What asset allocation would work?

[euro]

Quote:

Originally Posted by Blue Collar Guy Based on history and your parameters, none.

That!

[audreyh1]

Quote:

Originally Posted by slv1 For completion sake. I ran firecalc at 4% swr just now. 72% success rate. At 3.45% 95.8% success rate. 60/40 portfolio over 50 years. 40 years at 4% it was 81% success. At 3.45 % it was 96% success rate. No SS included.

Understand that success = the portfolio did not go to $0 during the time period. That is not the same as preserving principal!

So at 3.45%, 4% of the time you ran out of money within 40 years.

On average, however, you probably ended up with more than when you started - so on average you will preserve principal, but not in all cases.

[Blue Collar Guy]

Quote:

Originally Posted by slv1 Trinity study was for 30 years. The PDF you post is also based on that and Wade P. Also over 30 years. Also, 75% stocks. If you didn't have a pension would you have retired based on those studies?

Thats why I feel you shouldn't call the 4 % rule b.s. . It was based on 30 years not 40+ like you asked. And they didnt select a steady 3 % inflation. Yes if I didnt have a pension, I would have withdrew 3.15 % of my starting portfolio with an AA of 80/20. Except I would not have retired when i did, My nest egg was 1.1 million which would have only allowed us only 35,000 a year. I wanted 50,000.

[Fedup]

If you want not to touch your principle, put in a long term CD that earns over 3% and just spend 3%. I think we have people here in ER doing that.

[slv1]

Quote:

Originally Posted by Fedup If you want not to touch your principle, put in a long term CD that earns over 3% and just spend 3%. I think we have people here in ER doing that.

It will lose it spending power. Not adjusted for inflation. The only thing I can think off is inflation adjusted guaranteed funds but they don't pay much.

[slv1]

Quote:

Originally Posted by Blue Collar Guy Thats why I feel you shouldn't call the 4 % rule b.s. . It was based on 30 years not 40+ like you asked. And they didnt select a steady 3 % inflation. Yes if I didnt have a pension, I would have withdrew 3.15 % of my starting portfolio with an AA of 80/20. Except I would not have retired when i did, My nest egg was 1.1 million which would have only allowed us only 35,000 a year. I wanted 50,000.

I get what your saying but I think lots of people are making money on several websites the idea of a 4% SWR with FIRE at 25x etc. They are using it as a brand.

Regarding what your 3.15 percent withdraw rate and 80/20 AA. I'm not being mean or rude but it's easy to say one would do that but actually doing that without any other safety nets is hard and you can't say you would do it for sure unless you actually are doing it.

80/20 AA could lose over 50% in a bad market and if you did it right before a bad market you would not be able to recover for years.

The point of these exercises for me is to see if I can get out for the next possible 50 years.

[Blue Collar Guy]

Quote:

Originally Posted by slv1 I get what your saying but I think lots of people are making money on several websites the idea of a 4% SWR with FIRE at 25x etc. They are using it as a brand. Regarding what your 3.15 percent withdraw rate and 80/20 AA. I'm not being mean or rude but it's easy to say one would do that but actually doing that without any other safety nets is hard and you can't say you would do it for sure unless you actually are doing it. 80/20 AA could lose over 50% in a bad market and if you did it right before a bad market you would not be able to recover for years. The point of these exercises for me is to see if I can get out for the next possible 50 years.

I agree with you about what one might really do when the market slips 50 %. But that is how I think I would have started out. I would have tightened my belt If i got caught up in a bad bear market without the pension. I would also probably lick my wounds and go get a job a a bouncer, private chauffeur, security guard etc.

[pb4uski]

Quote:

Originally Posted by slv1 I get what your saying but I think lots of people are making money on several websites the idea of a 4% SWR with FIRE at 25x etc. They are using it as a brand. ....

Let's see some links.

Actually, even if they are... so what? Caveat emptor!

[Koolau]

Don't know if folks are using the "4% rule" as a brand or not, but the "4% rule" is actually a misnomer as the various FireCalc numbers earlier have shown. 4% is more of a short hand, catch phrase, estimate, guesstimate, starting point, educational introduction, etc. to the concept that, based on previous experience, it should be possible to calculate a "safe" withdrawal rate. 4% is the rounded figure for this result if you have 50% to 80% equities vs bonds and have a 30 year time frame.

I doubt anyone has ever copyrighted the "4% rule." So if anyone is coopting it for their own purposes (to make money) I guess that's the "American way." There are tons of materials here and elsewhere that can lead one to a good understanding of the so called 4% rule and its ramifications and parameters.

My take is that the 4% rule is a way to look at your stash and see if you are close to Financial Independence. Say you want to spend $40,000 per year in retirement, the 4% rule says you need a million dollars to get there. I wouldn't bet the farm on that, but it's a good first approximation.

IN ANY CASE, i would never trust my future to such a rule (or even a carefully calculated value from FIRECalc.) If my stash took a big hit, you can believe that I would cut back my spending well below my calculated SWR (even though the theory says you don't need to.)

I hope by now OP has a better idea of what specific questions he needs to seek answers to. I'm sure the folks here would be happy to give their opinions on them or give sources for finding answers. YMMV

[GravitySucks]

If you have a risk tolerance to accept a 20% chance of failure than a 60/40 over 40 years will work for you. In general longer periods do better with higher equity allocations.
The 4% is more a guideline than a rule. Anyone locking into a 40 year plan and insisting change won't be needed is unrealistic.
I'd suggest you actually read the Trinity study before casting aspersions.

[GalaxyBoy]

It is impossible to know the "best" AA in advance. I struggled with this for a couple years until I finally made peace with that reality.

See The Intelligent Asset Allocator by Bernstein.

But you all probably already know that.