On the first part, $3,333/month ($40k per year) adjusted for inflation, so increasing withdrawals to preserve $40k of spending power in Jan 2000.... I'm not sure if the inflation adjustments are monthly or annual, I presume annual, but I don't think that it makes much difference.
The hypothetical retiree wasn't putting themselves in any particular position to rely on a bull market unless they had some crystal ball... they just happened to retire in Jan 2000 and based on conventional wisdom selected a 60/40 AA and 4% WR. In retrospect, they retired at a particularly bad time... but they had no way of knowing that.
Now all of that presumes that the retiree's spending had no wiggle room and that they strictly stuck to 4% plus inflation withdrawals.... I think the reality is that the decline in the portfolio in the early years would have caused the retiree to do some belt tightening to stem the decline of the portfolio... or start SS or a pension earlier than the original plan... or the like.
Now all of that presumes that the retiree's spending had no wiggle room and that they strictly stuck to 4% plus inflation withdrawals.... I think the reality is that the decline in the portfolio in the early years would have caused the retiree to do some belt tightening to stem the decline of the portfolio... or start SS or a pension earlier than the original plan... or the like.
My portfolio is screaming rebalance right now - between a combination of dropping equities and capital gains distributions paid out over the past few weeks.
I will be rebalancing soon anyway as I usually do so near Jan 1.
I'd say we are more closer aligned in our thinking than we are different. I understood your selected date, but that supposes that one jumped in feet first at that date, at the absolute peak of the S&P. Those that chose that date did experience a bit of a scare, but chances are most either got in before or after.bobandsherry, yes, I see your point. It looks to me from the top graph that it took over 16 years for the S&P to catch back up to the bond fund, with two steep plummets at approximately the two year, and eight year out points.
{lots of other great points truncated}
.... But you really want to look at the inflation adjusted portfolio value over the years to see what is happening, and the portfolio is down 40% in real terms. Your nominal image above does not show this. So withdrawal rate is quite a bit higher than when they started.
My portfolio is screaming rebalance right now - between a combination of dropping equities and capital gains distributions paid out over the past few weeks.
I will be rebalancing soon anyway as I usually do so near Jan 1.
My portfolio is screaming rebalance right now - between a combination of dropping equities and capital gains distributions paid out over the past few weeks.
I will be rebalancing soon anyway as I usually do so near Jan 1.
Now all of that presumes that the retiree's spending had no wiggle room and that they strictly stuck to 4% plus inflation withdrawals.... I think the reality is that the decline in the portfolio in the early years would have caused the retiree to do some belt tightening to stem the decline of the portfolio... or start SS or a pension earlier than the original plan... or the like.
With the drops and distribution the market may have already made your AA adjustment for you
I definitely have the most conservative allocation on this board. I am 30% equities and 70% fixed income. I sleep well at night with my allocation.... Hence, I’m not trying to maximize my return on investments - I’m trying to accept being comfortable with what spent 30 + years trying to save.
I'm guessing it is of the original balance using the standard Trinity study concept.
Yes, one had to have the huge bull market, but the flip side is how many retirees had to face 2 bear markets in 10 years and an upcoming 3rd one in a total of 20 years?
Thus both sides of the analysis equation come into play.
Ours is more conservative and I think there are others on this board with 0 - 20% stock allocations as well. There just isn't as much to talk about or react to with a low market allocation.
Ours is more conservative and I think there are others on this board with 0 - 20% stock allocations as well. There just isn't as much to talk about or react to with a low market allocation. The main financial event in our house is we are winding down the number of years left we are going to try to limit our taxable income for ACA subsidies. So I get to start spending a bit more next year no matter what the market does.
(Bolded emphasis mine)Thanks to you and Dawg52 for your responses! I really don’t like stretching my AA and it’s comforting to hear that other folks think similar.
Based on the market gyrations over the past 2 to 3 months, I would have:
1. Worried More
2. Began to sell holdings, based on fear or feeling that I knew more than other investors (which is not the case.)
3. Wasted more time watching CNBC, which would have depressed me.
Glad I’m not there anymore.
I
Raises hand, now that retiree would be me. 1999 retiree, bear market of 2000-2002 and 2008-2009 and now 2018 and I believe some of 2019 also.
Nowadays the situation has changed, while long-term interest rates are still low short-term rates have improved. A 2 year CD pays 3%, less than the average of what typical portfolio need to earn, but within range. The Fed has told us they are going be unwinding the 4 Trillion of long-term bonds they own. This should drive prices down and yields up on long-term bonds. Meaning that if you stick your money a 2 year CD, by the time it matures, there is a good chance you'll be able to buy high-quality bonds with 4-5% yields.
Has this recent correction have you reconsidering your asset allocation?
I went into 2015 at 80/20 and found the first minor dip made it difficult to get a good night's sleep. I readjusted to 70/30 but the next drop was still to deep. Ive been 60/40 since and have barely paid attention to this ride down so far. Now I'm wondering if 60/40 is too conservative, but I doubt 65/35 would make any major difference so I guess it's time to sit here and do nothing.