audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
OK, thanks! I’ll try this next time I run VPW.For US large cap stock, an OK estimate of expected real returns is 1/PE10
For bonds, just use the current interest rate and take off expected inflation.
Then weight the two based on your AA. If you're backtesting, you can try the previous year's inflation as expected inflation or maybe an average of the last 2 or 3 years. For year's they existed, the delta between nominal bonds and TIPs is another choice.
That should get you going. If people want to discuss this further or have other ideas, then a new thread should be opened.
The scenarios I’ve run (50% TSM/50% 5 year treasuries) show you can go as high as 4.35% of remaining portfolio for 30-40 years and still end up on average with the portfolio you started, in real terms. Worst case ending portfolio portfolio was just over half of initial amount in real terms. You might have to deal with a 60% drop in income in the worst year, worst case, but your lowest income would still be higher than more conservative withdrawal rates. And all your other years would have higher income. The worst starting years clustered around the turn of the century: 1899, 1906, 1892, etc.
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