Independent
Thinks s/he gets paid by the post
- Joined
- Oct 28, 2006
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With all the "worst drop since ...." stories out there, I had to check a retirement oriented number. So I ran FireCalc this morning, leaving all inputs at the defaults except the number of years. I replaced the "30" with "10". This resulted in FireCalc picking up 1980 through 1999 as possible starting years.
I did the "write data to a spreadsheet" option so I could look at the detail. The default original balance is $750,000, with a 4% ($30,000) annual withdrawal. The end-of-10-years balance for a retirement beginning in 1999 was about $432,000. This was a poorer 10-year performance than the prior worst years of 1929, 1930, and 1937, which were $476k, $550k, and $567k, respectively. For more recent years, 1965 and 1969 had 10-year balances of $584k and $594k.
Of course, the "??" in the title indicates that we don't know how this is going to work out. For all I know, we've already hit the market bottom and we're into another big bull market. All these number show is that 1999 is off to a poor start.
This is particularly relevant to me because in 1999 I was talking to a friend who worked for a "financial services firm". He had done a survey of the firm's sales staff asking them about the advice they would provide people at the point of retirement. The consensus answer was "You should plan for a long retirement. That means stay heavily in stocks. Since stocks have yielded about 8% over inflation, you can probably withdraw 8% from your stock fund each year without invading principle." So I always have to think about the people who were retiring around then.
(I should add that my friend actively tried to change the sales reps attitudes, using things like the Trinity study that was pretty new at the time. Now, according to the Sharpe paper that Jacey linked to recently, the 4% SWR has become conventional wisdom. It's not perfect, but it's a lot better than 8%.)
I did the "write data to a spreadsheet" option so I could look at the detail. The default original balance is $750,000, with a 4% ($30,000) annual withdrawal. The end-of-10-years balance for a retirement beginning in 1999 was about $432,000. This was a poorer 10-year performance than the prior worst years of 1929, 1930, and 1937, which were $476k, $550k, and $567k, respectively. For more recent years, 1965 and 1969 had 10-year balances of $584k and $594k.
Of course, the "??" in the title indicates that we don't know how this is going to work out. For all I know, we've already hit the market bottom and we're into another big bull market. All these number show is that 1999 is off to a poor start.
This is particularly relevant to me because in 1999 I was talking to a friend who worked for a "financial services firm". He had done a survey of the firm's sales staff asking them about the advice they would provide people at the point of retirement. The consensus answer was "You should plan for a long retirement. That means stay heavily in stocks. Since stocks have yielded about 8% over inflation, you can probably withdraw 8% from your stock fund each year without invading principle." So I always have to think about the people who were retiring around then.
(I should add that my friend actively tried to change the sales reps attitudes, using things like the Trinity study that was pretty new at the time. Now, according to the Sharpe paper that Jacey linked to recently, the 4% SWR has become conventional wisdom. It's not perfect, but it's a lot better than 8%.)