pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Eating pet food at any stage in life is hard to swallow...
+1
Eating pet food at any stage in life is hard to swallow...
Probably just worth taking the low point as possible for any of them past that (i.e. 97% for any 3.5% SWR longer than 40 years).
First of all, you can eat "people" food for less than good quality pet food. I'm not sure about the extra large bags of dry dog food at Sam's.Eating pet food at any stage in life is hard to swallow...
William Bernstein was quoted in post #1 and more completely in post #19. If you read #19 or better yet more of The Retirement Calculator From Hell series you may come away with a slightly different conclusion...I can't remember exactly but I think it was William Bernstein that said any probability of success above 80% is good enough. We can all enjoy the wallowing in nerd-dom and working this all out to four or five decimal places but it doesn't change the fact that behind it all there is a big 10 to 20% of totally unknown out there.
A wildly optimistic historian might give us another few centuries of economic, political, and military continuity. Back-of-the-envelope, that’s about an 80% survival rate over the next 40 years. Thus, any estimate of long-term financial success greater than about 80% is meaningless.
Now, let’s return to the above table. The historically naïve investor (or academic) might consider reducing his monthly withdrawals to a very low level to maximize his chances of success. But history teaches us that depriving ourselves to boost our 40-year success probability much beyond 80% is a fool’s errand, since all you are doing is increasing the probability of failure for political, economic, and military reasons relative to the failure of banal financial planning.
Mind you, this is not a call for wild abandon. The above table constrains the retiree desiring a theoretical 97% success rate (of portfolio survival) from spending more than 3% per year of the initial real amount of his nest egg. Taking the accident propensity of the species into account would allow him to spend about 4%. But if you believe that we’re about to encounter a bad returns sequence or simply wish to leave a few baubles to your heirs, you’re right back to 3% again.
So live a little, and enjoy your money, for tomorrow we may be consumed by the ghosts of Hitler, Lenin, and Attila the Hun. And at withdrawals of 3% to 4% of your nest egg, don’t spend it all in one place.
I can't remember exactly but I think it was William Bernstein that said any probability of success above 80% is good enough. We can all enjoy the wallowing in nerd-dom and working this all out to four or five decimal places but it doesn't change the fact that behind it all there is a big 10 to 20% of totally unknown out there.
Wow. I am 47, planning to live until 95, and my SWR = 3.5%. Right on target
Hi Jwill. Thanks for registering to share your thoughts. I am one of those with a 40 year horizon and 80% probability @ FIRECalc. We each must work with our own risk tolerance. While I don't disagree with anything you say, I am also not confident that going from 80% or 85% to >95% probability makes my financial outlook at age 90 any different, for two reasons. First, the math behind most calculations assume investors act passively to market conditions, when in reality we react in a (hopefully) proactive way either by shifting our asset allocations or modifying our spending. Second, over 40 years the landscape changes so dramatically that we may not even know how we will be defining "success".Hi everyone. Just a lurker here who appreciates the board and informative discussions.
Hopefully this post is a worthwhile contribution.
For whatever reason, Bernstein's assertion struck me (and I do agree with Midpack's clarification of his assertion), so I did a little digging and registered to post this thought:
For a 40 year (or even less) portfolio, I would be concerned with shooting for "only" an 80%-90% backtested chance of success.
I haven't seen this discussed before, but after informally reviewing Firecalc, Otar and Pfau's data, an uncomfortably large number of the failed 10-20% of portfolios, with a typical mix of stocks and bonds, appear to failed after only 20-ish years, or less.
Also, a number of these failed portfolios started hovering around what I would consider "unacceptably/frighteningly close to failure", with maybe 20-30% of the original portfolio remaining in what appears to be around 10-15 years.
At, say, closer to 4% SWR, and particularly under what I perceive as a low-yield (interest and dividends), and seemingly somewhat higher-valuation (equity price) climate, I am a little more concerned about the possibility a 15-20 year portfolio failure than economic, political, and military discontinuity rendering the whole effort futile, within that shortened frame of time.
Without trying to split unknowable hairs, I personally feel more comfortable setting a 95% (1 in 20 likelihood of failure, rather than 1 in 5) backtested success probability as a minimum. Especially for > 20 year plans, since such a failure would likely hit when I'd be considerably less employable, yet perhaps still kicking.
Anyway, hope that makes sense.
2B said:There are so many factors in calculating SWR and portfolio survivability that anything we do now is going to look somewhat silly in 30 years. Think about your cost of living 30 or even 40 years ago. How much do you need now to support the same lifestyle? Have your investments been performing the same? What type of pension benefits did you think you would be getting? What were the taxes and government benefits? Do you think there may be as many or more changes in the coming decades?
Yes, we can run the numbers for a pseudo-inflation adjusted SWR. We can wax poetic about the nuances of various survivability rates. Ultimately, we will probably spend less (inflation adjusted) as we age and it won't be because we don't have the money. At some point we all just have to make the jump and hope our parachute works long enough.
Remember these success rates are based entirely on past history.
Not yet, but I predict you can get the next thirty years infoif you hang around for another three decades...Is there another website that we can obtain simular info, but with future history? Just curious...
ERD50 said:You might want to put those dancing shoes on ice.
Recall that the default FIRECALC runs that Midpack shows use the default 75% EQ 25% Fixed AA. IIRC, you are stock averse, and are 100% fixed?
-ERD50
Is there another website that we can obtain simular info, but with future history? Just curious...