endowment method of retirement spending

[Chris24]

For some reason I the link for the endowment method doesn,t work for me. Can someone please post the address ? .. Thanks

 

[obryanjf]

Fixed the graph.

The WD% is the running withdrawl percentage. The theory is if the WD% starts going crazy high (above 10, 15 or maybe even 20% !!), then some old person is going to start to get very nervous. So my preference is to track it to make sure the model holds it down to respectical levels while at the same time keeping the actual WD to a high enough level.

job

 

[obryanjf]

A couple other thoughts on the endowement model, 1 good and 1 bad.  From the graphs i would say the EM versus Hybdrib comps, the pain visualized in a low WD would generally be felt in the early years of retirement, where presumably one could take some positive action to shore up the accounts.  I note this  in comparing graph 2 versus 4. On 2 the WD's get low in most cases early in the retirement while in 4 some slowly bleed down.  That is the positive for EM.

The negative; one benefit of not necessarily having the WD% in such a tight band as graph 1 is to get an early read on whether one might be in trouble 15 or so years into the future.  Note graph 3 and some of the lines cross the 10% line.  This is an early indication that trouble is ahead, where again one should be able to take some action.  The 1st one actually fails in year 38 or so.  The others that cross the 10% line would make me nervous all along the way.

job

 

[ronin]

Just a thought, would there be any benefit from smoothing out the expense factor input by using a trailing average of, say, 3 years instead of the previous year alone?

 

[d]

certainly, but if you smooth it sufficiently i suspect you end-up with the fixed SWR.

 

[starboardtack]

From the graphs i would say the EM versus Hybdrib comps, the pain visualized in a low WD would generally be felt in the early years of retirement, where presumably one could take some positive action to shore up the accounts. 

....This is an early indication that trouble is ahead, where again one should be able to take some action. 
job

Having previously run the EM sims vs. suggestions/models of SWR found in this forum and at other independent resources, IMHO the EM's intriguing element is its flexibility and partial tracking dependence upon the retirement fund's changing value in light of "past performance is not indicative of future results" caveat so often read.  This may be especially important in the critical early years of distribution when the inevitable pain can be best tolerated and course adjustments made to increase the probability of maintaining the necessary later end of years(LEOY) spending element intact.  This may be facilitated, as has been discussed and written about elsewhere, by the tendency for spending to decrease in the LEOY.  

Since the retiring endowment model (REM) benefits from removal of the condition of perpetuity, unless failure = < X % to provide for residual legacy wishes or IRA "generational stretching", inclusion of optional multi-tiered (second, third, etc.) order conditionals to accomodate individual customization requirements, if desired, seem to be indicated for adaptation and refinement of EM > REM.  Hopefully, this can be accomplished for the benefit of all. 

IMHO success = passing to the great beyond with a  of satisfaction and a  and not a lot of bucks left over in the retirement fund. 

 

[unclemick]

And then - there are those of us who have a date with the Godfather - aka Da IRS and RMD.

Cheap early on and the historical blessing of the 90's was a great help the first decade of this ER.

heh heh heh