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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 02:16 PM   #21
 
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Re: Yahoo "Finance Quiz"

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The William Bernstein number (2 percent) is a reasonable one, in my view. I have looked at the data and I can see why he is saying that the number is 2 percent. The people claiming that the number is 4 percent are basing their claims on the results of studies using the conventional SWR methodology,
I think you are wrong here *****. Berstein believes that the 'real' return of a stock/bond portfoilo to be in the 3% range going forward. *He has stated this in books that he wrote before the 2002 downturn of stocks. A 2% withdrawal rate would mean that you are *actually saving money.

When I talk about a 4% withdrawal rate, I am talking about something that eats into principal. - My plan only goes for 43 years! - I don't know about you, but I'm actually planning on dying some day!

I am going to spend my principal ! - My perfect financial plan, would be that the check bounces to the undertaker!

Again *****, you and Berstein are making predications. I actually trust the past more than I do anyone's prediction.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 02:19 PM   #22
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Re: Yahoo "Finance Quiz"

Oboy. I think we're headed into the realm of decided what the definition of the word "is" is, and whether a BJ constitutes a sex act.

For the record, is freakin means is and yes, a BJ is a sex act.

What we decide to call it, and remembering to use the correct terminology is all well and good. I think everybody gets it. We're going to use the wrong term on a regular basis.

Now get this: outside of about 10 people, I dont think anybody gives a rats ass.

People smart enough to be able to reach an ER status are going to read the reams of materials out there on this topic, view the calculators and tools, review the agreements and disagreements, and make their own informed decisions regardless of whether we all agree to call it a HSWR or an SWR or 4%, 2%, 1%, 7%, etc.

I dont think most people have a portfolio big enough to live off of 2% unless they like the poverty level. I'm hanging between 3.75 and 4.25. If its 2% or go broke, you'll be seeing me in a shirt and tie again putting together campaigns that make you think things differently than you used to think them.

Nobody wants that.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 02:29 PM   #23
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Re: Yahoo "Finance Quiz"

I actually trust the past more than I do anyone's prediction.

That's fine. I of course have no problem whatsoever with any poster deciding that he or she prefers to use the historical surviving withdrawal rate (HSWR) as a guide to his or her personal withdrawal rate (PWR). That is of course a perfectly valid way to go.

You and Berstein are making predications.

The "prediction" that Bernstein and me and the others are making is that changes in valuation levels will continue to affect long-term stock returns in the future just as they always have in the past. Bernstein feels so strongly about his claim that valuation levels affect long-term returns that he says he says that this is so as a matter of "mathematical certainty." That is strong language for a writer like Bernstein to use. I believe that he is right to use that sort of language in this case.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 02:34 PM   #24
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Re: Yahoo "Finance Quiz"

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Now get this: outside of about 10 people, I dont think anybody gives a rats ass.
TH, you sum it up well!

Quote:
I dont think most people have a portfolio big enough to live off of 2% unless they like the poverty level.
Yes. And two percent in my view, is too conservative. Considering the fact that you can get a real return of 2.5% on TIPS, it makes little sense to limit the withdrawal rate to 2%. What would be the point? I'm done saving money.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 02:37 PM   #25
 
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Re: Yahoo "Finance Quiz"

Yes Bob Smith has once again hit the nail on the head.

*****, Just go for TIPS and you can lock in your 3% SWR now.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 02:51 PM   #26
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Re: Yahoo "Finance Quiz"

Outside of about 10 people, I dont think anybody gives a rat's ass.

Say that the Trinity study had never been done. We would all today be planning to take 7 percent withdrawals from our high-percentage stock portfolios, would we not?

The Trinity study (the grand-daddy of conventional SWR studies) changed how informed investors think about withdrawal rates. That study told us something we didn't know before it was issued, and people became able to construct more effective Retire Early strategies as a result.

I submit that the same will ultimately be seen to be true of the data-based SWR tool that JWR1945 and I have developed together. I have worked with this tool for over eight years now, and it is the most powerful tool for discovering effective investing strategies that I have ever discovered. I believe that, like the conventional SWR methodology, this advance in our knowledge of what the historical data says re what is safe is going to allow many thousands of people to achieve safe retirements years sooner.

I am today blocked in what I can tell you about the tool, however. There are hundreds of posts that I have written and never posted. Why? Because we cannot reach agreement on the ABCs of SWR analysis. It is a fundamental principle of SWR analysis that you must look to the historical data to determine what it safe. If I am going to explain how the tool works, I need to be able to have people on board on that basic assumption.

Every time in the past that I have started to explain how the tool works, I have had someone break in and say something to the effect of "Oh, no, the historical data doesn't say that the SWR for stocks is 2 percent, it says 4 percent." If we cannot agree on what the data says, how can we possibly get to the point of discussing strategies that follow from having an informed understanding of what the data says?

We are stuck. If we had never heard the phrase "safe withdrawal rate" before, we would be open to learning all sorts of wonderful things about how to invest more effectively. But we have heard the phrase before, and we have accepted some mistaken ideas as to what the phrase signifies.

I believe that in time we need to get over what we heard about SWRs in the past. There was a time when the conventional methodology was state of the art, when the insights it provided were the best insights to be had. Those days are past. We need to find a way to move forward so that we can begin discussing new and even more exciting insights.

I believe that we are going to make it. I don't believe that we are going to make it this week or this month. I think we all just need to mull over this question from time to time, and over time try to come up with creative and constructive ideas for helping us to get out of the ditch we now find ourselves in on this issue.

The debate should not be about personalities. That sort of stuff is nonsense. I am pretty sure that just about everyone here agrees with me on that. What matters is the subtance, what we can learn about the board project if we can find a way to talk about the SWR topic clearly and accurately and precisely. People of good will who put their minds together to find a way to make it happen will figure out a way to do so. My suggestion for now is that we all just hang in there and continue to do the best that we possibly can until some smart individual steps forward and provides us with the way of proceeding that we need to find to make real progress with this thing.

Make sense?
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 02:56 PM   #27
 
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Re: Yahoo "Finance Quiz"

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Make sense?
Yeah, but did you even read Bob Smith's post about TIPS?

Why go through all the mental masturbation? *Just take your 3% from TIPS and be happy. Or is this too simple?

BTW - Berstein has never said 2% - That is plain B.S. !

Are you on a fricken crusade to get everyone to go back to work?

Like I said before, you need a new hobby!
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 03:02 PM   #28
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Re: Yahoo "Finance Quiz"

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. . . I submit that the same will ultimately be seen to be true of the data-based SWR tool that JWR1945 and I have developed together. I have worked with this tool for over eight years now, and it is the most powerful tool for discovering effective investing strategies that I have ever discovered. . .
Hi *****,

The problem is that there is no tool. There is no computer simulation we can exercise. There is no formula we can use. There is no graph we can examine.

As I have said before, provide me with a tool, and I will use it. I imagine that many on this board and elsewhere will also use it. Now . . . we may also criticize it if we don't agree with the mechanics of how the tool works. But at this point in time, the real problem is that there simply is no tool.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 03:03 PM   #29
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Re: Yahoo "Finance Quiz"

Just take your 3% from TIPS and be happy. Or is this too simple?

TIPS are my primary asset class. I don't enter discussions of SWRs so much to enhance my own investing (although that has indeed happened from time to time). I do it more to share ideas with the various board communities and to get feedback on those ideas so that over time I can make them stronger and more effective and more persuasive.

Like I said before, you need a new hobby!

What's wrong with having as one's hobby the participation in discussion board threads for the purpose of learning about and teaching about the subject of how to achieve financial independence early in life? I love this stuff, Cut-Throat. I love it so much that sometimes it scares me to think about how much I love it.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 03:07 PM   #30
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Re: Yahoo "Finance Quiz"

The real problem is that there simply is no tool.

I don't want to get into discussions of the ins and outs of the data-based SWR tool on this thread, SalaryGuru. But there is a tool. It is described at the SWR Research Group board. We would love to see you contribute your thoughts on the tool over at that board. Please feel free join in the conversations going on over there.

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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 03:10 PM   #31
 
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Re: Yahoo "Finance Quiz"

*****,

I also like intelligent discussions about withdrawal rates, but by saying that 2% is the number, you are just going to scare a lot of folks needlessly.

I like facts also and have read Berstein extensively and he does not advocate a 2% withdrawal rate.

Yes I believe that those that say that 5% or 6% are as irresponsible as someone advocating 2%.

So, I'm not sure what your objective is, but if you can get 2.5% with no risk (i.e. TIPS) Berstein would be the first to tell you that a stock/bond portfolio over 30 years you should do better!

BTW - Berstein does Not advocate a 2% withdrawal rate. - did you hear that?
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 03:14 PM   #32
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Re: Yahoo "Finance Quiz"

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The real problem is that there simply is no tool.

I don't want to get into discussions of the ins and outs of the data-based SWR tool on this thread, SalaryGuru. But there is a tool. It is described at the SWR Research Group board. We would love to see you contribute your thoughts on the tool over at that board. Please feel free join in the conversations going on over there.
hi *****,

Tabulated thoughts on a internet board does not constitute a tool. I've offered my thoughts about the work of the SWR Research Group board in the past.
Based on what I've read, I don't think the approach you are taking is valid. I would still be willing to use a simulator or formula to examine my FIRE situation if such a tool existed. If we had a specific tool we could use, then we could suggest modifications and corrections. As it is now, the discussions always come down to vaguely stated philosophies.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 03:32 PM   #33
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Re: Yahoo "Finance Quiz"

I poke thru the data strings posted periodically at SWR and enjoy them - but I 'ain't' about to spreadsheet or analyize them -too much like 'work'.

My mental prejudice remains intact - floor is the SEC yield (real money) of 'my personal portfolio asset configuration' and ceiling is ballpark 4%. All in - including dividend hobby stocks - around 2.7% SEC. Plus 1% (another 'guide' I picked up from SWR) gets us to 3.7. My brand of hand grenades says that's close enough.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 04:16 PM   #34
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Re: Yahoo "Finance Quiz"

I like facts also and have read Berstein extensively and he does not advocate a 2% withdrawal rate.

I am not saying that Bernstein advocates that investors take a 2 percent withdrawal from their portfolio. I don't do that myself. The withdrawal you take from your portfolio is your personal withdrawal rate (PWR). My PWR is 4 percent.

It is on Page 234 of his book "The Four Pillars of Investing" that Bernstein says that the SWR for a high-percentage stock portfolio at the top of the recent bubble is 2 percent.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 04:20 PM   #35
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Re: Yahoo "Finance Quiz"

Based on what I've read, I don't think the approach you are taking is valid.

OK, SalaryGuru. Some like vanilla and some like chocolate. That's what makes the world go around.

If we had a specific tool we could use, then we could suggest modifications and corrections. *As it is now, the discussions always come down to vaguely stated philosophies.

There are a lot of specifics on many aspects of the question posted at the SWR board.

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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 04:20 PM   #36
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Re: Yahoo "Finance Quiz"

Cut-Throat
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BTW - Bernstein has never said 2% - That is plain B.S. !
Regardless, it is straight from Bernstein.

From the top of page 234 of The Four Pillars of Investing, William Bernstein said:
Quote:
In other words, a particularly bad returns sequence can reduce your safe withdrawal amount by as much as 2% below the long-term return of stocks. Recall from Chapter 2 that it's likely that future real stock returns will be in the 3.5% range, which means that current retirees may not be entirely safe withdrawing more than 2% of the real starting values of their portfolios per year !
Have fun.

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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 04:23 PM   #37
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Re: Yahoo "Finance Quiz"

Cut-Throat
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I think you are wrong here *****. Bernstein believes that the 'real' return of a stock/bond portfolio to be in the 3% range going forward. He has stated this in books that he wrote before the 2002 downturn of stocks. A 2% withdrawal rate would mean that you are actually saving money.

When I talk about a 4% withdrawal rate, I am talking about something that eats into principal. - My plan only goes for 43 years! - I don't know about you, but I'm actually planning on dying some day!
Volatility reduces the Safe Withdrawal Rate. Remember that the withdrawal rate was around 4% (plus inflation) when the long-term return of the stock market was 6% to 7% in real dollars. Heavy selling of stocks at low prices causes this reduction.

I have recommended an approach that should work for 40 years with a withdrawal rate just above 4%. It consists of owning long-term TIPS at 2.2% (or more) real interest until stocks become attractive once again.

Have fun.

John R.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 04:27 PM   #38
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Re: Yahoo "Finance Quiz"

Cut-Throat
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I don't understand why you keep beating the SWR dead horse. I think everyone here agrees that there cannot be a SWR - only an HSWR! You or no one else is going to come up with a SWR formula. No one can predict the future of financial markets!
I disagree since I have calculated SWRs.

People can still make mathematical predictions in a statistical sense. It is only the details of a specific outcome that is unknown. You can still calculate the likelihood that the outcome will be within specified limits. Otherwise, casinos would never make money.

I have made my methods and tools available at the NoFeeBoards SWR Research Group. I have presented my information in a form that others can duplicate. I provide Calculated Rates and their confidence limits.

To be very precise, the Safe Withdrawal Rate is the lower confidence limit of the calculated rate.

Have fun.

John R.
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 04:28 PM   #39
 
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Re: Yahoo "Finance Quiz"

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Remember that the withdrawal rate was around 4% (plus inflation) when the long-term return of the stock market was 6% to 7% in real dollars.
That is correct John, but the 4% was safe for the very worst of times. Double digit inflation and a flat market for 16 years. In most of the other time periods a much higher number would have been safe. That is why I advocate a 'flexible' Withdrawal Rate.

What you are advocating is Market timing. I no longer believe in Market timing as well as Santa Claus or The Easter Bunny.

Don't forget to Have Fun!
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Re: Yahoo "Finance Quiz"
Old 05-24-2004, 04:29 PM   #40
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Re: Yahoo "Finance Quiz"

TH
Quote:
What I think it did was recalc the 30k withdrawal into 1972 dollars and then go from there..There are "use inflation adjusted dollars" for everything except the withdrawal rate (I think)..Or is what I'm saying just not making sense, or am I way off base?
FIRECalc (and Yahoo) started making a $30K withdrawal in 1972. The withdrawal amount was increased each year thereafter to match inflation. The final balances are in nominal dollars.

Have fun.

John R.
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