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What about the opportunity to make money in the early years of retirement and thereby make a huge positive change in the SWA for the decades of retirement?
So consider what happens for those who follow Bernstein's advise and put their investments in TIPS, annuities and short term bonds. We can be very sure these will perform poorly for quite a few years into the future. Best case is that someone retiring will start off poorly and will damage their nest egg at the wrong time, early in retirement.
Stock investments could be volatile. They offer the possibility of continued and very substantial growth. Or maybe the market stalls and the investor cannot make money. The investor is still no worse than if they invested in TIPS, etc. The market could also move into a period with a substantial downturn, a recovery and continued volatility. The investor who does not panic is likely to do well under these conditions if they follow a simple rebalancing plan or just plain do nothing. The worst case would be a large extended downturn of many years. In that case, no doubt about it, the investor will lose. In that case you might also want to look for a hole to crawl into. A long downturn when the economy is still trying to recover from the 2008 recession would be bad news. Not only will investors loss, but you can expect major issues in with the entire economy including unemployment and a prolonged set back in standard of living.
No, I think I must stick with my initial reaction. The Bernstein approach makes sense for him and for those of you would have reached "Game Over" and have well more money than you need. Just put it in a sock drawer for security. The situation is different for those of us who need and want to spend down our investments.
For goodness sakes, read the goshdarn books Ages of the Investor and Deep Risk rather than rely on forum comments to understand Bernstein's ideas.
First of all, he is a strong advocate of stocks for young people saving for retirement. The shift to less volatile assets comes after the once-young person -- now older -- has saved enough to have "won" the game. At that point, enough of his resources go into stable assets to provide a secure income that covers life's necessities, just exactly precisely to avoid the "hole" you mention. The rest (if any) goes or stays in riskier investments for an upside and luxuries. I believe that some advisors call this phase a "floor and upside" strategy. (Note: if you can't afford to do this, it's my personal opinion -- and nothing more than a personal opinion -- that you really can't afford to retire at the level of consumption that you envision, and that you are at serious risk of having your head handed to you by Mr. Market.)
Although it's fun to think about huge gains in the stock market early in retirement, it's wise to look at other possibilities that are well within the limits of plausibility.
My wife has relatives who are quite wealthy. They always complain that they live on a "fixed" income and need to live inexpensively. I suspect they spend a lot of time counting their money, which I am pretty sure is at least a few million dollars. I know they track every expense literally to the penny. As their wealth has grown, the concern about money has increased. At this point they barely eat. Even though they barely eat they continue with some major expenses such as trips to Europe and new cars. The way they behave towards money is just plain weird.
I suspect we have some posters on this forum who progressing towards similar miserly tendencies or financial insecurities.
I suspect we have some posters on this forum who progressing towards similar miserly tendencies or financial insecurities.
Perhaps, but for the record I want to say that I am not one of them, and that I live better than you likely ever have or ever will, judging from what you have written here. My suspicion is that Mathjack and Tuborg, for example, are also doing just fine . . .
Perhaps, but for the record I want to say that I am not one of them, and that I live better than you likely ever have or ever will, judging from what you have written here. My suspicion is that Mathjack and Tuborg, for example, are also doing just fine . . .
My wife has relatives who are quite wealthy. They always complain that they live on a "fixed" income and need to live inexpensively. I suspect they spend a lot of time counting their money, which I am pretty sure is at least a few million dollars. I know they track every expense literally to the penny. As their wealth has grown, the concern about money has increased. At this point they barely eat. Even though they barely eat they continue with some major expenses such as trips to Europe and new cars. The way they behave towards money is just plain weird.
I suspect we have some posters on this forum who progressing towards similar miserly tendencies or financial insecurities.
Not weird but different from yours with different results. Understand for some the market under performing their expectations doesn't mean dog food at 80 but not as lofty a nest egg but still considerable. Maybe life for your in laws is comfortable and secure so their stress triggered hunger is minimal. Also as I tell MathJak he won't be able to turn it off.
Lots of people live better than I do. But I am not on the edge. Depending on my expenses, my investments are probably in the range of 20x. I have watched my money all my life and deferred expensive purchases and vacations. Johns Hopkins got a big chunk of my discretionary, pre-retirement income in the form of tuition for the younger daughter. I retired the year I stopped paying tuition. I would like to make some of those deferred expenses and vacations, in addition to having a cushion to meet all of my usual expenses.
I think what I see here is a lot of very conservative, if not downright pessimistic, thinking on this forum. I could be wrong but I really see at least another year or two of great opportunity to grow my nest egg. There are many people who panicked in 2008 and are still sitting on the sidelines.
Lots of people live better than I do. But I am not on the edge. Depending on my expenses, my investments are probably in the range of 20x. I have watched my money all my life and deferred expensive purchases and vacations. Johns Hopkins got a big chunk of my discretionary, pre-retirement income in the form of tuition for the younger daughter. I retired the year I stopped paying tuition. I would like to make some of those deferred expenses and vacations, in addition to having a cushion to meet all of my usual expenses.
I think what I see here is a lot of very conservative, if not downright pessimistic, thinking on this forum. I could be wrong but I really see at least another year or two of great opportunity to grow my nest egg. There are many people who panicked in 2008 and are still sitting on the sidelines.
My friend, I sense you are seeking to justify a withdrawal rate that will enable you to do the things in retirement you want. Thats fine. I think the disagreement comes up when you include the word safe. Sit back, chill and think about your situation in your context and not others. I am sure I will be corrected if wrong, but Bernstein talks about game over in the context of having achieved your goals and now protecting them. Have you achieved your financial goals/lifestyle or do you need increased risk to get there. If so yes you are retired but game not over and that is ok.
Not weird but different from yours with different results. Understand for some the market under performing their expectations doesn't mean dog food at 80 but not as lofty a nest egg but still considerable. Maybe life for your in laws is comfortable and secure so their stress triggered hunger is minimal. Also as I tell MathJak he won't be able to turn it off.
Actually that is not the case. They seem to suffer daily from insecurity about money. It has become a serious pathology. They are actually in the position of being emaciated because they do not spend money on food. They bought a new car, but will not spend money to drive it 1 mile to the grocery store.
My friend, I sense you are seeking to justify a withdrawal rate that will enable you to do the things in retirement you want. Thats fine. I think the disagreement comes up when you include the word safe. Sit back, chill and think about your situation in your context and not others. I am sure I will be corrected if wrong, but Bernstein talks about game over in the context of having achieved your goals and now protecting them. Have you achieved your financial goals/lifestyle or do you need increased risk to get there. If so yes you are retired but game not over and that is ok.
Bingo..the game becomes "preservation of capital" which I think is much easier to accomplish because whatever you earn is icing on the cake.
Bingo..the game becomes "preservation of capital" which I think is much easier to accomplish because whatever you earn is icing on the cake.
Yes and we both have been in thread discussions about the best funds/portfolios for that and remember many of the participants.
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