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Old 08-02-2018, 07:27 AM
 
106,238 posts, read 108,237,907 times
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Quote:
Originally Posted by jrkliny View Post
I cannot imagine how many times I have read the sad stories about how the Great Recession destroyed retirement finances. That makes for a great excuse but almost always there seem to be stupid behaviors that were more involved. In almost every case it seems that those who were close to retirement or in retirement would have done just fine without poor decisions. Sure the markets dropped 40% or so but they also recovered fairly rapidly. On top of that we have had 10 years with nice growth in the markets.


Many people just have no understanding of the 4% rule. The 4% rule is designed to cover a retirement of about 30 years. The withdrawal is not 4% per year. The 4% rule means taking that amount at the start of the 30 year retirement. Then the amount is increased each year based on inflation. Each year the withdrawal will be a high percentage so that by the 30th year it is 100% and nothing is left. If the 2 retirees are greatly different in age and the retirement withdrawals need to extend well past 30 years, then it is necessary to begin with less than a 4% withdrawal rate. Don't blame the markets or the 4% rule if you withdraw more or longer than covered by the rule.
the reality is a 4% inflation adjusted withdrawal rate with a 60/40 mix you ended with more than you started 30 years later 90% of every rolling 30 year cycle to date . 67% of the time you ended with 2x what you started and 50% of the time 3x .

so because it is based on worst outcomes , even average would have actually left you with a 6.50% draw rate .
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Old 08-02-2018, 07:59 AM
 
17,817 posts, read 15,478,142 times
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Quote:
Originally Posted by mathjak107 View Post

so my new thinking is i don't want to bet the ranch as a retiree on just prosperity and low inflation . that is certainly not being diversified at all because now you are subject to the full fury and fire that the markets choose to dole out in the 2nd half of the market cycle. you are never knowing when that recovery is coming or how bad the down blast will be when it is happening and that is what puts the house limits on us in retirement .

at this stage the gains of the bull have been wonderful and i would like to mitigate giving much of it back if i can hence the change in strategy after so many years of this bull .

my investing style has always been adaptive and the asset classes change but i have never been out of the markets ever . that is a losing strategy . i am always in my target range equity wise . what changes from time to time is the asset classes that fly fighter cover when i am not comfortable .

I recall you climbed aboard the Permanent Portfolio after the election in 2016 then dumped it a couple or so months later. There's adaptive and then there's whiplash reactive. Flipping a significant part of a portfolio and then abandoning it quickly is a battle between fear and greed. I think that kind of change would be considered reactive; I've never seen this advised by any of the experts.

As a long-time subscriber and advocate for the FM&I newsletter, is there a reason their portfolio model(s) can't or won't fully support you in retirement? Is there something the financial team is missing?
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Old 08-02-2018, 08:03 AM
 
997 posts, read 844,360 times
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DexCom is killing it, wish I had more than 46 shares!
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Old 08-02-2018, 08:24 AM
 
106,238 posts, read 108,237,907 times
Reputation: 79776
Quote:
Originally Posted by lottamoxie View Post
I recall you climbed aboard the Permanent Portfolio after the election in 2016 then dumped it a couple or so months later. There's adaptive and then there's whiplash reactive. Flipping a significant part of a portfolio and then abandoning it quickly is a battle between fear and greed. I think that kind of change would be considered reactive; I've never seen this advised by any of the experts.

As a long-time subscriber and advocate for the FM&I newsletter, is there a reason their portfolio model(s) can't or won't fully support you in retirement? Is there something the financial team is missing?
that was the butterfly , held it for about 6 or 8 months through the election until i was comfortable and did very well with it . i just preferred the insight models at that time .

well i am uncomfortable with trump and his actions as well as we are dealing with the worlds first time ever un-doing of the qe's , so while the equities levels are pretty much the same as i had the supporting asset classes are far more powerful to profit if the bull does not continue .

if i have more faith in trump at some point i may very well switch back but overall i am doing about the same but with much better downside coverage
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Old 08-02-2018, 08:29 AM
 
17,817 posts, read 15,478,142 times
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Do you have a specific concern about the less risky models in the FM&I not being able to support retirees even with what's in the whitehouse and undoing of qe's?
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Old 08-02-2018, 08:38 AM
 
8,005 posts, read 7,170,420 times
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Quote:
Originally Posted by mathjak107 View Post
the reality is a 4% inflation adjusted withdrawal rate with a 60/40 mix you ended with more than you started 30 years later 90% of every rolling 30 year cycle to date . 67% of the time you ended with 2x what you started and 50% of the time 3x .

so because it is based on worst outcomes , even average would have actually left you with a 6.50% draw rate .

What if it's different this time?
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Old 08-02-2018, 08:49 AM
 
106,238 posts, read 108,237,907 times
Reputation: 79776
Quote:
Originally Posted by lottamoxie View Post
Do you have a specific concern about the less risky models in the FM&I not being able to support retirees even with what's in the whitehouse and undoing of qe's?
yes , there is not enough lift to turn things up ward when the equities take a hit , there is no weak dollar protection either which is coupled to inflation .

so i am more comfortable with the lifting ability of long term treasuries in a flight to safety and gold is nice because it tends to have a 98% success rate of providing a positive real return when stocks hit the other 1/2 of the cycle .

i have a few hundred thousand in gains from this run up and i am not about to just ride things down and see these wonderful gains evaporate if i can try to mitigate that while still having enough equities in place if the bull continues .

i still use the growth model from insight for a bet on prosperity but 2/3's of the assets are now bullet proofed . but stocks still have a 43% healthy allocation .
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Old 08-02-2018, 08:53 AM
 
106,238 posts, read 108,237,907 times
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Quote:
Originally Posted by 1insider View Post
What if it's different this time?
nothing except you don't know :

if you will hit the down turn in the early years of retirement before your first up cycle .

your own outcome may be less than average or even worse than we have had in the past so there are no guarantees 4% will hold . it has already failed quite a few times . that is why 50/50 only has a 96% success rate .

most of history had much higher rates too . in the old days if markets were down 15% with a 50/50 mix you were whole again on interest in 2 years .

volatility since 2000 has picked up greatly too . my 60/40 mix was down 31% in 2008 . prior a drop like that generally was at far higher allocations .
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Old 08-02-2018, 09:05 AM
 
2,189 posts, read 2,598,869 times
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Quote:
Originally Posted by mathjak107 View Post
the reality is a 4% inflation adjusted withdrawal rate with a 60/40 mix you ended with more than you started 30 years later 90% of every rolling 30 year cycle to date . 67% of the time you ended with 2x what you started and 50% of the time 3x .

so because it is based on worst outcomes , even average would have actually left you with a 6.50% draw rate .
I actually did not know the 4% withdrawal rule was inflation adjusted so the initial amount goes up every year based on COLA, I thought it was just 4% of the principal, and whatever that dollar amount represented, was fixed.

If the 4% withdrawal rate was not inflation adjusted and the dollar amount corresponding to that initial 4% withdrawal in the first year was constant for the next 30 years, would it result in ending more than you started with 30 years later 100% of the time?
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Old 08-02-2018, 09:12 AM
 
106,238 posts, read 108,237,907 times
Reputation: 79776
yes 90% of all 117 30 year time frames , on an INFLATION ADJUSTED BASIS you ended with more than you started with . that is called a constant dollar withdrawal method because the value of your initial draw is inflation adjusted and is based on the orthogonal 4% in real dollars .

my own method i use is not the same thing .

i use bob clyatt's 95/5 .

i start each year with 4% of the balance so in good years i get rewarded right away . in down years you take 4% of the balance OR 5% less than the year before , which ever is higher .

that has inflation adjusting built in. it has a 100% success rate
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