Outlooks > 30 years....Are we too optimistic??

[amt]

Hi

I've been following this and other REHP pages. In my humbled opinion, assuming the next 60-year period cannot be worse than the past, is a little too optimistic.

I think maybe we've got enough data to be confident about a 30-year period, but probably not longer ones (because of fewer periods available). Therefore, I think for someone who is planning for the next 60 years, that person should plan so that his portfolio would survive the worst 30 yr period from the past (e.g., 1965-1995) and still have enough purchasing power left to survive another such 30 years. For 50-year outlook, 30+20 may be the way to go.

What does everyone think??

amt

 

[SteveMcgarret]

Done it.

I used 1966-1996 (The worst 30 yr period due to low performance and high inflation and truncated prior to the unreasonably cheery bull market 1996-2000 which I though would be tacking on too much compensation after a bad spell)

Then looped back to 1966-1986. I belive the safe withdrawl rate I ended up with was 3.3% I don't have that "paperwork" anymore but if it were a complete catastrophe like 2% or 1.8% I think I'd have remembered that

 

[Brat]

Here is an interesting link I found at Fund Alarm.

"Retirement Distributions: Creating a Limitless Income Stream for an Unknowable Longevity "

http://www.fpanet.org/journal/articles/2004_Issues/jfp0204-art1.cfm?renderforprint=1

 

[haha]

Here is an interesting link I found at Fund Alarm.

"Retirement Distributions: Creating a Limitless Income Stream for an Unknowable Longevity "

http://www.fpanet.org/journal/articles/2004_Issues/jfp0204-art1.cfm?renderforprint=1

I read the article linked above. Here is an interesting quote, which to my mind is typical of financial planner types:

Kathleen P. Day, CFP®, CFA, of The Enrichment Group in Miami, Florida, notes that a withdrawal rate that seemed safe a few years ago may not be safe any longer. “Portfolios are down and we anticipate lower returns,” she says. “Although we used distribution levels of five percent to six percent, at this point we’re cutting back to five percent as absolute top level, but we are much more comfortable with three percent."

Portfolios are down and we anticipate lower returns? Excuse me, but portfolios being down is mathematically predictive of higher returns, as compared to when portfolios were up. Maybe what she means is that she got a whack to the side of the head, as portfolios came down, and now she is able to recognize that the returns formerly assumed were ridiculous.

Mikey

 

[Cut-Throat]

Mikey,

Yeah, I also read that link. That was my reaction also.

I like Bernsteins comment regarding Stock Brokers. "They service their clients, just like Bonnie and Clyde Serviced Banks"

 

[unclemick]

Maybe I'm too old school but I still think the 'short end of the stick' - dividends, interest, SEC yield is the important one - provided it covers expenses - then portfolio fluctuation is - Mr Market in Ben Graham terms and portfolio longevity a non- issue.

Of course, I love FIREcalc and all those other modern tools developed in the 'modern era' - but if 'hard times' return I'm more inclined to cut expenses and LBYM with the portfolio income we have. In our case, that's doable with the help of pensions plus hopefully SS.

 

[John Galt]

Hi unclemick! It's okay to be "old school", me too!
I think it's because we are geezers (relatively
speaking). My attitude toward what is safe to do
in ER and how much I need, and how long the money will last has changed drastically since 1993. I'm close
to SS and 11 years nearer to my demise. As the guy said who was about to be executed. "It focuses your attention wonderfully!"

John Galt