haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
"Please consult your financial advisor, legal team, accountant and/or astrologer."How would you advise each of them?
Ha
"Please consult your financial advisor, legal team, accountant and/or astrologer."How would you advise each of them?
I agree, in two ways:My guess is that once a portfolio that is one's only or main source of support hits $375,000, life changes, and likely forever.
Nope, not saying that. But let me ask you this ... Take two people, A & B. Both are the same age. Both have same budget. Both have same portfolio. Only difference is A retired five years ago and is doing a gut check to see how things are looking, and B is contemplating retirement now. Both of them see the same thing, that it does not look so hot, 2% SWR advised per whatever tool of choice. How would you advise each of them?
Raddr has been running a long-term thread on his board about the hapless Y2K ER who refuses to reduce his spending to reflect reality.
I'll do one better - here's a story of THREE people
To give you a more serious answer, I agree with your conclusion 100%. Early on I would read the explanations of how the history of one’s getting to the present effects his chances going forward- given same size port, same WR, and same required duration.But should whoever advises them give the two of them different advice? I think not. A's likelihood of success in a continued retirement is exactly the same as B's in starting retirement, assuming they do everything the same.
It does not matter that A's original calculations supported 4% and that A went through a bad spot and (historically) should recover. Current projections inform both A & B that they are only safe with 2%. If there is any valid argument that A can continue with 4%, then the same argument says B can start with 4%. But I would not be any more comfortable with that than I would with the approach of the "hapless Y2K ER".
-Arnie
It does not matter that A's original calculations supported 4% and that A went through a bad spot and (historically) should recover. Current projections inform both A & B that they are only safe with 2%. If there is any valid argument that A can continue with 4%, then the same argument says B can start with 4%. But I would not be any more comfortable with that than I would with the approach of the "hapless Y2K ER".
Thanks folks for taking the time with me. I am, after all, confused by dryer sheets. I doubt we're disagreeing much at this point and I may just be going on because I enjoy the sound of my own voice.
-Arnie
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By the way, person A should not have waited 5 years to re-evaluate.
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-Arnie
Now whether you are comfortable with taking that higher rate or not is a personal gamble. But that is (to the best of knowledge) how to interpret what FIRECALC does with that scenario.
Disagree (at least as far as analysis of past data, as FIRECALC does).
We didn't have two Great Depressions in a row. We didn't have two periods of high inflation like the 80's in a row. The market conditions have been cyclical.
So you are saying, "My hypothetical portfolio just barely survived the inflation of the 80's (or the GD), I need enough left over to do it all over again".
If you want enough buffer to provide some assurance that you could survive a future scenario that might be like two past bad periods strung together, then that would be a reasonable approach. But it's assuming the future will be worse than the worst of the past. And it might be reasonable to allow for that kind of buffer.
But it isn't correct to say that you can just run FIRECALC again after a bad stretch, and say that that new number is the new 'correct' number. By that logic, the you are really saying that those squiggly lines you see that dip, and then correct themselves over the long haul do not really exist - that they all ended up failures. But they didn't.
-ERD50
I don't think so. It is sort of like the guy who rolled heads and the question is how likely is it that his next roll would be heads. Some would say not because it is less likely someone will roll two heads than one head and one tail. But they are comparing apples and oranges. When no rolls have been made it is less likely that someone will roll two heads. But once one roll has been made (and been heads) that person still has a 50-50 chance of rolling heads.
So, yes, it is very unlikely someone will have two sets of extremely bad market returns close in proximity. However, if A retires, has the bad market returns, then that has already happened to him. He does not have less likelihood of bad future market returns than B who hasn't retired. A's overall probably of success may be higher because he might have less years of retirement to plan for. But future economic conditions will be the same for both him and B.
Dory not only took care of all the "routine" maintenance and bug-fixing and upgrades, as well as educating those who thought a feature was actually a bug, but every year he also downloaded Schiller's databases of asset-class performance. I remember there used to be a lag of months until the previous year's data was available for Dory to download.I know Dory had adjusted Firecalc for the large down draft. Does anyone know if it was again adjusted for the large come back in the last year and 1/2?
There's a difference in assumptions in the two scenarios:
Scenario 1: planning for retirement only looking with a forward model(i.e. your person B)
Scenario 2: planning for retirement by including both recent past and modeled future results assuming temporal autocorrelation (your person A); the answers to this simulation are merely a subset of answers to scenario 1
Therefore, scenario 1 is a more robust answer to a monetary survival question.
As to whether it is better? That depends on how well one thinks that the future can be predicted based on the past. Ultimately, which imperfect prediction method allows you to peacefully sleep each night?
While I see your point, it is inconsistent with a FIRECALC probability prediction because of the 5-year time difference.
At this point A has 25 years to go and B has 30 in terms of measuring the success of a FIRECALC prediction. Certainly FIRECALC would say that A has a higher probably of success for 25 years than B for 30 at the same withdrawal rate. By saying they both now have 30-year horizons, you are implicitly saying that A should have based his initial withdrawal rate on a 35-year time span.
This is always good for an argument. But truthfully, it is understood best on a first take before you get confused. Short of some sort of magic attribution, it cannot matter, as I posted above. After a huge crash, another one is somewhat less likely. But just as less likely for a new retiree as for the battle scarred and portfolio damaged veteran. Valuation is what counts, not path.Yes, there is an implicit assumption that A retired earlier, should have (and did) base his initial WR on a longer period. But that was then and this is now. In spite of A getting an earlier start on ER, they have both experienced the same markets over the last 5 years. They are the same age, have the same expenses, portfolio, AA, etc.
To give you a more serious answer, I agree with your conclusion 100%. Early on I would read the explanations of how the history of one’s getting to the present effects his chances going forward- given same size port, same WR, and same required duration. But I cannot see how it possibly could matter.
Because the markets tend to be mean reverting over long periods of time, (as to value ratios, not level) I believe that the market has some sort of memory. Its history does matter, as opposed to the model of it being a Monte Carlo generator. But the market has no idea when you or I dropped in, and would be indifferent to this information if it had it.
Ha
Yep.This is always good for an argument. But truthfully, it is understood best on a first take before you get confused. Short of some sort of magic attribution, it cannot matter, as I posted above. After a huge crash, another one is somewhat less likely. But just as less likely for a new retiree as for the battle scarred and portfolio damaged veteran. Valuation is what counts, not path.
But FIRECALC isn't MonteCarlo. There is no rolling of dice, it is just reporting on the past scenarios. It has nothing to do with the likelihood of it happening. It either happened or it didn't. If it happened it's considered.
And the fail scenarios you get don't start 5 years into the bad period, that would shorten the bad period by 5 years and that wouldn't be the worst of the worst. And they don't start at the beginning of the second stage of a double-whammy bad market, the worst would be both stacked together (if/when that happens). So for that case, we are now talking about someone surviving a bad market and then throwing two more sequential bad markets on top of that with the FIRECALC failure. That no longer reflects history, and is outside the realm of what FIRECALC does.
And this assumes the future is no worse than the past, but that is all the tool can do. You can adjust for that if you wish (not a bad idea at all), but don't double-adjust w/o considering what it is really telling you.
-ERD50
Pre-FIRE DW and I studied our spending and estimated how that would change in retirement and how we would meet other goals such as self-insuring for LTC, providing for a special needs grandchild and other things. Then we calculated how much retirement resource we'd need to give us the necessary income with a conservative WR to meet that spending level.
We did not, as you are doing, simply retire and then calculate how much we could withdraw from whatever we had.
IMO, you're making a mistake not considering how much you want/need to spend but rather simply testing for a WR that would survive given what you have and then assuming you'll somehow survive on that spending level. You really should consider how much you want/need to spend.
I have been using the 4% withdrawl and my portfolio has gained except in 2008 but i made back all those losses in 2009. Since we are in a bear market and have been since 2000 BTW the average bear market lasts 18 years. I am still to young to collect social security. I am a 100% Vanguard investor and I use 40% High yield bonds as a proxy for stocks my equity holdings are about 6% I also hold corporate long bonds my current porfolio generates 4% in interest and dividends so I dont lose sleep over a shinking portfolio by needing to sell equities to raise cash. I sweep all my interest and dividends into a money market. I am also getting about 4-5% in capital appreciation. For me stocks just do not pull the wagon and have not for ten years. I am still shocked that so many people are 60% plus in stocks at retirement age.