Samurai Says: 1/2% SWR...

[Chuckanut]

Reminds me of Suze Orman's $5-$10M number from a while back...

https://www.marketwatch.com/story/s...5-million-to-retire-thats-nonsense-2019-01-15

I a reminded of the Saturday WSJ which often has articles on clothing, gadgets, etc. The items they feature are astronomically priced - $650 for tennis shoes, $175 toasters, $220 suspenders, $1500 for earrings, and so on.

If I spent like that I would not be able to afford my WSJ subscription. I am probably dragging down their advertising rates.

 

[NW-Bound]

Yes, old(er) age has some advantages. I stopped planning for 30 years (more) retirement at age 70! I now think in terms of 100 minus my age. Haven't refigured what my "new" SWR is. Honestly, I can't spend my RMDs now. Fortunately, there are enough charities in my heart to absorb the excess. YMMV

I used to ponder a lot about SWR and retirement planning. I ran FIRECalc every which way, tweaking this and that.

And now, into the 8th year of retirement, with the help of the bull market and the ability to tap SS whenever I feel like it, plus our desire for "stuff" which was never that strong has diminished to nothing, I no longer worry about SWR, or even what the future market return is.

I still watch my stash, and remain an active investor. I still want to see my stash grow, or not shrink too much. I am doing it as a pastime, and a challenge. This mercurial market is just one of the many unpredictable and temporarily insane things in life. But it is one in which I can act upon unilaterally for mitigation as I see fit, compared to other things in life where other people do not share my thinking.

 

[HI Bill]

I think he's writing for remuneration.

He is, but this post pretty much killed his goose. For 99.9% of the US, a 0.5% WR would mean the end of the ER concept, as well as FI. I've been saying for a while that interest rates will never return to what they were, and therefore, the 'safety' provided by bonds in the portfolio are being overstated. But running FIRECALC, I just upped the equities portion to overcome the lower future anticipated bond yields...and up to around 95% equities, the overall success rate increased.

 

[CardsFan]

He is, but this post pretty much killed his goose. For 99.9% of the US, a 0.5% WR would mean the end of the ER concept, as well as FI. I've been saying for a while that interest rates will never return to what they were, and therefore, the 'safety' provided by bonds in the portfolio are being overstated. But running FIRECALC, I just upped the equities portion to overcome the lower future anticipated bond yields...and up to around 95% equities, the overall success rate increased.

And, in 1981 we were told that mortgage rates would NEVER be below 10% again. Never say never

 

[Dtail]

I think he's writing for remuneration.

There you go. It is that simple.

 

[foxfirev5]

Whether he is an idiot or a moron he wins if you click on his drivel. Genius.

 

[HI Bill]

And, in 1981 we were told that mortgage rates would NEVER be below 10% again. Never say never

You're right...we could pay off the national debt and stop deficit spending, then interest rates could return to normal, and savers would be rewarded. I'd be all for that! Then, we can move to a 5 or 7% rule and live happily ever after!

 

[Scrapr]

You're right...we could pay off the national debt and stop deficit spending, then interest rates could return to normal, and savers would be rewarded. I'd be all for that! Then, we can move to a 5 or 7% rule and live happily ever after!

or the Dave Ramsey 12% growth in stock funds! I'd be withdrawing 7% and saving 5%. I love this New World order

 

[CardsFan]

You're right...we could pay off the national debt and stop deficit spending, then interest rates could return to normal, and savers would be rewarded. I'd be all for that! Then, we can move to a 5 or 7% rule and live happily ever after!

Maybe you have a better crystal balls than me.

I am guessing you were too young to be a homeowner in 1981, when mortgage rates were 17% and CD's paid 10-12%. At that time, just about every financial prognosticator declared were were in a new era, and we will never go back to low rates again.

I am not saying your guess can't be right, I'm just saying, it IS a guess.

 

[HI Bill]

Maybe you have a better crystal balls than me.

I am guessing you were too young to be a homeowner in 1981, when mortgage rates were 17% and CD's paid 10-12%. At that time, just about every financial prognosticator declared were were in a new era, and we will never go back to low rates again.

I am not saying your guess can't be right, I'm just saying, it IS a guess.

Yes, you're right (I was still in HS). In 1981, the national debt was only ~35% of the GDP. Today, it's closer to 107%. So, imagine if interest rates bumped back up to 17%, and we could no longer service the national debt. The US would default on the debt, or a portion of it, and the US currency value would plummet (inflation would skyrocket). Just can't see that happening just to allow interest rates to be raised significantly. Also can't see us paying off the debt. We've backed ourselves into a shrinking corner.

 

[NW-Bound]

I paid 14% for an FHA mortgage in April 1980. I believe there was another 1/2% for the mortgage insurance on top of that.

The rate moved up even further after that, and I patted myself on the back for getting in before it got really bad. Ended up refinancing twice when the rate dropped, prior to selling and moving to another home in 1987. I cannot remember what the rate was on the newer home, and am too lazy to go through my file for the mortgage paper. That high mortage rate in 1980 is however unforgettable.

 

[Gumby]

My first car loan, in 1981, was 21% APR.

 

[CRLLS]

In 1973-6 we rented an upstairs apartment. The next door neighbor bragged that he had a 5.5% mortgage and said they would never get that low again. He was right for about 40+ years which in mortgages, is basically forever. IIRC, I got a mortgage for ~12.75% in 1983 plus the mortgage insurance. Those were tough times. But it was not uncommon to get double digit raises. I paid 15.5% on a car loan in that period.

 

[jazz4cash]

I bought 1st home in ‘83. The going rate was -12% and everyone said rates would never drop below 10. Many people were doing seller financing. I got a state mortgage bond subsidized loan for 9.375 + .375 for insurance. I think auto loans were ~8% and I recall 10% MM rates.

 

[BeachOrCity]

No credibility. Close the thread

 

[NW-Bound]

My first car loan, in 1981, was 21% APR.

Consumer loan interest such as car loan and credit card interest was even tax deductible back then. It was taken away in 1981 or 1982, as I recall.

PS. My memory is shot. It was later than what I wrote. The phasing out of consumer loan interest deduction did not start until 1986.

 

[CardsFan]

I guess I started a trip down memory lane

My only point was, no one knows with any accuracy what will happen to the economy, the market, interest rates, etc. in the long term.

Even in the short term, I recall some very well respected financial pundits predicting a financial Armageddon in November 2016.

So, back on topic, I don't give much credence to people like the "Samurai" with their normal predictions. So, when they spout nonsense I don't even notice unless I see it referenced at ER.org.

And then I just laugh it off.

 

[jazz4cash]

No credibility. Close the thread

You post this right after my comments?
I guess I should not take it personally?

 

[SecondCor521]

You post this right after my comments?
I guess I should not take it personally?

Pretty sure they were referring to Financial Samurai, not you.

(Maybe you're teasing or joking. If so, sorry, but I can't tell very well.)

 

[Out-to-Lunch]

So, imagine if interest rates bumped back up to 17%, and we could no longer service the national debt. The US would default on the debt, or a portion of it, and the US currency value would plummet (inflation would skyrocket).

Perhaps I am mistaken, but you seem to imply that the existing US debt would be subject to these increased interest rates. Remember that inflation is kind to debtors. I would argue that the value of outstanding debt would plummet, and inflation would make paying these debts off easier. (Of course, there would be ****-tons of other problems.) Or am I misinterpreting your post?

 

[BeachOrCity]

You post this right after my comments?
I guess I should not take it personally?

I meant FS has no credibility. It’s not even worth discussing.

 

[Aerides]

I meant FS has no credibility. It’s not even worth discussing.

Exactly. And yet, every time he posts something outrageous, we get another thread, and feed him more clicks, so I guess he's not completely stupid.

His advice is not even worth the time spent reading it.

 

[BreathFree]

Perhaps I am mistaken, but you seem to imply that the existing US debt would be subject to these increased interest rates. Remember that inflation is kind to debtors. I would argue that the value of outstanding debt would plummet, and inflation would make paying these debts off easier. (Of course, there would be ****-tons of other problems.) Or am I misinterpreting your post?

Unless something changes with budgets or taxes the U.S. has no money to pay off debt, they would have to roll the debt over into new debt at the current interest rate, thereby increasing the debt service costs. Are you suggesting inflation would increase tax revenues to offset the higher debt service costs? This sounds like a terrible experience either way for a retiree with no remaining human capital.

 

[HawkeyeNFO]

Unless something changes with budgets or taxes the U.S. has no money to pay off debt, they would have to roll the debt over into new debt at the current interest rate, thereby increasing the debt service costs.

Federal Government doesn't need to have money to pay off the debt. They can literally make their own money. They could then take some of that money to pay to the lender, and in theory, the result is inflation.

For the US Federal budget, taxes and other revenues have ZERO connection to expenditures, including debt service.

 

[BreathFree]

Federal Government doesn't need to have money to pay off the debt. They can literally make their own money. In theory, the result is inflation.

For the US Federal budget, taxes and other revenues have ZERO connection to expenditures, including debt service.

Of course they could just print the money, or they could confiscate from the citizenry or just default and refuse to pay. How about not taking any of those risks and be fiscally responsible.