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As an example of the switching decision in practise, someone who is happy to run out of money in precisely 30 years time (doesn't want an SPIA) might calculate a withdrawal rate from safe assets for real returns of 0%, 1% or 2% respectively as being (in Excel) PMT(0% or 1% or 2%,30,-1) = 3.3%...

You use the value the portfolio had at the date of your PE10 figure. I think you're asking how to adapt this method if you don't want to preserve capital? I believe you can't simply increase the withdrawal rate without starting to encounter sequence-of-returns issues that carry unacceptable...

The presumed portfolio is the S&P 500. I'd guess that other well-diversified equity portfolios would have a high correlation with the S&P 500, so it would be a good guide for them as well. The implementation is fairly simple - get the latest value of PE10, divide 80% by PE10 to get an...

For those skeptical about a 12% withdrawal rate, I've looked at a retirement starting on that date with $1 million capital. Up to November 2010, the average monthly income would have been $8,400, the minimum $6,800 and the maximum $10,500. The final balance would be a fraction under $3 million...

It's worth adding that at the height of the 2000 bubble, the withdrawal rate would have been below 2%. Considering there were times in the late nineties when you could have got up to 4% from TIPS, this would have told you something about the wisdom of being invested in equities then. Edit...

Using Shiller's data, I explored what withdrawal rate would preserve capital over the whole period for which he computed PE10. I think the period in question was something like 1880 to 2009. I found that a withdrawal rate of something like 83%/PE10 would leave the initial sum intact in real...

Someone said why have an ebook when a netbook is more versatile. Someone else (probably) said the same thing in relation to an ipad. Well, for a start, the battery on my netbook lasts about two hours, I believe an Ipad lasts several hours, the battery on my Sony Reader is claimed to last long...

I saw a Porsche Panamera for the first and only time recently, it was in front of me for a while in heavy traffic. I'm not usually a fan of Porsches, but this was really beautiful. I think better than the Aston. (Judging by rear view alone.)

An advantage of owning is the matching of liabilities to assets. If you put the money in the stock-market, it's unlikely stock market monthly returns will match the rent you need to pay. Edit: how much this matters depends on the cost of housing as a proportion of overall expenses. For me...

I glossed over default risk because it is not an issue for me. I can think of various tweaks to the plan to accomodate those from whom it is an issue, but I didn't want to complicate the original idea. One possible tweak would be split the safe assets phase in two, investing in safe assets...

While still two years away from finishing high school, I had to fill in a form to defer my being drafted into the army. Irritated by the box that enquired into my profession, I wrote "trainee astronaut." Five years later, having finished school and university, and needing another six month...

100% of assets into inflation-linked SPIA achieves exactly that. (Ignoring provider default risk.) I agree with your analysis. As a result I've completely rejected the idea of running down capital while invested in volatile assets. In my view, (early) retirement should start in an...

This is a good point. In "Valuing Wall Street", published in April 2000, Smithers did suggest a two-threshold timing strategy, getting out of equities at say 150% overvaluation and re-entering at 100%. This would have got you out in 1993 and back in near the bottom of 2009/2010. You would...

I should add the Smithers complains that many people do abuse the dividend discount model by using the wrong discount rate, so I've no doubt that there are any number of examples of people doing so that can be quoted. The only question is how impressive they are as an authority. I wouldn't be...

Can you give reference where Graham or Buffet use the "risk free" rate in the dividend discount model? Incidentally, if they do disagree, I'm so impressed by "Valuing Wall Street" that I'd be inclined to believe Buffet and Graham wrong. (I don't expect they do disagree, but I'm willing to be...

"Q" does precisely that. Fair value is when what it would cost to buy all companies on the stock exchange equals what it would cost to create them from scratch. I believe Smithers disagrees, in his first book, "Valuing Wall Street." In a chapter called "Yield Ratios and Yield Differences" he...

Although I know the phrase, I'd never really thought about the derivation. In looking it up, I found an interesting alternative explanation, the second in the quote below. I'm inclined to believe the first though, the second has almost no hits in Google. Quote from Your letters | From the...

Having the list of threads centrally rather than left aligned is my reason for going back to the old version. Instead of running your eye down a list, now you have extra work to do just to locate the start of each thread title. Edit: I see this misalignment issue is everywhere, even...

I am busy reading the Otar book mentioned in a more recent thread. (The book is obtainable at this link, in the near future only.) otar retirement calculator I though of this thread when I found a whole chapter on borrowing to invest. I'm prevented from cutting and pasting some brief...

My bible on the subject of valuation is "Valuing Wall Street." The book presents a thorough argument that there are two valid methods for valuing the stock-market, the q ratio and cyclically-adjusted PE's. They also review and demolish the arguments for alternative methods. If I recall...

The logic that the percentage should be adjusted with valuations is correct, but the idea that shares are currently cheap is wrong. 4% is the rate for someone who retires in an average year. Starting in the early nineties and ending last year, shares have been overvalued, so a...

Malaysia (as someone mentioned above) is definitely interested in attracting retired people, I don't remember the details, but the requirements were quite reasonable. I don't know what other Asian countries are like, but Malaysia is very good for English speakers. Local newspapers, magazines...

The person who retired in 2000 has also been hit by 2008.

The paradox (flaw) in using firecalc, or the standard 4% rule, or any method that doesn't take valuations into account, is discussed in this report. http://www.kitces.com/assets/pdfs/Kitces_Report_May_2008.pdf

Economist on the radio this morning said you need to do two things, the original plan would only have done the first. Isolate the bad assets by buying them up. Inject capital. I think he suggested recapitalising could (partly?) be done by converting existing debt into equity. i.e. compulsorily...