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Old 04-02-2011, 02:05 PM   #21
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Oh. Hmmmm..... You're right. My comments were based on FireCalc output graphs, not on anything this author presented. So if future outcomes are different than the historical-data driven outcomes from FireCalc, perhaps the dispersion will be small and most people will be right at the median.

That doesn't pass my common sense test. But, who knows, I suppose it's possible that folks retiring in any year of the next several decades will all have similar outcomes unlike folks who retired in the past and typically had wide ranging outcomes depending on the year they retired.

Do you agree that at least with FireCalc output data, few outcomes are at or very near the median while many outcomes are widely dispursed from the median? That's the way it looks to me. So to assume (which many do) that your outcome is likely to be near the median is not justified.
I was only questioning your statement that most (as opposed to many) ending values were far from the median. To know that we would need to know the actual distribution of ending values (and its moments). This is true for Firecalc as well.
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Old 04-02-2011, 02:40 PM   #22
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I was only questioning your statement that most (as opposed to many) ending values were far from the median. To know that we would need to know the actual distribution of ending values (and its moments). This is true for Firecalc as well.
The fact that end outcomes are widely dispursed around the median is readily apparent with FireCalc output graphs with just a quick glance. Sometimes when just playing around with the numbers, I'll change AA values just to watch the distribution widen or tighten up.....

But, if you need to have descriptive statistics of the FireCalc ending values, they're readily available from the downloadable spreadsheets. I went through that exercise a number of times before coming to the conclusion that, since eyeballing the graph pretty much tells the story and the distribution is skewed anyway, I was measuring with a micrometer and cutting with an axe.

Did you see anything different when you applied the usual statistical formulas/calculations to the data in the spreadsheets?

My suggestion to Don was simply that his observation about the median value was correct but that any assumption that the median value is "typical," "common" or "probable" is likely a stretch.
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Old 04-02-2011, 05:00 PM   #23
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This kind of thing is pure trash, resume padding by someone with no experience of what really gets retirees into trouble. It is absolutely irresponsible and meaningless to talk about nominal withdrawals in a real world.
...

Ha

Have you read the report?

Do you think my interpretation of the authors conclusion (or data) is wrong (as stated in the example) or are you saying you think taking a nominal withdrawal is a bad idea or increasing the risk of failure (i.e., must be 100% success)?

It kinda looks like high nominal WD caused a reaction.

There are scenarios and circumstances where nominal can make sense just as there are scenarios and circumstances where it would be a bad idea.

My main point was... it is not a rule, rather insight that can be applied to planning.

Personally, I am fairly conservative.
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Old 04-03-2011, 06:32 AM   #24
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What is with the big stats argument? I started it by fantasizing how I would spend my median ending portfolio. For my fantasy it doesn't much mater if there is a fat tail. I have a better than even chance of flying first class. If I am on the bad end I will stick with coach.
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Old 04-03-2011, 07:11 AM   #25
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I assume he thought I was making a general recommendation for a high nominal WR%.


To use the Otar vernacular... Red and gray zoners would be taking on the risk of a bad outcome... with the possibility of having to cut their base lifestyle.


Green zoners might also if they pushed it too far.


Still the key part of managing any portfolio for income is: to begin with a realistic plan and make adjustments based based on reality as the future unfolds... don't plan on the market saving you!
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Old 04-03-2011, 10:38 AM   #26
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Have you read the report?
Yes, I never criticize something I am completely ignorant of. True he does return to advice more or less down the middle of what has come before; but why get into the 7% nominal at all? It is meaningless. To summarize, the world is real, it is unpredictable, and paying any attention at all to nominal values is just confusing at best, stupidifying and lethal to success at worst.

Just another endless permutation to entertain those who are still seeking some magic to tame uncertainty. It certainly will not help anything.

Ha
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Old 04-03-2011, 10:47 AM   #27
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I was disappointed with the paper. Why waste our time on nominal withdrawals? Who in their right mind would do that over periods of 15 to 30 years?

Besides there was nothing new.
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Old 04-03-2011, 12:58 PM   #28
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I was disappointed with the paper. Why waste our time on nominal withdrawals? Who in their right mind would do that over periods of 15 to 30 years?
IMO - this information offers a lot of insight. But that might not be appropriate for many or even most.



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Besides there was nothing new.
New data set with more recent years.


One needs to consider that the paper is not intended to be a consumer "do it yourself" guide... but a study done by financial academics which offers insight to other academics and financial professionals.
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Old 04-03-2011, 01:24 PM   #29
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One needs to consider that the paper is not intended to be a consumer "do it yourself" guide... but a study done by financial academics which offers insight to other academics and financial professionals.
This is one of those "pad your publication list" papers written my mid level academics who are more into teaching and review articles that real economic research. There's nothing new here apart from an extended data set. It has some usefulness to underline some pretty common sense ideas but it isn't really worthy of a peer reviewed publication. I have very little regard for financial professionals after seeing what passes for "high level mathematics" in CFA examinations.
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Old 04-03-2011, 02:23 PM   #30
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New data set with more recent years.
+1
It is good that the Trinity folks updated their study to bring in the past few years. I hope they continue to update. As to the nominal withdrawal table. It is what it is. Whether anyone prudent would accept 75% success as an acceptable minimum is irrelevant. The table has data for larger withdrawals (which some folks take).
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Old 04-03-2011, 08:09 PM   #31
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Boy oh boy. Tough crowd here. I will await (without holding my breath) for the nun/haha peer reviewed, academic journal article that better addresses for the masses what is a reasonable withdrawal rate from a portfolio should be. These are the same authors that published the original article in 1998. Here, and elsewhere the question has been raised as to what the impact of the great recession would be on the SWR as proposed by the Trinity study - the numbers are now updated. There has also been a lot of controversy about the 4% as an absolute rule, or as a guideline, they have now clarified that beyond the notation in their original publication that it was for planning purposes only. As for the nominal vs real withdrawals, in the real world people have non-cola'd pensions and annuities so it is not unreasonable to guesstimate what a reasonable rate of withdrawal would be based on the historical data.

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Old 04-03-2011, 08:20 PM   #32
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Boy oh boy. Tough crowd here. I will await (without holding my breath) for the nun/haha peer reviewed, academic journal article that better addresses for the masses what is a reasonable withdrawal rate from a portfolio should be.
Don't bother, it is hopeless. Anyway, why would a doubledoc want a plan suitable for the masses?

Ha
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Old 04-03-2011, 11:02 PM   #33
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Boy oh boy. Tough crowd here. I will await (without holding my breath) for the nun/haha peer reviewed, academic journal article that better addresses for the masses what is a reasonable withdrawal rate from a portfolio should be.

DD
I wouldn't presume to write about finance in a peer reviewed journal, I keep my nonsense for this forum....however I have been published in Nature, Cell and Astrophysical Journal so I'm qualified to sniff out a rehash of an old paper to get another publication on the list.

My opinion about a SWR is anything less than the annual return of your portfolio, not to exceed a max of 5%. I'm all about preserving capital, and I suppose that puts me in the adaptive withdrawal camp.
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Old 04-04-2011, 04:51 AM   #34
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I wouldn't presume to write about finance in a peer reviewed journal, I keep my nonsense for this forum....however I have been published in Nature, Cell and Astrophysical Journal so I'm qualified to sniff out a rehash of an old paper to get another publication on the list.

My opinion about a SWR is anything less than the annual return of your portfolio, not to exceed a max of 5%. I'm all about preserving capital, and I suppose that puts me in the adaptive withdrawal camp.

When I am ready for a debate on astrophysics, I'll know who to contact.



But come on... Those guys are serious professionals. Are you really going to attack their findings, their data, or creds?? or even the general conclusions? Do you have any real reason to do that or are you just spewing? [no need to answer... I already know]
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Old 04-04-2011, 06:59 AM   #35
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When I am ready for a debate on astrophysics, I'll know who to contact.



But come on... Those guys are serious professionals. Are you really going to attack their findings, their data, or creds?? or even the general conclusions? Do you have any real reason to do that or are you just spewing? [no need to answer... I already know]
Sure there's some spewing going on along with some probably misplaced arrogance, but running simulations using historical data isn't really that original. Isn't that why we have FIRECalc. None of the conclusions add anything new to planning, so that's why I see it as a rather lazy article.
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Old 04-04-2011, 08:01 AM   #36
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however I have been published in Nature, Cell and Astrophysical Journal so I'm qualified to sniff out a rehash of an old paper to get another publication on the list.
OK Nun, you peaked my interest. How does the Astrophysical Journal fit in? Alien anatomy? Did you work for the Air Force down in New Mexico?
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Old 04-04-2011, 08:35 AM   #37
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Old 04-04-2011, 10:03 AM   #38
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I think it's good for the authors to update the original study with more years of data.

This is what I see - for a 30 year time horizon, a 4% CPI-adjusted withdrawal rate gives the following success rates:

100/0 portfolio, 98%
75/25 portfolio, 100%
50/50 portfolio, 96%

So we know that adding a few more years didn't dramatically change success rates.

I wish they would have tested some specific "adaptive" strategies. I believe that everyone who has posted here on that topic has said that they would not blindly follow a 4% rule through a severe market downturn, so adaptive strategies are very important in the real world. I would have liked to see these authors do a comparison of a few different strategies.
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Old 04-04-2011, 10:08 AM   #39
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Don't bother, it is hopeless. Anyway, why would a doubledoc want a plan suitable for the masses?

Ha
Do you have any idea what the investment track record of doctors in the USA is? I made the classic mistakes of too much home and an annuity investment product fresh out of residency. Fortunately my DW checked out a copy of Malkiel's "A Random Walk" and we found this site as well as bogleheads and the old Motley Fool board. If I had followed my physician colleagues footsteps I would not be retiring early...

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Old 04-04-2011, 10:17 AM   #40
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Sure there's some spewing going on along with some probably misplaced arrogance, but running simulations using historical data isn't really that original. Isn't that why we have FIRECalc. None of the conclusions add anything new to planning, so that's why I see it as a rather lazy article.
Historical data is all they have to work with, unless you are aware of a prescient alternative?

Started life as a molecular biologist, now a doctor, also published so I can see your point but as I noted above there are some compelling reasons why they updated the study. Of course the more interesting results will be in 10, 20 and 30 years when we will see what happened for those who retired into the Great Recession.

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