Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Old 09-17-2017, 09:12 AM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
Quote:
Originally Posted by ESRwannabe View Post
pb4uski,

You are very certain about things. So, maybe you will know the answer to a question for me. I don't know the answer. So you could make it up and I would not know.

Anyway, has anyone taken the Trinity study or better yet whatever new slice and dice Boglehead variation is used today (REITs, small value tilt, whatever the new fad is, etc) and found out if their strategy would have worked in Japan?

Thanks!
What in the world does whether the Trinity study or some new variation would have worked Japan have to do with this thread (or with the price of eggs in China)?

If you can't stand the heat then change the subject?

OP is in the US.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-17-2017, 09:40 AM   #42
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
Quote:
Originally Posted by marko View Post
+1
Been there. Despite a stellar resume, 30 years in the industry and industry-wide name recognition I never worked again after two years off. To say the least, it was an eye-opener.

I was "overqualified" (age 53 = too old), kids coming up could be hired for a lot less (despite my insistence that I didn't care about the compensation) and the concern that I was "A rich guy who just wanted to take clients golfing all day".
And, what's wrong with that!?!?

BTW, if you ever need a 4th, I'm there for you; although, you might have to put the air fare from Cali on your expense report.
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
Huston55 is offline   Reply With Quote
Old 09-17-2017, 09:49 AM   #43
Full time employment: Posting here.
ESRwannabe's Avatar
 
Join Date: Mar 2010
Posts: 889
Pb4uski

You shot my recommendation down with so much confidence I merely wanted to find out if whatever the current variation of boglehead method still only applies when using US data from the recent past few decades.
ESRwannabe is offline   Reply With Quote
Old 09-17-2017, 09:52 AM   #44
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
It is pretty easy when there are no credible studies or publications on the face of the earth that support a 6% WR.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 09-17-2017, 10:08 AM   #45
Full time employment: Posting here.
ESRwannabe's Avatar
 
Join Date: Mar 2010
Posts: 889
Quote:
Originally Posted by pb4uski View Post
It is pretty easy when there are no credible studies or publications on the face of the earth that support a 6% WR.


No studies that's probably true. That doesn't mean it isn't possible.

As an example investing in real estate has been a successful way to retire for thousands of years and that often has withdrawal rates higher than 6%.

I am certain more people have retired off of real estate than bogleheads method.
ESRwannabe is offline   Reply With Quote
Old 09-17-2017, 10:23 AM   #46
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,474
Quote:
Originally Posted by Honeyfill View Post
my plan is to take 0.5%per month which works out to 6% per year with a 100 % equity allocation. This plan is guaranteed to never run out of money. Our base expenses are low enough that could easily survive a 50% drop in the stock market.
I just finished skimming/reading the thread. This is probably a little off topic, but if your base expenses are less than 50% of what you plan to withdraw, then you are planning for 50% of your annual 6% withdrawal to go to discretional (fun) spending, and I am simply floored.

What in the world do you plan to spend the other 3% on? I guess I am lacking in imagination. To me, that's a huge amount to allocate for discretional spending; figuring out what to blow an additional 3% on (beyond base expenses) sounds to me like a lot of work.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is offline   Reply With Quote
Old 09-17-2017, 10:27 AM   #47
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
Quote:
Originally Posted by mathjak107 View Post
there seems to be a balance point . 100% equities clocked in over 30 years with a 93% success rate vs 96% for 50/50 .going out 40 years 100% equities did better than 50/50
I think this is the 'Efficient Frontier' at work.

The EF is the basis of most of the posts on this thread recommending an AA <100% equities. IMHO, the OP would do well to take that advice.
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
Huston55 is offline   Reply With Quote
Old 09-17-2017, 10:52 AM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 7,866
Quote:
Originally Posted by Senator View Post
A 6% withdrawal rate is way above what everyone else recommends for a 30-year withdrawal rate.
FWIW, there is a person (sol, I think) over at the MMM boards who recommends a 6% withdrawal rate. I think he is even targeting that number for when to retire himself (and he's fairly young - 30s or 40s).

The usual logic with the 4% rule is that it is historically safe 95% of the time. His argument is that you are more likely than not to oversave with the 4% rule.

He claims - and I haven't checked his math, but it seems reasonable - that 6% is historically safe for 30 years about 50% of the time. So you are as likely to be OK as you are to be not OK.

He's more willing to go back to work if things don't pan out than I am.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 09-17-2017, 11:02 AM   #49
Recycles dryer sheets
mistermike40's Avatar
 
Join Date: Aug 2014
Posts: 336
I think OP's 6% is different than the typical 3-4% SWR.

The SWR gets adjusted for inflation each year... I believe OP's plan (from what I've read) is to take 0.5% per month (6% annually), each month... no adjustment (always taking the 0.5%/6%) except his nest egg increasing as his assets hopefully appreciate over time. This means his annual increase (or decrease) would be dependent on market performance and not inflation.

I don't think there's a direct correlation between the two values (I could be mistaken and I haven't read every post in the thread).
mistermike40 is offline   Reply With Quote
Old 09-17-2017, 11:27 AM   #50
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
Quote:
Originally Posted by ESRwannabe View Post
No studies that's probably true. That doesn't mean it isn't possible.

As an example investing in real estate has been a successful way to retire for thousands of years and that often has withdrawal rates higher than 6%.

I am certain more people have retired off of real estate than bogleheads method.
You don't really have a withdrawal rate with real estate so your post is a bit of an odd point. The big risk with a real estate only funding approach is that it is very hard to get adequate geographic and property-type diversification in directly owned real estate. I have a neighbor friend who has a commercial property in Flint, MI that he can't sell... he may ultimately hand the keys to the bank.... I'm guessing a similar story in some areas of Detroit and Chicago too.

DMother is another example... a commercial property that she owns and I manage for her provides more than she needs when combined with her SS... but it is a single tenant in an area where it would be hard to replicate those lease cash flows if that single tenant were to leave so it would be very risky to rely on that property or even a number of like properties for retirement funding... fortunately she has other resources if that should happen.

While your certainty that more people have retired off of real estate than off of stocks/bonds is interesting, it would be even more interesting if you had facts to back it up... but alas...
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 09-17-2017, 11:39 AM   #51
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
Quote:
Originally Posted by mistermike40 View Post
I think OP's 6% is different than the typical 3-4% SWR.

The SWR gets adjusted for inflation each year... I believe OP's plan (from what I've read) is to take 0.5% per month (6% annually), each month... no adjustment (always taking the 0.5%/6%) except his nest egg increasing as his assets hopefully appreciate over time. This means his annual increase (or decrease) would be dependent on market performance and not inflation.

I don't think there's a direct correlation between the two values (I could be mistaken and I haven't read every post in the thread).
Actually, I forgot that you can model this in FIRECalc. Below is a scenario of 100% stocks, 6%/year withdrawals ($60k on $1000k base).

Quote:
A constant spending model is designed to allow you to maintain your lifestyle throughout the term of the plan, but variable spending plans use calculated spending amounts that may or may not be suitable after decades. Here is the annual spending for all 117 of the 30 year cycles, shown in 2017 dollars.


From the graph it looks like there are nunerous scenarios where the retiree woudl have to reduce their spending/standard of living with a 6% of balance approach.

Quote:
FIRECalc looked at the 117 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 117 cycles. The lowest and highest portfolio balance at the end of your retirement was $364,743 to $2,477,022, with an average at the end of $1,042,716. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

In other models in FIRECalc, "failure" means the portfolio drops to zero. Since you are limiting spending to a percentage of your remaining portfolio, the total balance should never reach zero — but it could become pretty small in some situations. Pay attention to the spending graph, below. Since we can't use portfolio failure as a metric, FIRECalc is following the lead of the 95% Rule from Work Less, Live More, in which one of the goals is for the portfolio to be as big (after adjustment for inflation) at the end of the 30 years as it was when you started. FIRECalc found that 47.0% of the time, the portfolio you would have left behind exceeded the portfolio you started with.
I think this means that 53% of the time that a 6% of balance WR would not allow your spending to keep pace with inflation and possibly required lower spending/lowered standard of living.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 09-17-2017, 12:24 PM   #52
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 284
I understand that various SWR analyses can be useful as guidelines, but does anyone really withdraw and spend X% of his/her portfolio every month, or year, no matter what...?

I assume that, in the real world, people spend various amounts, over time, depending on what they want or need to buy in a particular month or year.

And I assume that most people probably adjust their spending based (in part) on how their portfolio is doing.

Actually, I don't have any idea what "most people" do. But I would guess they do these things, and I think I will do these things when I retire.
medved is offline   Reply With Quote
Old 09-17-2017, 12:32 PM   #53
Moderator
braumeister's Avatar
 
Join Date: Feb 2010
Location: Flyover country
Posts: 25,199
Quote:
Originally Posted by medved View Post
I assume that, in the real world, people spend various amounts, over time, depending on what they want or need to buy in a particular month or year..
That's what I do.

However, I also track it, with an eye toward how the WR is going.
So far it has been within the 4% guideline (except for one year) and more usually within 3%. As long as it stays in that range, I'll keep spending freely.
__________________
I thought growing old would take longer.
braumeister is offline   Reply With Quote
Old 09-17-2017, 01:08 PM   #54
Full time employment: Posting here.
ESRwannabe's Avatar
 
Join Date: Mar 2010
Posts: 889
pb4uski,

Firecalc, Bogleheads, Trinity, Fama French small/value, etc. give a false impression that future returns can be calculated. This is wrong. Past returns have no more determination on future returns than do past results of flipping a coin determine the future result of a coin toss.

You cannot claim 4% will work nor that 6% will not work in the future. This model only works for the past few decades in the US. Take it to Japan or wherever and the equivalent Trinity study fails.

If we are going to use a limited amount of US data, then it is equally valid to go back and cherry pick anything we want. Someone could do a study on a portfolio of soft drink companies and even make a firecalc for it.

It can become so popular that eventually it attracts a devoted following that goes around calling themselves Cokeheads, and telling everyone on every single finance discussion board that they have the answer, and anything different is wrong. Anyone that disagrees will be told about how firecoke says this strategy allows an X% withdrawal rate with a 95.99% confidence. If you disagree your wrong because just look, we have 40 years of data for the US and it worked just fine there.
ESRwannabe is offline   Reply With Quote
Old 09-17-2017, 01:24 PM   #55
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 35,712
If we drew 6% of present value each year, then after 10 years the worst-case ending balance of a $1M portfolio was the following, according to FIRECalc.

100% equity: $340K
75% equity: $384K
50% equity: $391K

Note that in the worst case, the $60K/yr WR became $340K * 0.06 = $20.4K/yr. I think the retiree would have hit SS long before the 10-year period ended.

The fact is that in the past, a $1M portfolio without any WR on it demonstrated an amazing ability to shrink occasionally. Just by making some simple runs with FIRECalc, I see that in the worst case, after 10 years of 0% WR, a $1M portfolio became

100% equity: $625K
75% equity: $695K
50% equity: $715K
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)

"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is offline   Reply With Quote
Old 09-17-2017, 01:41 PM   #56
Moderator
braumeister's Avatar
 
Join Date: Feb 2010
Location: Flyover country
Posts: 25,199
Quote:
Originally Posted by ESRwannabe View Post
Firecalc, Bogleheads, Trinity, Fama French small/value, etc. give a false impression that future returns can be calculated. This is wrong. Past returns have no more determination on future returns than do past results of flipping a coin determine the future result of a coin toss.

You cannot claim 4% will work nor that 6% will not work in the future. This model only works for the past few decades in the US. Take it to Japan or wherever and the equivalent Trinity study fails.

If we are going to use a limited amount of US data, then it is equally valid to go back and cherry pick anything we want. Someone could do a study on a portfolio of soft drink companies and even make a firecalc for it.
Perhaps it would be good to review what FIRECalc does and does not claim to do.

https://firecalc.com/index.php

Quote:
How can FIRECalc predict future returns from past performance?
It can't. And it doesn't try. In fact, it tries to predict what will not happen.
__________________
I thought growing old would take longer.
braumeister is offline   Reply With Quote
Old 09-17-2017, 02:43 PM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,008
Quote:
Originally Posted by medved View Post
I understand that various SWR analyses can be useful as guidelines, but does anyone really withdraw and spend X% of his/her portfolio every month, or year, no matter what...?

I assume that, in the real world, people spend various amounts, over time, depending on what they want or need to buy in a particular month or year.

And I assume that most people probably adjust their spending based (in part) on how their portfolio is doing.

Actually, I don't have any idea what "most people" do. But I would guess they do these things, and I think I will do these things when I retire.
I withdraw X% every year, no matter what. I don't usually spend it all, and save the excess for rainy days or splurges.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 09-17-2017, 02:44 PM   #58
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 13,202
Quote:
Originally Posted by medved View Post
I understand that various SWR analyses can be useful as guidelines, but does anyone really withdraw and spend X% of his/her portfolio every month, or year, no matter what...?

I assume that, in the real world, people spend various amounts, over time, depending on what they want or need to buy in a particular month or year.

And I assume that most people probably adjust their spending based (in part) on how their portfolio is doing.

Actually, I don't have any idea what "most people" do. But I would guess they do these things, and I think I will do these things when I retire.
I'm pretty sure there are some people here who do exactly that, withdraw a set amount per month or year and live off that.

I withdraw as I need to. I probably check 2-5 times a year to see if my spending seems to be on track to my budget. If I know I'm hitting more big expenses, I'll check more often.

I don't spend more if more portfolio is doing well for the most part, because I don't want to have to cut sharply back during a correction. I say "for the most part" because I use VPW, so after a good year I'll be able to spend a bit more the next year. If my portfolio went up $100K, I might get an extra $3K or so to spend the next year, because I'm basically spreading out that $100K windfall over the rest of my life, and it can get canceled out in the next downturn.

I'm guessing you're taking some issue with the preciseness of these numbers? I think for planning it makes sense. I'd rather have a clear spending/withdrawal target than a fuzzy one. If I'm a bit over one year, that's fine, but if it's year after year, and investment returns aren't great, it's eventually going to catch up to me. I don't want to have to cut back on things that are closer to "needs" than "wants" in my later years because I was lax in my younger years.
RunningBum is offline   Reply With Quote
Old 09-17-2017, 02:47 PM   #59
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 284
How is this for my simpleton approach:

4% probably works. It has pretty much worked in the past. But there is no guaranty it will work in the future. So if you can spend a lower percentage, and still be happy, that would probably be a good idea. If you need to spend 4% in order to meet your needs and be happy, then maybe just keep an eye on your portfolio and adjust your spending depending on how your portfolio does. A little bit of adjusting in down years might help.

6% might work. But there's a much worse chance that it will work than 4%. So its higher risk. If you don't mind higher risk (more chance you will run out of money), then go for it. But to pretend that 6% WR does not have materially greater risk than 4% WR seems silly to me.
medved is offline   Reply With Quote
Old 09-17-2017, 03:00 PM   #60
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,008
I have modeled 6% of remaining portfolio for the case of 50% total stock market, and 5 year treasuries. It survives indefinitely of course, but the income in real terms has dropped 73% in the worst case scenario during a 30 year period. Now, if you are ignoring inflation it might not be obvious in nominal terms, but I expect someone would notice their standard of living was dropping.

Average ending portfolio was 60% of starting portfolio and lowest ending portfolio was 30 % of starting portfolio in real terms.

So it's viable, at least in the 50/50 case I modeled, you are just going to have a gradually shrinking income in real terms from such a high draw.

It's easy to model % remaining portfolio scenarios using FIRECALC.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Any One Have Any Thoughts on CAT Golden sunsets Active Investing, Market Strategies & Alternative Assets 67 10-18-2018 10:20 AM
Pretty much retired for over a year... Ian S Hi, I am... 6 08-29-2014 01:49 PM

» Quick Links

 
All times are GMT -6. The time now is 02:03 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.