Y2K Retirement?

[lswswein]

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Originally Posted by Nords Our asset allocation was: 37% Tweedy, Browne Global Value 15% Berkshire Hathaway 12% S&P500 ETF (SPY) 6% NASDAQ QQQs 4% Disney, Lowes, & Kraft 1% TSP "S" fund 25% Cash (stopped out of a lot of QQQs, banking my pay for the last six months) Today: 9% TBGVX (started selling around $30/share, up to $33.96 last week) 21% Powershares International Dividend ETF (PID) 30% Berkshire Hathaway 15% S&P600 small-cap value ETF (IJS) & TSP "S" fund 9% DOW Dividend ETF (DVY) 10% Eagle Shipping, Diana Shipping, Tate & Lyle, Superior Industrial, Intel (EGLE, DSX, TATYY, SUP, INTC). 6% Cash.

Btw Nords that's a whole lot of trading going on there! It almost looks like a complete overhaul with a few things left. Tax consequences?

-h

[unclemick]

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Originally Posted by lswswein Yes it is all about who has the "Huevoes" to stick with 4% SWR and sticking with your Asset Allocation -h

And a large supply of clean underwear.

heh heh heh - the Norwegian widow's version of aggresive defense is to cut spending back to 'current yield' of portfolio. - Yet another way to skin the cat. 8)

[Dawg52]

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Originally Posted by Jarhead* I've always tried to maintain a 7 year cushion between me and having to tap into equities. (While probably not the best thing for building up a net worth, it's kept us off the streets, and allowed my to pay my "Green Fees"and have a good nights sleep) You guessed it, raining today (Unusual this time of year).

I like the 7 year cushion. That's what I plan to do.

Hey Jar, got my round in this morning and shot a 73. That included an eagle from a hole out with a 7 iron on a par 4 hole. My partner and I won the money. Life is good!

[Nords]

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Originally Posted by Dry Socks Is a table like this realistic ? I'm not retired, but, if I were, the withdrawals would have dropped way before now. Probably starting in 2000.

No, it's not realistic because inflation has already eaten nearly 13% of the person's spending power and yet their withdrawals haven't gone up to reflect higher living expenses.

But a mechanical withdrawal scheme can't easily adapt to huge changes in portfolios. ESRBob's 95% rule is a good start yet the results would give even the most ardent statistician reason to reflect on the benefits of part-time employment.

It's also a warning to those retiring on a razor's edge into a potential bear market. Having a big cash cushion or a flexible budget helps a lot.

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Originally Posted by lswswein Btw Nords that's a whole lot of trading going on there! It almost looks like a complete overhaul with a few things left. Tax consequences?

Over five years? That's not much turnover, especially compared to the average actively-managed mutual fund. Most of the last couple years' trading has been on market weakness. Berkshire's change in the AA has been all by itself.

We sold our Heartland Value holdings in late 1999 & early 2000 amid their bond-fund scandals, so that was a huge tax bite that raised the basis of our subsequent purchases (mostly Berkshire). We dumped the S&P500 fund & QQQs in favor of DVY & IJS a couple years ago. We dumped TBGVX for an unhedged index (PID) a year ago. Disney, Lowes, & Kraft all had their day in the sun and were sold on weakness in favor of other "undervalued gems".

Tax consequences weren't much. My military pension isn't taxed by the state and we have a big mortgage deduction so we stay well within the 15% bracket. The QQQ cap losses neatly balanced out the shift to DVY & IJS. The TBGVX sales have been mostly in IRAs. The cap gains in the stocks have mostly been long-term as I improve my analysis skills.

The remaining TBGVX will be sold to buy more PID. The stocks will eventually be sold for more DVY & IJS. I don't know if I'll ever feel comfortable selling Berkshire shares. And our trading activity will continue to taper off, although hopefully the testosterone poisoning will remain confined to my personal account.

I can't take any credit for Tate & Lyle-- spouse picked that up from Splenda commercials a few years back. When she asks "Is ____ made by a publicly traded company?" I've learned to bite my tongue and start researching it.

[haha]

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Originally Posted by Dry Socks Is a table like this realistic ? I'm not retired, but, if I were, the withdrawals would have dropped way before now. Probably starting in 2000.

This table may be more realistic at least for some people than your solution to the problem. Not everyone retires with a 100% over-funding; hence not everyone will be able to cut back very much without cutting into the part that hurts.

Ha

[Sam]

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Originally Posted by Nords ... not realistic because inflation has already eaten nearly 13% of the person's spending power and yet their withdrawals haven't gone up to reflect higher living expenses.

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Originally Posted by lswswein The following numbers assume a 0.2%/yr. expense ratio, 4%/yr. withdrawal, and are stated in constant (real) dollar amounts:

I did not verify the numbers, but according to lswswein, inflation is already taken into account.

I think the retiree is ok if he/she has the gut to stay the course. In a few years, the balance will bounce back to the original value.

[farmerEd]

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Originally Posted by brewer12345 So we should all be going to cash next year?

I am staying fully invested until my brother calls me up and tells me he is getting back in the market. Then I sell. When he gives up and closes his trading account, then I get back in.

[lswswein]

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Originally Posted by Sam I did not verify the numbers, but according to lswswein, inflation is already taken into account.

Yes those numbers have inflation already included in them. All the numbers are inflation adjusted real dollars. Infact the nominal dollar numbers do not look as bad the numbers before.

This is the nominal dollars ie not adjusted for inflation
Commercial Composite
CPI S&P500 Paper Return Withdrawal Portfolio
2000 3.4 -9.1 6.8 -5.4 40 906
2001 1.6 -11.9 3.7 -8.3 41 789
2002 2.4 -22.1 1.8 -16.4 42 618
2003 1.7 28.7 1.2 21.5 43 707
2004 3 10.9 1.7 8.3 44 722
2005 3.4 4.7 3.3 4.1 45 706

See the withdrawal amount increase? That's inflation - The assumption was that you need $40K in real dollars. Obvioulsy does not take into account that your "personal" inflation could be different from the CPI numbers and all that. (We discuss that topic annualy and it is not that time of the yr yet! )

-h
again Reference:
http://www.raddr-pages.com/forums/vi...tiree&start=45

[Jarhead*]

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Originally Posted by DOG52 I like the 7 year cushion. That's what I plan to do. Hey Jar, got my round in this morning and shot a 73. That included an eagle from a hole out with a 7 iron on a par 4 hole. My partner and I won the money. Life is good!

Now there's the "pony" in this thread.

If I recall, I think you mentioned that you were an ll or l2 handicap.

You sound like the answer to a Pro's dream as a playing partner.(Net 61)

The NCGA since going to a Statewide Computer system, has placed anyone that plays a tournament at less than 6 shots under his handicap in the category of "keep an eye on that guy." If it happens a 2nd. time, they will force him to play at the lower handicap of the two.

Be careful out there.

Anyway, great round, and an Eagle on a Par 4 is no easy task.

Congratulations on your retirement, and good to hear you are putting your time to constructive use.

[Dawg52]

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Originally Posted by Jarhead* Now there's the "pony" in this thread. If I recall, I think you mentioned that you were an ll or l2 handicap. You sound like the answer to a Pro's dream as a playing partner.(Net 61) The NCGA since going to a Statewide Computer system, has placed anyone that plays a tournament at less than 6 shots under his handicap in the category of "keep an eye on that guy." If it happens a 2nd. time, they will force him to play at the lower handicap of the two. Be careful out there. Anyway, great round, and an Eagle on a Par 4 is no easy task. Congratulations on your retirement, and good to hear you are putting your time to constructive use.

Last Saturday I shot 81 so 73 is not the norm. My handicap is probably closer to the 7-8 range now that I'm playing more. Our group knows who shoots what so we give up strokes to whoever really needs them.
Enough of off topic talk. Time for a beer.

[ERD50]

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Originally Posted by lswswein The portfolio of a hypothetical investor who retired at the end of 1999 with a 75:25 mix of S&P500 stocks and 6 mo. commercial paper. The following numbers assume a 0.2%/yr. expense ratio, 4%/yr. withdrawal, and are stated in constant (real) dollar amounts: Year Return CPI Withdrawal Balance 1999 1000 2000 -9.1 3.4 40 869 2001 -9.9 1.6 40 743 2002 -18.8 2.4 40 564 2003 19.7 1.8 40 635 2004 5.3 3 40 628 2005 40 599

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Originally Posted by Dry Socks Is a table like this realistic ? I'm not retired, but, if I were, the withdrawals would have dropped way before now. Probably starting in 2000.

Drysocks, I think it is a good question, but we are looking at that table in hindsight. If you look year by year, what would you do? Would you have cut spending the very first down year? I've only been retired a few years, so I have not been 'tested' in this way - but my time will surely come.

If your portfolio dropped 9% one year, would you automatically cut back - or assume that next year would be fine and just ride it out? And, if the next year was down 9% again, OK this might get us a bit more concerned. That third year with the -18% - at that point I'm sure I would want to start doing some adjustment. And then the next year of +20% might have me wondering what the fuss was all about, and thinking ' just trust the FireCalc numbers'!

Something I really should do is actually identify how I would cut back, and see what that % comes to so I am prepared if/when the time comes. As an LBYM I don't think of myself as having a bunch of obvious extravagances that I would just cut. I should review it, but there are so many more interesting things to do!

I think I mentally rely on some of my 'back pocket' safety factors built into my SWR. I've never counted the NW in my home, so that is probably making my SWR look conservative by about 15% to 20%. DW has a job she wants to continue for a few more years, reducing withdraws and boosting ultimate pension a bit. Hopefully, I would pretty much just ride out a storm, but who knows?

-ERD50