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figured my own results as if i retired in 2000 and using my income and capital preservation model and drawing 4% inflation adjusted i come up with only 22.5 years of money after taxes so far.
that could change and improve though before we hit 22 years because the fact is there will be no 30 year time frame with which we can hope things got better. there has been way to much already spent down for my comfort level.
Last edited by mathjak107; 08-30-2012 at 06:31 AM..
2 potential flaws in his study in my opinon is that he based it on 60/40 mixes which today are not the norm for most retirees. according to fidelity most retiree mixes seem to be under 40% equities.
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also there was no provisions for how cash would effect the outcome, retirees can have big cash positions as much as 20-25% of a portfolio . that surely would effect the outcome.
That isn't a flaw, he never claimed to be projecting the potential SWR for the most common asset allocation among retirees. He was using 60/40 since that is commonly pointed to (along with 70/30) as an optimum stock/bond allocation for retirees expecting a multi-decade period of withdrawals, which seems like a perfectly reasonable method to use for an article about exactly that.
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Originally Posted by mathjak107
figuring in cash as a position too how do you think those who retired in 2000 will conform at the end of their 15 year period?
my opinon? not good.
I'm not really interested in the performance of retirees who are overweighted in cash perform, we've discussed that before and obviously have different opinions on it.
I would be interested in the portfolio performance of someone who retired in 2000 with a 70/30 mix. Sure stocks returns have not been great but that is partially offset by a great bull run for bonds and very low CPI. Throw in dividends it might not be as bad as one would assume. Using VWELX as a barometer (its about 70/30) we can look at growth of 10k since 2000:
if your talking about spending down in retirement you better be talking about retirees with cash positions to live on as thats reality.
a 70/30 mix ,with no cash looks good on a chart but not very practical as far as i think many retirees go .
equity positions have been at very low levels and may stay that way for quite a long time. i would think there are very few retirees who have to live off their portfolios sitting with a 70/30 mix and spending down directly off it.
the chart you posted above is meaninging less without showing spending down and showing a 4% inflation adjusted withdrawal taken against it at the same time ,... that makes all the difference in the outcome of the balance .
my own conservative retirement mix shows up 39% from 2000 to 2011 but would only survive 22 years at 35% equities /45% bonds /20% cash taking 4% inflation adjusted based on so far. .
did you know you can have a 100% equity position and not even worry about holding any cash?
yep. a 90-100% position back tested has shown that even selling into a down market to raise each years funds for living would survive a 4% swr for 30 years.
the difference you would be up without the weight of cash or bonds offest the losses in the equities when sold...
the reality is though no retiree who depends on his nest egg to live on will do that.
there is a big difference between how thinks look on paper and how they translate to the real world in my opinion.
the allocations are very crucial to whether you can pull 4% or not.
Last edited by mathjak107; 08-30-2012 at 08:27 AM..
Bottom line of the article is that a 4% SWR is already based on the worst case scenario that includes the Great Depression. Also the portfolio being tested uses the SP 500. It does not even have small caps, REITS, and foreign stocks which produce higher returns. I don't know anyone who invests solely on the S&P 500. So a 4% SWR is already pretty conservative and needlessly austere.
if your talking about spending down in retirement you better be talking about retirees with cash positions to live on as thats reality.
a 70/30 mix ,with no cash looks good on a chart but not very practical as far as i think many retirees go .
I know you believe in holding way more cash, but again that is not what I'm interested in since I don't share that view.
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Originally Posted by mathjak107
. i would think there are very few retirees who have to live off their portfolios sitting with a 70/30 mix and spending down directly off it.
I don't care what a survey of retiree opinions is, I'm interested in what seems the wisest option for me.
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Originally Posted by mathjak107
the chart you posted above is meaninging less without showing spending down and showing a 4% inflation adjusted withdrawal taken against it at the same time ,... that makes all the difference in the outcome of the balance .
Agreed that the graph would be much better if it showed that, but it isn't meaningless the point I was making with the chart was that 2000-2012 wasn't some timeframe of no returns as some people like to oversimplify by looking only at a big chunk of money thrown 100% into the stock market.
Quote:
Originally Posted by mathjak107
my own conservative retirement mix shows up 39% from 2000 to 2011 but would only survive 22 years at 35% equities /45% bonds /20% cash taking 4% inflation adjusted based on so far. .
Maybe you should try a 70/30 mix similar to Wellington, maybe it do much better than yours.
Wellington is no good for spending down from or adjusting allocations as your risk level changes if your inclined to do so.
Its fine for accumulating assets but not geared for developing an income stream from.
You cant just sell off bonds without selling stocks at a loss and its allocation to stocks isnt high enough to pull efficiantly from in down markets.
the gains you got from 2000 on were very depenant on your allocations.
my conservative capital and income model was up about 39%. the permanent portfolio averaged over 9% a year on average . the fidelity insight growth model was up 65% .
In a way we're in agreement, I wouldn't try to take 4% SWR from your cash heavy conservative portfolio either.
But for a 70/30 stocks/bonds mix (or 60/40) I believe author had some pretty good points on how the SWR we see are actually the worst case scenario and how variables going forward would need to be. I don't subscribe to the theory that one should hoard years and years of cash with almost no return and have no interest in SWR for that sort of asset allocation.
Have any of you looked at the Vanguard Managed Income Funds? According to the website they attempt to allocate monthly payments while preserving your principal. I think a fund like that mixed with a moderate pension, an early retirement is possible.
Example: (Closest to my future situation) I will get about $2200 a month when I retire from the military @ 38. I want to hang it up at 52-55 range. That $2200 combined with a payout of about $1900 (with $500K invested in the fund) should carry me until 68 when I can substitute Social Security for that $1900. Hopefully I'd be able to pull all my cash out without taking a hit, or even ahead a bit.
The only problem I have with the Vanguard funds is putting so much money in one place. Has anyone ever dealt with these types of funds?
In a way we're in agreement, I wouldn't try to take 4% SWR from your cash heavy conservative portfolio either.
But for a 70/30 stocks/bonds mix (or 60/40) I believe author had some pretty good points on how the SWR we see are actually the worst case scenario and how variables going forward would need to be. I don't subscribe to the theory that one should hoard years and years of cash with almost no return and have no interest in SWR for that sort of asset allocation.
yep he was spot on for the allocations he used. but the problem is as you see here all the time that 4% swr has grown bigger than life and folks think its true regardless of allocation.
its very dependant on allocation and order of gains and losses......
our plan will be fine once social security kicks in.. ill need only a little bit from our portfolio once we take ss.
thats why i run as conservative as i do. we have other income too .
but the last 12 years have actually represented the failure period they talk about if you were conservatively invested .
as i said the income mix would have gone bust in 22.5 years .
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