After spending countless hours becoming comfortable with the 4% number - I turned my attention to securities/asset allocations that I would purchase for both my parents who are retired and for myself (especially excess cash).
Asset Allocation Conclusions: I came to the conclusion that Vanguard's Wellesley fund (60% fixed income and 40% equity) was the best diversified (and a no brainer regarding volitility versus return). My overall holdings are 60%/40% which allows me to "play" in the stock market. I also hold muni bonds in for tax purposes.
Since I was purchasing Vanguard's mutual funds - I took advantage of thier "free" retirement analysis. Surprisingly, they wanted me to sell the Wellesley fund and asset allocate into other index funds. They also recommended an equity/fixed income ration of 50%/50%.
What really surprised me was thier Time Path scenerio analysis. Despite a less than 4% starting number for current expense ratio - they managed to demonstrate that if I started investing in 1965 (thier worst scenerio) and stuck to thier inflation adjusted expense estimates - I would run out of money in 25 years.
In fact, to get to a 100% safety, (they projected 75% success at an initial core 3.3% spend rate) I would have to reduce my core expense numbers (expense numbers without new cars, kids education) to 2% of my total balance.
Anyone else have experience with thier analysis? I just got the results and I'm trying to understand what the difference between thier time path analysis and the 4% number analysis.
One major difference (I believe) is that they don't assume a fixed rate of inflation - they use actual inflation numbers starting from 1965 (6% growing to 13%) as well as actual return numbers (stocks falling by 50% in 1973-1974).
Comments from those who are more facile with the 4% number than I am