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Gotcha. I get the whole "you want 100% ratio" , but 94.8% is still very good...only thing is if you fall into that 5.2% fail scenario you are royally screwed!
Not so much.. remember there are other factors that bring your success rate higher.
Everything is a statistical basis so life expectancy plays a key role too. Odds are most of us will not last 30 years in retirement improving the score.
We may also not need inflation adjusting yearly since our natural spending pattern tapers off as we age
94.8% chance my money will last for thirty years is good enough for me. I doubt I will live that long (to my early 90s), so the chance I will both run out of money using a 4% inflation adjusted withdrawal, and live to my early 90s.... is next to zero. I will take those odds.
But that is figuring more than a 4% return happening at times . you asked about a flat 4% return in your thread . 1% appreciation and 3% dividend .That will fail way to many times
Not so much.. remember there are other factors that bring your success rate higher.
Everything is a statistical basis so life expectancy plays a key role too. Odds are most of us will not last 30 years in retirement improving the score.
We may also not need inflation adjusting yearly since our natural spending pattern tapers off as we age
are you saying 94% isn't good? the life expectancy is built in to that equation...if hes assuming a 90-95 year life then thats conservative
i am saying it is actually better than the 94.80% in real life . while we figure age 90-95 usually , very few will live that long making the 94.8% a better number . the stress testing figures inflation adjusting yearly , real life study's show that is un-necessary in real life . we actually need less .
on the other hand those numbers assume you can deplete all your principal by the 31st year and you pass with flying colorsif you ran it for 30 years .
have expenses in long term care , want money for heirs or live another 5 years and that 94.8% can be a failure in your own life . so all the other things like life expectancy and not needing so much inflation adjusting help you have more for the unexpected stuff as a cushion .
but remember a high success rates does not guarantee a balance of any amount left nor provide for big expenses that exceed your budget in a year ..
Last edited by mathjak107; 09-12-2016 at 06:57 AM..
i am saying it is actually better than the 94.80% in real life . while we figure 90-95 usually very few will live that long making the 94.8% a better number . the stress testing figures inflation adjusting yearly , real life study's show that is un-necessary in real life . we actually need less .
on the other hand those numbers assume you can deplete all your principal by the 31st year and you pass with flying colorsif you ran it for 30 years .
have expenses in long term care , want money for heirs or live another 5 years and that 94.8% can be a failure in your own life . so all the other things like life expectancy and not needing so much inflation adjusting help you have more for the unexpected stuff as a cushion .
but remember a high success rates does not guarantee a balance of any amount left nor provide for big expenses that exceed your budget in a year ..
Right. It seems like the big unknown is healthcare......and I know people are living longer , but lets face it, the overwhelming majority of people don't live till 90
yep , but if they have long term care costs expenses can have them spending more than living to 90 but dying at a much younger age . my dads 6 years in a snf at age 70 cost us a fortune and impoverished his wife eventually .
The costs of medical care for the elderly cannot be overestimated.
Near us is a popular CCRC facility. IF you are in good health, you can buy a cottage or apartment at a very inflated price. Then you pay a huge monthly fee. Basically to participate, a couple needs to have a commitment of about $3 million. Then they get basic living, meals and healthcare for life. Of course the couple would need additional sources of money to do anything else. There is a long waiting list.
Although it sometimes pains me to agree with anyone; Mathjak107, is correct. It is how I structured our retirement to avoid sequence-of-unfortunate-events and try to capitalize on favorable-sequence-of-events.
YMMV
This is really only relevant in taxable accounts. In a Roth IRA it is irrelevant and in a traditional IRA you only pay taxes when you withdraw the money.
So, for the sake of argument, I will change the question to a three percent annual withdrawal, only dividends...
...Examples and current yield:
PEY 3.20%
VYM 2.99%
DEM 4.15%
DLS 2.98%
PID 3.81%
Each of these funds is actively managed. That is, the fund manager tries to out-smart the market by selecting specific stocks to meet their objective.
History shows that actively managed funds rarely are worth it. Do a google search on "luck vs skill in mutual fund performance" and you'll see what I mean.
Suppose we form a portfolio of actively managed US equity mutual funds, where each fund is weighted every month by assets under management. This is the aggregate portfolio of wealth invested in active mutual funds, and its performance is the aggregate experience of fund investors. For 1984-2006, the α (abnormal return) of the portfolio, measured with our three-factor model, is ‑0.81% per year. This α estimate is 2.50 standard errors below zero, which is rather strong evidence that active mutual funds as a whole provide returns to investors below those of an equivalent portfolio of the three passive benchmarks of the FF model.
The high management fees and expenses of active funds lower their returns. If we measure fund returns before fees and expenses - in other words, if we add back each fund's expense ratio - the α estimate for the aggregate fund portfolio rises to 0.13% per year, which is only 0.40 standard errors from zero. Thus, even before expenses, the overall portfolio of active mutual funds shows no evidence that active managers can enhance returns. After costs, fund investors in aggregate simply lose the fees and expenses imposed on them.
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