 AM   #41
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I think our biggest risk is a decade of inflation following this period of low equity returns. We had the market collapse of the late 60's early 70's followed by the inflation of the 70's. I believe FireCalc's worst time to retire is 1967.
I agree that inflation (NOT hyper-inflation) will be a growing threat to FIRE portfolios during the next decade.
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Old 10-06-2011, 07:54 AM   #42
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I agree that inflation (NOT hyper-inflation) will be a growing threat to FIRE portfolios during the next decade.
I remember the 70's. I lost a bundle (at the time) in a long term bond fund when interest rates went from about 5% to over 15%. I've converted all of my fixed income to less than 3 years and in individual bonds. I think we'll see significant inflation in my life time. FireCalc has these episodes built in so you just have to go with the flow.

Yes Virginia. There is a very good chance of inflation in our future but there ain't no Santa Claus.
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Old 10-06-2011, 01:17 PM   #43
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I remember the 70's. I lost a bundle (at the time) in a long term bond fund when interest rates went from about 5% to over 15%. I've converted all of my fixed income to less than 3 years and in individual bonds. I think we'll see significant inflation in my life time. FireCalc has these episodes built in so you just have to go with the flow.

Yes Virginia. There is a very good chance of inflation in our future but there ain't no Santa Claus.
I agree that holding bonds or bond funds with long durations might be painful during inflationary times.

But, my real intent in saying that inflation will likely be a challenge going forward is to point out that rising prices and corresponding increases in WR's can be devastating to a FIRE portfolio. If you wish to maintain your standard of living during a decade of moderate inflation, you might be increasing your withdrawal rate by 50% or more...... That's what killed FIRE portfolios in the 70's.

And unlike periods of crappy investment performance, the impact of inflation seldom corrects itself. Prices go up and eventually stabilize or at least reduce the rate of increase, but they very seldom "recover" to lower levels. This can be seen by looking at the BLS site and noting that there are near zero periods of deflation.
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Old 10-07-2011, 08:05 AM   #44
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Have you looked at the German program?

When the economy was falling, they paid companies to retain workers rather than fire them.

Job-Sharing in Germany, Unemployment Checks in the U.S. | The Washington Independent
Thanks for the link - it does seem to have some positives. There's got to be a better way than what we are doing.


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Old 10-07-2011, 11:24 PM   #45
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I've often wondered and suspected if all these retirement calculators I've been using are giving me numbers that are a bit rosier than I should expect, in terms of accumulation. If I actually hit my target #, Firecalc shows good things, but getting there by the time I hit 45 is the big question for me, and was for others when I posted more about my plan.

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Have you looked at the German program?

When the economy was falling, they paid companies to retain workers rather than fire them.

Job-Sharing in Germany, Unemployment Checks in the U.S. | The Washington Independent
NPR's Planet money had a nice podcast on the concept of German mini-jobs and how they reformed unemployment, you may be interested: The Friday Podcast: Germany's Painful Solution To High Unemployment : Planet Money : NPR
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Old 10-07-2011, 11:32 PM   #46
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NPR's Planet money had a nice podcast on the concept of German mini-jobs and how they reformed unemployment, you may be interested: The Friday Podcast: Germany's Painful Solution To High Unemployment : Planet Money : NPR
I don't envy them for having to integrate East Germany into their economy, and I'm wondering if they're still recovering from that hangover.

Imagine if the U.S. had to cover Mexico's debts with large injections of govt subsidies, and then find jobs for their workers. Hey, waitaminnit...
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Old 10-08-2011, 02:39 PM   #47
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she was not aware of Firecalc
Wonder how she qualified as a financial writer?
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Old 10-09-2011, 10:23 AM   #48
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+1
I'm old enough to remember that article.
I was a USNA midshipman, and I remember discussing that article with another mid who was investing his "portfolio" in unset diamonds & gold bullion. At the time I was very impressed that he could have his own broker.

Today? Well... I think he's still working.
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