Hey,
Did anyone read the DIESEL article in the Sept FPA Journal at
http://www.fpanet.org/journal/articl...p0906-art7.cfm
I saw some discussion in Morningstar's forum and thought I'd give it a read.
It's a system for managing withdrawals in such a way that you can supposedly start at 7% and adjust up by 3% per year, without impacting chances for success.
The folks on Morningstar really ripped the article apart because in the period shown (from 1972 to 2005), the system would have only retained around 60% of the retiree's purchasing power (at least the portfolio didn't run out).
I'm kind of surprised that the FPA Journal published this, I've always thought of them as having pretty high standards. Maybe the naysayers at morningstar don't know what they're talking about, but their arguments look solid to me.
In any case, the article is a relatively easy read and it covers quite a bit about managing cashflows during retirement and gives some insight into how the financial planning world works.
One thing the system requires is that all income and dividends are reinvested, then cashflows are skimmed off when rebalancing (quarterly). I can't figure out what the reason for the automatic reinvestment would be (they recommend no-load funds).
Anyhow, reading about the Ray Lucia "buckets" strategy made me think of this other report. I guess everyone is trying to figure out a "system" that gets the withdrawal rate up...
Jim
{Jim - Edited typo in date range }