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Old 01-29-2018, 10:12 AM   #21
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Points out that “slavish” adherence to the “rule” is less than optimal. Just stay flexible and roll with the punches. Taylor Larrimore has it right.
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Old 01-29-2018, 10:33 AM   #22
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The two guys who worked another year would only need to to go 29 years since they have similar health to Mo. That might keep their heads above water.

IMHO, Mo has ignored sequence of return risk and needs to adjust his withdrawal rate. He is not as smart as his friend thinks. A variable withdrawal plan would help him survive.
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Old 01-29-2018, 10:34 AM   #23
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This has been discussed many times. Search for "retire again and again", or "retire again & again" - I think those threads show why they should all be able to take the same amount.

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Old 01-29-2018, 10:43 AM   #24
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OK I'll play.

Of course Moe and Curly have the same chance of success, in the second year they have the same amount in the portfolio (if I understand your scenario properly) and withdrawal the same amount for all subsequent years, they will behave identically.

Your scenario points out the failings in the constant amount withdrawal strategy. Among all the various compromises it prioritizes having the same amount to spend every year, over all other points. It doesn't prioritize withdrawing the most money from the portfolio, nor does it prioritize leaving either the most or least after death, nor does it prioritize reactivity to particularly bad market runs. Poor Larry will be spending a fraction of what the others spend for the next 30 years, his portfolio is the most likely to survive, but also the most likely to leave tons on the table unspent when he kicks the bucket.

I'm currently of the mind (though I have plenty time to change it) that I'm willing to make the sacrifice of allowing some variance in the amount I get paid each year by my portfolio in order to better allow me to ultimately withdrawal more from my portfolio, and better respond to long term market trends. It appears that a constant percentage withdrawal with a defined floor will do that.

I think the 4% constant amount withdrawal strategy is a useful model just as a quick shorthand, math you can do in your head. To actually follow the rules for a person's entire retirement would in many, probably most, scenarios be crazy. Spending the same amount each year when your portfolio suffers a bad bear, year after year just driving your portfolio into the ground. Or the opposite, sitting on 8 mil but spending 40k a year because that's what the equation said. I don't know but I doubt many people actually do that. People who 'retire again and again' are just doing the constant percentage strategy but adjusting on a less frequent basis.

LM&C could have also used some assessment of the state of the market. Perhaps if they had looked at the CAPE and/or some other measures (if you believe in such things), Moe would have chosen to withdrawal a lower percentage, but after the 30% drop Curly could have gone with a higher percentage (of the remaining) having them both end up with about the same nominal amount.
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Old 01-29-2018, 10:59 AM   #25
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Moe now only has 29 more years to go on his 30.
Curly has the full 30.

That's all I could think of.
I thought of that first thing but the premise is all had a 30 yr horizon. Not a specified age. So, no Curly wouldn't be looking at a 29 yr time line

Revising and extending: Curly is not "safe" as stated. But he is as safe as Moe +/- one year perhaps.

And VPW is not "Safe" . Sure there will be money left as a mathematical certitude but the food and shelter might run out first. Yes, I know, that means there's money left 'cause you're dead! The whole pernt of all these exercises is to have money only in order to have the things money provides. If you can't get those things the whole "money angle" is moot
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Old 01-29-2018, 04:03 PM   #26
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And VPW is not "Safe" . Sure there will be money left as a mathematical certitude but the food and shelter might run out first.
Well, let's put it this way, it will be much safer than the off touted 4% Rule..... I am using VPW and if the Market Drops 50%, my Withdrawal Amount only drops 15%, based on my asset allocation. Add to this Social Security and it's even a smaller portion of my budget. For anyone who studies VPW and employs it properly, running out of 'food an shelter' is quite laughable. It would take a complete financial meltdown on a global scale for this to happen... Where nothing you could do would save you, let alone a different withdrawal scheme.

If you cannot cut your Budget by 15% you probably should not be retired. So while your point is correct academically, it's not even close to correct in practicality.
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Old 01-29-2018, 04:58 PM   #27
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Well, let's put it this way, it will be much safer than the off touted 4% Rule..... I am using VPW and if the Market Drops 50%, my Withdrawal Amount only drops 15%, based on my asset allocation. Add to this Social Security and it's even a smaller portion of my budget. For anyone who studies VPW and employs it properly, running out of 'food an shelter' is quite laughable. It would take a complete financial meltdown on a global scale for this to happen... Where nothing you could do would save you, let alone a different withdrawal scheme.

If you cannot cut your Budget by 15% you probably should not be retired. So while your point is correct academically, it's not even close to correct in practicality.
Yes of course. If this and if that... then I use my other money I'll never want for anything. I actually use that in my own calculations. I was speaking in the sterile, academic way the "pure" 4%'ers usually do. 4% is 4%. Not "desired slop factor built in so 4% is really some other percent" How big does that have to be anyway? The world should never know. BYW, what inflation rate were you playing with in your mind with that example?

When I think of VPW I think.... crappy returns.... high/accelerating inflation... cutting back can go only so far for so long. That's where the "food and shelter running out before the money does" came in.

I can live with your equity allocation though.
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Old 01-29-2018, 05:35 PM   #28
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When I think of VPW I think.... crappy returns.... high/accelerating inflation... cutting back can go only so far for so long. That's where the "food and shelter running out before the money does" came in.
VPW does NOT cause crappy returns and inflation... And what withdrawal method do you propose for not having to Cut Back? Yes, the Food and Shelter thing is laughable!

If Food and Shelter is put at risk, it's because of too risky an Asset Allocation and Not enough money saved for retirement. It has nothing to do with VPW... You have to structure your investments correctly. And I have been using VPW the last 5 years... In the most strictest terms... I actually sit down on Jan 1 of each year, and calculate my withdrawal amount and withdraw that exact amount. Selling off investments to make the withdrawal. No matter what the market does. -- And as you admit, no one actually employs the 4% method (It's a planning tool)...

One big advantage of VPW, is that it forces you to sell investments when markets are higher, and sell fewer when markets are lower..... This is like a 'Reverse Dollar Cost Averaging'.
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Old 01-29-2018, 08:26 PM   #29
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no one actually employs the 4% method (It's a planning tool)...
Really?
I agree that most folk frequenting this forum are not likely to blindly execute the 4% method.
However I'm pretty sure that the world is full of poor misguided souls, who have read a few articles in financial magazines and online ranting about the "25x" and the 4%, and being simple-minded, have believed and are about to follow this as a rule, to the letter.
As a matter of fact I happen to know a couple of these. Critical thinking is not their strong suit.
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Old 01-29-2018, 08:35 PM   #30
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Really?
I agree that most folk frequenting this forum are not likely to blindly execute the 4% method.
However I'm pretty sure that the world is full of poor misguided souls, who have read a few articles in financial magazines and online ranting about the "25x" and the 4%, and being simple-minded, have believed and are about to follow this as a rule, to the letter...
oh
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Old 01-29-2018, 08:42 PM   #31
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Really?
I agree that most folk frequenting this forum are not likely to blindly execute the 4% method.
However I'm pretty sure that the world is full of poor misguided souls, who have read a few articles in financial magazines and online ranting about the "25x" and the 4%, and being simple-minded, have believed and are about to follow this as a rule, to the letter.
As a matter of fact I happen to know a couple of these. Critical thinking is not their strong suit.
But here is what will really happen... If we get into a period of high inflation, and a stock market downturn -- Like the Stagflation of the mid 1970s (Which I lived through) ... They will pull in their horns.... They will not take their inflation adjusted 4% into the teeth of a Bear Market, Hyper Inflation environment.... especially if they have any sense at all... They will be driven by fear.
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Old 01-29-2018, 08:47 PM   #32
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I agree. When the net worth goes down big time so will spending.
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Old 01-29-2018, 11:32 PM   #33
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Seems to be the CAPE based strategy. High Cape -stocks are overvalued, use lower SWR.
Stocks drop, Cape goes low, allows higher SWR.
It does suggest that the SWR for 30 years is 4% of the highest portfolio value you ever reach.
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Old 01-30-2018, 06:02 PM   #34
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Where did Larry, Curly and Moe go?
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Old 01-30-2018, 06:10 PM   #35
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Where did Larry, Curly and Moe go?
They went ice fishing:


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Old 01-30-2018, 06:27 PM   #36
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Did Larry have worms?
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Old 01-30-2018, 07:44 PM   #37
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This does not make mathematical sense. If Moe started the year with $960,000 and Curly and Larry started with $1,000,000 and the market gained 4.16% before dropping 30%, then the beginning balances in year two would not be the same. .....
+1 Not interested in playing the OP's silly game with such ridiculousness.
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Old 01-31-2018, 04:48 AM   #38
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I feel that events in real life are much less predictable than pseudo-events modeled by various withdrawal schemes promulgated by different retirement "professionals".

When the smash-up finally occurs, I will be hurt like most here, but I have a psychological tendency toward an AA that is counter-cyclical to market exuberance. This has usually helped me in downturns, at least to some degree, but it also seems true that every chapter is in some ways a whole new book.

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Old 01-31-2018, 05:29 AM   #39
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I thought of that first thing but the premise is all had a 30 yr horizon. Not a specified age. So, no Curly wouldn't be looking at a 29 yr time line

Revising and extending: Curly is not "safe" as stated. But he is as safe as Moe +/- one year perhaps.

And VPW is not "Safe" . Sure there will be money left as a mathematical certitude but the food and shelter might run out first. Yes, I know, that means there's money left 'cause you're dead! The whole pernt of all these exercises is to have money only in order to have the things money provides. If you can't get those things the whole "money angle" is moot
I don't think the difference between 29 and 30 years will matter. Whenever I run firecalc the failure cycles end well before the last year. If you hit a really bad sequence of returns you're in trouble. In fact, when I add 5 years to mine I actually end up with more money and still get the same failure %
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Old 01-31-2018, 06:47 AM   #40
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+1 Not interested in playing the OP's silly game with such ridiculousness.
Respectfully disagree.
While the details and position weren't properly laid out, I thought the premise was an interesting one and I had been hoping for a more insightful discussion.
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