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Old 11-24-2016, 02:57 AM
 
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interesting look at safe withdrawal rates vs pe10


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Old 11-24-2016, 06:57 AM
 
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We know that calculators such as Firecalc come up with highly, highly uncertain results when attempting to predict a SWR. We know that the PE is all but useless for short term (1 year) stock market performance prediction. We know that the PE is also all but useless for long term (>15 years) prediction. The only predictive value is for intermediate performance at about 8 years out and even that is very poor.


So how does Kitces come up with such a precise looking chart? What is the variability of each of those data points?


I would be willing to bet that this is did not come from a peer reviewed article. I would bet it is from his webpage or newsletter. I would bet there is no raw data or method of calculation specified and he merely cites the data as his own. Am I wrong?
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Old 11-24-2016, 07:15 AM
 
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he just took the ibbotsen data and broke it down by p/e when starting a retirement and simply ran the numbers . it is basically what it is , based on the results of each time frame . ..

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Old 11-24-2016, 09:50 AM
 
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Nonsense. Just because there is a year with a high Shiller that does not mean a SWR would be 9-10%. I don't know how those SWRs were determined but certainly they make no sense. In my opinion a SWR should be a withdrawal rate that is reasonable every year of retirement.
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Old 11-24-2016, 10:39 AM
 
Location: SoCal
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It looks like 60% stock portfolio is the optimum. I don't see why people should be in 100%.
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Old 11-24-2016, 11:15 AM
 
Location: Haiku
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Quote:
Originally Posted by NewbieHere View Post
It looks like 60% stock portfolio is the optimum. I don't see why people should be in 100%.
60% may be the optimum during the draw-down phase of your investment life-cycle but that does not mean anything about what the optimum AA is during the accumulation phase. Statistically, the optimum portfolio (assuming you have steady nerves and don't panic-sell) to maximize return is 100% equities during accumulation.
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Old 11-24-2016, 11:23 AM
 
Location: SoCal
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Originally Posted by TwoByFour View Post
60% may be the optimum during the draw-down phase of your investment life-cycle but that does not mean anything about what the optimum AA is during the accumulation phase. Statistically, the optimum portfolio (assuming you have steady nerves and don't panic-sell) to maximize return is 100% equities during accumulation.
I assumed it's a draw down phase from the graph because it has SWR.
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Old 11-24-2016, 11:26 AM
 
Location: Haiku
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Originally Posted by jrkliny View Post
We know that calculators such as Firecalc come up with highly, highly uncertain results when attempting to predict a SWR.
Have you ever looked at the uncertainties around your investments? The mean return for the total stock market has been about 9% in recent years but the standard deviation is about 11%. That means that about 60% of the time the return will be somewhere between -2% and 20%, and about 10% of the time the return will be between -13% and 31%. That is a huge amount of uncertainty. The entire investment world is full of uncertainty. It is not surprising that a RIP tool like FireCalc has uncertainty to it.

But I agree with your basic statement - Kitces has produced a sloppy chart. It does not include error bars. Results like this need to be clear on what the uncertainty is, and that is normally expressed to the viewer with error bars. But to be fair to Kitces, it seems to be the norm in the finance world to not show uncertainty in plots.
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Old 11-24-2016, 11:28 AM
 
Location: Haiku
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Originally Posted by NewbieHere View Post
I assumed it's a draw down phase from the graph because it has SWR.
Than why the comment about 100% equities? I have never heard anyone recommend 100% equities in retirement.
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Old 11-24-2016, 12:06 PM
 
Location: SoCal
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Originally Posted by TwoByFour View Post
Than why the comment about 100% equities? I have never heard anyone recommend 100% equities in retirement.
Look at the chart. It has 100% equity.
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