The 4% article that started it all?

[cute fuzzy bunny]

And end up living in group homes or in their kids spare rooms, washing off tin foil and plastic wrap.

But you never know. Bonds may outperform stocks for the next 20 years for all we know.

Yeah TH, nobody knows the future. That's what makes it interesting don't you think. I was always pretty
conservative in my investing. Once I saw I could make it until my demise, I turned superconservative. Now,
I realize some would feel my heavy stake in real estate
refutes that. However, the right real estate in the right
location looks very safe to me. And, with no common
stocks, I need some inflation protection. In any case,
it's workin' so far.

John Galt

[cute fuzzy bunny]

And both of us having working wives doesnt hurt much either...does it

Isnt that the same as a cola'd pension? Except you have to do all the laundry and vacuuming to receive the full benefit?

[unclemick]

I shall remain true to DeGaul and the Norwegian widow.

Heh heh heh heh heh heh heh heh heh

o.k. o.k. - better late than never - got Four Pillars and Birth of Plenty today - early birthday present and I - who doesn't recommend reading investment books 'is gonna' read them while waiting for the third one to arrive - rumored to be about Yogi Berra's famous quotes - a 'real' investment classic.

Yeah TH, having a workin' wife is a MAJOR plus for sure.
I can handle the pet care, laundry, vacuuming, dishes, windows, lawn care, vehicle maintenance, etc. The bedroom is another story, but I am saving that stuff
for my memoirs

John Galt

[Jarhead*]

John Galt:
Thanks for not sharing

You're welcome.

John Galt

[trumpeting_angel]

Well, I see I've arrived too late in the thread for this, but I'll confess: I am a published author in The Mother Earth News. (recipes)

I went to a progressive college in rural Vermont during the back-to-the-land movement of the early 70's. We were frugal by necessity, though, graduating during a severe recession and wanting to stay in rural Vermont. Good thing we were into the back-to-nature thing because I bought a freezer for $15 and froze a whole lot of stuff from the garden, became an expert at cooking with beans (thus, a recipe article was born), and chopped a lot of wood.

I couldn't take the worrying, though, about whether or not we could manage the mortgage (get this - $150.00!!!) and, especially, the heating bill each month. Ended up moving to higher-paying jobs.

Good practice, though, for keeping the expenses down and not wasting money. When there's none to waste, it starts to come naturally!

Anne
Flying to San Francisco in the morning!

[cute fuzzy bunny]

The bedroom is another story, but I am saving that stuff
for my memoirs

Good, your wife was wondering what you're saving it for. I'll pass that along

Hey Anne, wave as you fly overhead. In fact I think you're going to fly over or by at least a half dozen of us!

We'll expect a full trip report when you get back, along with a timely expense report.

RE: YOUR MONEY OR YOUR LIFE, ect. A combination of I bonds, TIPS and Canadian inflation-indexed bonds gives a SWR of 5% over 30 years with little investment expense to speak of. 5% certain or 4-4.5% maybe... Hope I'm around long enough to spend it all- guess there's always something to meditate on!

[cute fuzzy bunny]

That works pretty good if you dont live longer than 30 years.

What you really have there is an inflation adjusted ~2% return plus portfolio consumption.

At 42 with a healthy 70 year old father and two grandfathers that lived past 90, I think I'll stick with good asset allocation and a survivable portfolio.

If theres anything left when I buy the farm, my kid can ER on it. Or if I hang in there, he can supplement his regular retirement.

[Zipper]

I'm curious TH? Is your SS the same as our CPP? I left employment at 54, and at 60 I'm receiving full benefits, minus the 30% reduction for accessing before 65. (-6%/year). All Canadians receive Old Age Security at 65, in addition to CPP. At 42 I would think your U.S. Social Security would be compromised?

[gayl]

If by 'compromised,' you mean that someone who retires early gets less SSA in the end (as he has less employment years), then you are correct. But TH stated that he has a working wife and may be able to draw a higher benefit as her spouse.

If I could find an asset allocation that gave a better pay-out than 5% with any degree of probability I'd take it. I
have yet to find same. I don't feel a 20% probabilty of going broke to gain an extra .25% is worth the risk myself. Equities enthusiasts like to ignore 1901-1936, 1929-1954 qnd 1966-1982. I speak of inflation-adjusted total returns of course. Anyone read IRRATIONAL EXUBERANCE all the way through?

[cute fuzzy bunny]

Fred - I need to put you and SillyGirl next to each other so you can talk about future returns.

My social security wont be too bad. I contributed the max for most of my working years and started work early.

If I worked for 25 more years at the same contribution level, I would see roughly $1500 a month in todays dollars at 62. Having quit at 39, that will decline to about $1000. The extra $500 a month (if it even pays out) isnt worth working another 25 years! :P

But i'm not counting on social security at all in my planning. If it happens, its a cherry on top.

Wife WANTS to work until she's at least in her late 60's, which is good. We're maxing her pretax retirement options, her pension plan and contributing to an aftertax Roth IRA and a taxable investment account. Because I have very little taxable income, and she's having so much taken out pre-tax, our tax profile as 'married filing jointly' is low and almost everything will be taxed @15% max. In essence, she's working just to pile up a secondary portfolio and to pay for health care through her group plan. I pay all the bills.

My plan is standalone good enough for us to make it to 90 on just my taxable portfolio. If you add in her pension and 403b plans, our combined annual 'income' when we turn 60 will be over $80k. If social security comes through, add roughly another $20k for both of us. Tapping our Roth IRA and her after tax plan would allow us another $15-20k per year on top of that. All these figures are in todays dollars.

In other words, sitting pretty

[Hyperborea]

If I could find an asset allocation that gave a better pay-out than 5% with any degree of probability I'd take it. I
have yet to find same. I don't feel a 20% probabilty of going broke to gain an extra .25% is worth the risk myself. Equities enthusiasts like to ignore 1901-1936, 1929-1954 qnd 1966-1982. *I speak of inflation-adjusted total returns of course. Anyone read IRRATIONAL EXUBERANCE all the way through?

Fred, I think you are missing Th's point. With the portfolio allocation that you are running you are essentially guaranteed to run out of money after 30 years. Taking 5% and inflation adjustment from a fixed income portfolio that is making 2% will leave you with ZERO dollars after 30 years. What happens when you retire at 40 and you live to be 85?

The 4% withdrawals from 50-80% stock portfolio with the remainder in fixed income will historically survive a 30 year time period and leave zero dollars only in the worst case. In most other cases you end up with a much larger portfolio at the end. You may still have zero dollars at the end of 30 years but the probability is low - that sounds a lot better than being 100% guaranteed of having zero dollars after 30 years.

Your allocation might be ok if both you and your wife are 75 or older. If you're any younger than that what do you plan to do if you're still around when you're guaranteed to have no more money?

[Zipper]

TH, can I trade my CPP for SS?

[cute fuzzy bunny]

That depends...is your system expected to actually BE there in 20 years?

I'll gladly pay you all the money SS ever pays out to me in exchange for $75,000 today.

Great, now I sound like Wimpy from the Popeye cartoon.

And yes Hyperborea, you got my point. A little problem with principal eating processes or people who invest in fixed income alone. Excluding John Galt.

HYPERBOREA, et al Yeah, I know- there's Paul Samuelson and me on one side of this question. What I want to know is what all the folks with equities are going to do when they run dry in twenty years or so... Unlikely right? www.fpanet.org and take a look at May 2003 issue, R.L. Terry. It is painful to hear the conventional wisdom trumpeted so loudly. A 2% I bond would sustain a withdrawal of 4.4% for thirty years and those 3% ones 5.0%. I don't know of a law that mandates I spend it all within the thirty years. I don't know of many who consider inflation indexed securities fixed income in the traditional sense.

[unclemick]

Arbitrage. Adam Smith's invisible hand et al. Hold balanced index appropriate for *your age/ER sit. - take the SEC yield and go fishing.

All else is games with numbers and spreadsheets - perhaps providing historical insight and 'feel' for what could happen.

I do own trash from the past - timberland, LLC land dev., 5% of a patented gold claim, and good doses of *Norwegian widow utes, banks, oils, drugs, etc. with a Vanguard REIT kicker in my IRA. But the big dog centerpiece - 75% is balanced index.