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it is funny how you mention the inflation adjusted safe with-drawal rate being meaningless yet it agrees with bill bernsteins data exactley.
Because of this kind of inept misrepresentation of Bernstein's work, I urge anyone who is interested in the topic and competent in mathematics to read his book rather than rely on internet blather. It helps if the reader understands enough about stochastic processes, for example the concepts of finite, stable moments and stationarity, to understand why the SWR method is meaningless.
i am glad you find the work of some of the most respected minds in the industry meaningless.
it has served as the basis for most of the financial planning industry for many many years now.
but i am glad you came to the conclusion their work is meaningless. i am sure with your credentials they will take it right to heart.
while it certainly is debatable whether folks actually withdraw or spend like robots or whether future markets will be worse than the worst of the past it is all mathamatics and number crunching and it certainly can form a good foundation for planning as opposed to the seat of someones pants.
everyone needs a starting point from which to start their dynamic adjustments in real time and as a guide i find it hardley meaningless.
Matt -- read your own guru, Wade Pfau: An International Perspective on Safe Withdrawal Rates from Retirement Savings: The Demise of the 4 Percent Rule? . Then read Bud Hebeler's work, and then William Bernstein's. The accepted reality, at least accepted by those who know enough math to understand what is going on to the extent that it can be understood, is that the SWR approach is rubbish. It was an interesting historical curiosity, and that's all.
Regarding your attempt at sarcasm: If you are really interested in this topic perhaps you should go back to school and learn something about stochastic processes, stationarity, moments, random variables, simulations, fractals, long-tail probability density functions, and the pressure to publish that demands tractable models even though they be wrong or meaningless. Then publish some papers of your own. In other words, come back when you actually know something, and then we can talk intelligently about the subject and talk intelligently about my credentials and whether anybody takes my thoughts to heart or not.
To anyone still following this thread: read Bernstein's book!
A common theme seems to be health insurance preventing people's retirement...
Why limit yourself to the US? Don't many people go to Ecaudor or Costa Rica for medical care and retire there? Just a thought. Sad state of affair that you must do that, but just a thought.
Yeah, then what happened to the two families that we know who did that is they retired too early. It worked out fine at first.
In Panama they are tired of it all and want to come back home but they dropped out so long ago their SS is almost nil and they don't own a home here. They lost a lot of their assets in the '08 crash. They're trapped. Living well, but trapped.
The other couple took off on their sailboat while in their 50s. Gradually, the expense of USA marinas forced them to the Caribbean. They can work and get by, but they can never come back to the USA for the same reason as the couple in Panama.
Gotta be careful, I guess. And one way or the other you have to create an estate of some sort. And your estate must be large enough to support you forever. Social Security is an integral part of the estate I have in mind.
Matt -- read your own guru, Wade Pfau: An International Perspective on Safe Withdrawal Rates from Retirement Savings: The Demise of the 4 Percent Rule? . Then read Bud Hebeler's work, and then William Bernstein's. The accepted reality, at least accepted by those who know enough math to understand what is going on to the extent that it can be understood, is that the SWR approach is rubbish. It was an interesting historical curiosity, and that's all.
Regarding your attempt at sarcasm: If you are really interested in this topic perhaps you should go back to school and learn something about stochastic processes, stationarity, moments, random variables, simulations, fractals, long-tail probability density functions, and the pressure to publish that demands tractable models even though they be wrong or meaningless. Then publish some papers of your own. In other words, come back when you actually know something, and then we can talk intelligently about the subject and talk intelligently about my credentials and whether anybody takes my thoughts to heart or not.
To anyone still following this thread: read Bernstein's book!
all the links you posted are speculations as to why the 4% rule may not work anymore in the united states and they are all valid points. but what they are not at this stage is fact that the methods used by most of the financial planning industry are dead or untrue..
it is only speculation as to what might be in this country going forward for future retirees. they are all valid points and maybe the 4% rule and all its data will be dead but at this point nothing is fact.
even the hardest hit group ,those that theoretically retired in the year 2000 still have 15 years to go before anyone knows whether the data still holds true.
why are all the calcultors based on the trinity and shiller still the best guide?
because of the fact it is all based on worst case scenerios for the most part and if anything the rule has been critized for being to conservative and leaving to much money left on the table at the end.
throw in the fact people do not spend or withdraw like robots but tend to do so dynamically based on whats happening around them and the fact that spending MAY drop off as one ages and you still have the best house in the worst neighborhood for outlining at least a road map with a conservative plan and having some slack for things to go wrong.
if the conservative trinity study and shiller based planning methods and research fail i would go out on a limb and say there is little hope for any other methods either as others may not be as conservatively based in worst case scenerios nor are their any calculators folks can plan by.
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Last edited by mathjak107; 06-02-2013 at 04:56 AM..
Guru wars? Pretty much pointless. There is no reason to look here for hard and fast rules or answers. It is the "S" in "SWR" that is variable. It can be drained or it must be protected, depending on circumstances and developments that a ticking clock will put into motion. Five years later, a 30-year horizon becomes a 25-year horizon. There are implications. It is always a dynamic, real-time game of act and react. All that financial planners can provide is an outline of a best-guess snapshot scenario based on assumptions that will inevitably be proven wrong given enough water over the dam. "Make a plan and then stick to it" most often turns out to be really bad advice. "Make a plan today and then make a new one again tomorrow" would turn out to be a better bromide for most people.
"Make a plan and then stick to it" most often turns out to be really bad advice. "Make a plan today and then make a new one again tomorrow" would turn out to be a better bromide for most people.
hi,
based on my math, putting 25k away for 33 years (till you reach 62), assuming a 6% annual ROI as you suggested, puts the total value at:$2,433,579 not 3.5M
how are you calculating 3.5?
I used a simple retirement calculator. I also was not planning on drawing from retirement until I was 65. Was planning on starting to stash money around 55. Should be able to stash about 200k in my final 7 years of work, especially if I don't have a house payment or car payments.
Also, it's a good thing I love my job and my field so if I don't retire at 62, oh well. Plus I have a PhD and applied experience in a fortune 10 company already, I could easily start teaching masters classes part time for an extra 20k a year right now, so adjust that for when I am 62.
well thats the idea but the point is what do you use to kick off the first plan as a guide?
Within reason, it doesn't actually matter. If you are 65 and want to live the same lifestyle to age 90, take 1÷25 (4%) out of what you have right now. If you are 60, take 1÷30 (3.33%) instead. Either one of those would easily be within a rational ballpark, so if you need a little more as the result of first-year lifestyle conversion effects, take that too. Once you get used to this new world and have some set patterns and standards and actual expectations, do a more careful analysis just to make sure you aren't boiling the kettle dry.
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