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Right that's why I said, "Living in a life"..... that's the key. Same as "if you live a life of drugs" then you have a problem. The drugs aren't the problem if you want to get technical about it. Credit is equally as addicting as drugs, but its the lifestyle that's the problem.
It's not debt that's a problem at all. Technically it's negative equity or net worth. Simply but, when you owe more than you own, you have a problem. Debt is just half of the equation and by itself, can be a very useful tool. Even credit card debt has a time an place. If I'll be getting my bonus in 2 month and need to fix my car today, paying one month of interest is still justifiable if I'm going to lose my job before my bonus without a working car.
My opposition is to people who draw the hard and fast line of Debt = Bad. Owing $1000 at 0% and having $1000 in the bank is exactly the same as not having any cash or debt. You only have a problem when you owe $1000 and have $500 in the bank.
Agreed. Still, I don't think "debt=bad" is a horrible message for DR's target audience. It is better than continuing to spend far more than one earns year after year.
Throw them in and....what? William Bengen's research concluded that adding small caps to a portfolio increases safe withdrawal rate to 4.5%. International stocks do not increase expected return. Their value lies in diversification (less than perfect correlation).
William Bengen's research was published in the 1990s in The Journal of Financial Planning, in four different articles.
What research have you read which leads you to conclude adding small, mid, and international makes 8% a sustainable withdrawal rate?
Again, it depends on what you mean by 8% withdrawal rate. I agree that that is not sustainable when it has no adjustment to portfolio value going forward.
Again, it depends on what you mean by 8% withdrawal rate. I agree that that is not sustainable when it has no adjustment to portfolio value going forward.
It can mean whatever DR means.
Being willing to adjust to 8% of current portfolio value does help prolong the life of the portfolio. But the odds are the high withdrawal rate will cause the portfolio to grow smaller over time. While the cost of living rises, the annual withdrawals shrink. This is a problem for those who need that money to cover basic expenses.
Being willing to adjust to 8% of current portfolio value does help prolong the life of the portfolio. But the odds are the high withdrawal rate will cause the portfolio to grow smaller over time. While the cost of living rises, the annual withdrawals shrink. This is a problem for those who need that money to cover basic expenses.
The real issue I think is living for more than 30 years after retirement. An 8% WR in that case is likely to turn into poverty if any really big expense comes up along the way.
Of course if you retire near the peak of a market bubble, you suffer a huge hit very quickly.
And of course the WR must be reduced by any mutual fund costs, so 8% after fees of 1% is only gives you 7%WR of purchasing power.
If you're willing to accept less income uncertainty, of course the WR needs adjustment. I think a practical case might be willingness to take up to a 25% hit, combined with 1% fees. Under these conditions your SWR is probably just under 5.5%.
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