Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-09-2010, 01:47 PM   #41
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
There's this thing called the Recency Effect.

I see no explanation from Scott on why dividends will remain low in the future relative to the past, why equities will appreciate less in the future relative to the past - other than to say that that's what has happened in the recent past.
__________________

__________________
walkinwood is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-09-2010, 04:58 PM   #42
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Well, If that happens we all will adjust.
__________________

__________________
chinaco is offline   Reply With Quote
Old 07-09-2010, 07:39 PM   #43
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Vanguard just recently held a webcast for Flagship members regarding withdrawal strategies for taxable investors. It discussed SWRs of 4~5% (although the success rate wasn't 100%) for stock/bond asset allocations of 50/50. I've attached the slides from that preso - pretty sure I can get the link to the rebroadcast. I prefer the percent of portfolio strategy where you shouldn't deplete your funds - Vanguard is going to publish a follow up paper on that strategy with a ceiling floor SWR.

Kumquat - don't worry about the end of the world - the Mayan's "cut it in stone" for 2012.....
Attached Files
File Type: pdf Vngrd webinar on retirement.pdf (639.6 KB, 59 views)
__________________
fritz is offline   Reply With Quote
Old 07-09-2010, 10:59 PM   #44
Recycles dryer sheets
 
Join Date: Jun 2008
Location: Los Angeles
Posts: 156
Quote:
Originally Posted by fritz View Post
Vanguard just recently held a webcast for Flagship members regarding withdrawal strategies for taxable investors. It discussed SWRs of 4~5% (although the success rate wasn't 100%) for stock/bond asset allocations of 50/50. I've attached the slides from that preso - pretty sure I can get the link to the rebroadcast. I prefer the percent of portfolio strategy where you shouldn't deplete your funds - Vanguard is going to publish a follow up paper on that strategy with a ceiling floor SWR.

Kumquat - don't worry about the end of the world - the Mayan's "cut it in stone" for 2012.....
Interesting presentation. I really should pay more attention to my VG email.

I'm curious, though, about slide #10 which says "No taxes—assumed to be paid from the $47,500." Why would there be an assumption of no taxes?
__________________
CaseInPoint is offline   Reply With Quote
Old 07-09-2010, 11:12 PM   #45
Recycles dryer sheets
 
Join Date: Jun 2008
Location: Los Angeles
Posts: 156
Quote:
Originally Posted by FIREdreamer View Post
If you don't have strong real returns, then your SWR will have to plunge to 2.5% or even 2% in order to make it work.
That's probably true, and I really have to salute anyone who can happily survive on 2% of their portfolio.
__________________
CaseInPoint is offline   Reply With Quote
Old 07-10-2010, 02:20 AM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Heretical comment follows.

I think it's useful to at least consider the possibility that the real anomaly has been the US equity performance for the 20th century. That's the data set that FIRECalc and most other simulations are based on, explicitly or implicitly. When we consider the US geopolitical preeminence and the economic boom that resulted, particularly since WW-II, it's quite easy to argue that this data set (this particular nation in these particular years) is really the likely anomaly. The same holds true, to a lesser extent, for the US business environment and conditions favoring US economic expansion over the last century--they were certainly unusually good when considered in the entire context of human history. So, when someone says that the future years are really going to be "different this time," we should ask if they mean "different from the recent very anomalous 'good years' in this one particular country" (7-10% PA total returns) or "different from what most developed countries in the modern age have experienced" (2-3% total returns)? Put another way--it's very possible that it really was "different this time" for the last century, and now we're going to experience the "normality" most countries have experienced.

By the same token, technological advances or even advances in our understanding of how economic systems function might result in even higher growth rates than those recently experienced. Or, an asteroid could hit us. We don't know

If a person is ever going to retire, they have to make some assumptions. But (IMO) anybody believing they can set up a fixed 40 year ironclad SWR based on history is fooling themselves. Anyone who comes away from FIRECALC believing there's a meaningful difference going forward between a portfolio allocation/withdrawal rate that generates an 80% historic survival rate and one that generates a 95% survival rate might be overestimating the power and precision of the tools and underlying data in forecasting the future.

What's the solution? I don't know. My particular answer has been:
- Continue to work and squirrel away money longer than "the data" says I need to. Quitting work now and possibly returning to the work force in 5-10 years is not a good answer for me for several reasons. But, I downshifted into work that is more psychologically sustainable.
- Plan to take a year-end percentage rather than a fixed percentage adjusted for inflation. I'm going to use 3.0 - 3.5% at first.
- Plan to be flexible. Monitor the buying power of my portfolio and make adjustments if it starts to slip. Adjustments would include lower annual withdrawals and taking more risk. If the buying power climbs, we'll raise withdrawals and/or reduce the risk we take in our portfolio ("risk" being broadly defined: due not only to volatility, but also from higher inflation, long-term reduced equity returns going forward, etc. Figuring out how to do this might be my new "career").

Sorry, no huge revelations in the foregoing observations. We're all in "measure with micrometer, mark it with a grease pencil, cut with an axe" territory, and what we're measuring is a blob of Jello. And the world going forward might be pudding.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 07-10-2010, 06:36 AM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
If one is concerned, they should consider taking a more conservative approach.

It would seem to me that a large part of the risk (being discussed) depends on how much discretionary spending is factored in versus non-discretionary (basic lifestyle). discretionary spending could flex a bit to absorb the impact of lower returns and likely preserve the basic lifestyle (comfortable and ability to meet basic needs).

DW and have enough cushion over and above our current spending level can flex.


IMO - One should be fairly confident about being able to provide for their basic lifestyle (for their expected lifespan) if they are considering ER. If not, perhaps the plan should be adjusted. They could w*rk a bit longer or w*rk partime. For many, it is easier to w*rk one more year than go back to w*rk after several years off. I know if I quite w*rking for 2-5 years, I will probably not be able to earn the same wage that I earn today. Plus, if a health problem occurs, I may not be able to earn at all.


Assuming one can fund their lifestyle (with a conservative estimate/projection)... I believe other factors can present far more risk. People have some level of control over their spending and can exercise it. Plus it is easy to understand. IMO - There is more risk in people making investment mistakes by unwittingly taking on too much risk or risks they did not understand.
__________________
chinaco is offline   Reply With Quote
Old 07-10-2010, 07:22 AM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,634
Quote:
Originally Posted by fritz View Post
Vanguard is going to publish a follow up paper on that strategy with a ceiling floor SWR.
I don't pay attention to my VG emails either. If you catch the ceiling/floor presentation followup here to remind those of us who are interested to check it out.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 07-10-2010, 08:35 AM   #49
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by CaseInPoint View Post
Interesting presentation. I really should pay more attention to my VG email.

I'm curious, though, about slide #10 which says "No taxes—assumed to be paid from the $47,500." Why would there be an assumption of no taxes?

I took it that they were only concerned with the rate of return on investments for the presentation, and did not account for any income tax scenarios (assumed that an individual's SWR from their investments includes what's appropriate for paying fed/state/local taxes).
__________________
fritz is offline   Reply With Quote
Old 07-10-2010, 09:05 AM   #50
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by donheff View Post
I don't pay attention to my VG emails either. If you catch the ceiling/floor presentation followup here to remind those of us who are interested to check it out.
The next Flagship web cast is coming up on July 22nd about managing your portfolio in retirement (Retirement is only the beginning). I believe these are scheduled by invitation only, and not done for their general investor population due to limitations of allowing participants to interact with the presenters during the presentation.

If I manage to get the follow up white paper on percentage of portfolio withdrawals with a ceiling/floor scenario - will follow up. I don't always get (or pay attention to) all their correspondence either - if someone here participated in that webcast and should get it - would appreciate their follow up. Unfortunately, I was unable to successfully connect to the original webcast in March. It was redone in May (I was not on that invite list, as I was on the first one). Attached is the link to the May 27th presentation's replay (is still accessible for now).

https://admin.adobeconnect.com/_a45190094/p69664262
__________________
fritz is offline   Reply With Quote
Old 07-10-2010, 09:14 AM   #51
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by samclem View Post
I think it's useful to at least consider the possibility that the real anomaly has been the US equity performance for the 20th century.
That has always been my primary concern. And so I think you have to compensate by managing to a low withdrawal rate, based on a budget with a healthy amount of spending flexibility. Maintaining professional contacts and job skills with part-time freelance assignments is not a bad idea either.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 07-10-2010, 09:14 AM   #52
Full time employment: Posting here.
 
Join Date: Sep 2007
Posts: 716
They didn't assume no taxes. They assumed that taxes would be paid out of the $47K withdrawal---just like everything else.
__________________
rayvt is offline   Reply With Quote
Old 07-10-2010, 10:06 AM   #53
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,456
Quote:
Originally Posted by Gone4Good View Post
That has always been my primary concern. And so I think you have to compensate by managing to a low withdrawal rate, based on a budget with a healthy amount of spending flexibility. Maintaining professional contacts and job skills with part-time freelance assignments is not a bad idea either.
Well - that last sentence. I can't do that! I can't enjoy retirement if I am always looking over my shoulder and feel that I have to devote some time to keeping up career skills.

If I find myself destitute for some reason, I will truly have to start over. New skills and all. Fortunately I have learned enough new stuff that if I really had to, I could probably figure out a way to get by..... It would just not have anything to do with my old job and I'm sure pay considerably less.

Audrey
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 07-10-2010, 10:38 AM   #54
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
Quote:
Originally Posted by CaseInPoint View Post
That's probably true, and I really have to salute anyone who can happily survive on 2% of their portfolio.
Heck, that will be us (in the future - eight years from now).

Even though our current rate of withdrawl is in excess of 4% (and will raise to around 10% in the future) we still have many "income sources" still coming on-line in that eight year period (e.g. SS, pensions, etc, none of which we are currently drawing).

And yes, our withdrawl rate will drop below 2% at age 70 (when my SS starts) and dosen't exceed 4% till well after age 100 - the end of our forecast period.

4% may be a guide, but it dosen't work for those who retire early, before all their income sources are available...
__________________
rescueme is offline   Reply With Quote
Old 07-10-2010, 12:09 PM   #55
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,634
Quote:
Originally Posted by audreyh1 View Post
Well - that last sentence. I can't do that! I can't enjoy retirement if I am always looking over my shoulder and feel that I have to devote some time to keeping up career skills.
+1 I did a few projects to keep in touch my first year out but I have done my last paid work.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 07-10-2010, 12:35 PM   #56
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Change is interesting. I'm really enjoying reading the "new outlooks" prevalent on this board today vs. those when I first joined. At that earlier time, discussions seemed to center more on the risk of leaving excessive money behind at death rather than on running out of money. How could we spend more during our early years of retirement without increasing the risk of portfolio failure?

A related observation...... My own view is that I'm expecting more variability in FIRE portfolio returns and in inflation in the future than historical data would suggest. This will lead to folks wondering how they wound up with much more or less than planned after 2 - 3 decades of withdrawals. Few will actually see "average" projected results. Those using historical "averages" to project future results will develop a new, indepth understanding of "variance!"

Only living through the time and making the withdrawal and investment decisions will tell the actual story. Projections? Forecasts? Naaaaah. Fun to discuss but I don't hear any layers being peeled off this mystery, either by ourselves or by the pundits.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 07-10-2010, 01:02 PM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by youbet View Post
I'm really enjoying reading the "new outlooks" prevalent on this board today vs. those when I first joined. At that earlier time, discussions seemed to center more on the risk of leaving excessive money behind at death rather than on running out of money. How could we spend more during our early years of retirement without increasing the risk of portfolio failure?
My guess is that if you go back and look at those old posts, what you'll find is that those people who advocated stretching to meet an aggressive retirement goal; using complicated formulas to arrive at higher withdrawal rates; using 100% equities; maybe borrowing against the house to invest even more, etc. etc. . . . well, I'm guessing those folks aren't posting any more because they're too busy working. Meanwhile, those of us who advocated caution back then are still here saying the same thing today.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 07-10-2010, 01:13 PM   #58
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by audreyh1 View Post
Well - that last sentence. I can't do that! I can't enjoy retirement if I am always looking over my shoulder and feel that I have to devote some time to keeping up career skills.

If I find myself destitute for some reason, I will truly have to start over. New skills and all.
No reason it has to be in the same field. My wife does freelance writing assignments part time. I might dip into that a little myself. It's something I could do a couple times a year, just to make contacts and a little extra coin. And then if we needed to, for one reason or another, it would be simple enough to rev that up to a full-time thing. Starting from scratch, though, would take several years to start making a reliable income.

60 years is a long time to go without earning an income or receiving a pension. And although our WR is well below what is considered 'safe', I still feel better having a belt to go along with my suspenders.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 07-10-2010, 01:32 PM   #59
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by Gone4Good View Post
My guess is that if you go back and look at those old posts, what you'll find is that those people who advocated stretching to meet an aggressive retirement goal; using complicated formulas to arrive at higher withdrawal rates; using 100% equities; maybe borrowing against the house to invest even more, etc. etc. . . . well, I'm guessing those folks aren't posting any more because they're too busy working. Meanwhile, those of us who advocated caution back then are still here saying the same thing today.
No. Actually just the opposite of your guess. These were folks who advocated conservative investments and retirement budgets with lots of cushion. They seemed to have a better grasp of the concept of variability in outcomes that some today. Therefore they recognized that a plan which was (based on FireCalc Testing using historical data) projected to be 95% successful included many outcomes where an uncomfortably large residual portfolio was left. That is, spending was held back during retirement only to result in large residuals being left at death.

So, the question was how could we reduce variability, even at the cost of lower projected returns, so a plan could provide an outcome of zero or few failures but allow you to spend keeping residual end portfolios at a miniumum.

Having some portion of your portfolio in an annuity was frequently suggested, and would work, but this solution always led to "interesting" discussions and back and forth by the anti-annuity gang.

A conservative plan that results in a low probability of failure also results in a high probability of large amounts of residual money at death according to the hundreds of FireCalc output graphs I've pondered. That's what the discussions were about.

edit: BTW, didn't mean to say your guess was "wrong." I'm sure there were folks with that POV posting as well. Those just aren't the folks I'm referring to.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 07-10-2010, 02:19 PM   #60
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,380
Quote:
Originally Posted by youbet View Post
So, the question was how could we reduce variability, even at the cost of lower projected returns, so a plan could provide an outcome of zero or few failures but allow you to spend keeping residual end portfolios at a miniumum.

Having some portion of your portfolio in an annuity was frequently suggested, and would work, but this solution always led to "interesting" discussions and back and forth by the anti-annuity gang.

A conservative plan that results in a low probability of failure also results in a high probability of large amounts of residual money at death according to the hundreds of FireCalc output graphs I've pondered. That's what the discussions were about.
As you point out, some threads addressed this problem- that because of variability of returns, of sequences of returns, and of longevity, individuals will tend to either have too little at some point (too little capital or too little income), or have a suplus left late in the game. Usually these threads received a lot of blowback. Often, I felt, because the concepts were misunderstood. But there must be something else too. Mostly I think that the LBYM, I do things my way bent that is typical of board members including me just tends to be hostile to giving up any control.

Here is a link to William Sharpe's paper which was given in a recent thread.

Ha

http://www.stanford.edu/~wfsharpe/retecon/4percent.pdf
__________________

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Another safe withdrawal rate question arandomwalk07 FIRE and Money 52 04-04-2007 10:46 AM
Safe withdrawal rate questions jhecht FIRE and Money 7 12-18-2006 02:53 PM
"Is the Safe Withdrawal Rate TOO Safe?" Nords FIRE and Money 13 10-20-2004 11:36 AM
Safe Withdrawal Rate for living like a chicken cute fuzzy bunny Other topics 4 07-10-2004 06:59 PM
'Son with a spare room' safe withdrawal rate intercst FIRE and Money 16 07-02-2004 11:41 AM

 

 
All times are GMT -6. The time now is 11:00 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.