Search found 4713 matches

by nigel_ht
Mon Nov 28, 2022 7:44 pm
Forum: Investing - Theory, News & General
Topic: Withdrawal based on net worth?
Replies: 39
Views: 5097

Re: Withdrawal based on net worth?

tennisplyr wrote: Sat Nov 26, 2022 7:54 am Does anyone take their withdrawal percentage based on their total net worth? While technically not an investable asset, home equity...through HELOCs, refi and reverse mortgage..is accessible for cash.
As others have pointed out you already counting home equity via imputed rent and the reduction to monthly costs. To count it for the purposes of calculating 4% or whatever would be double counting the value.

That said, we know that we will be downsizing from this large house once the kids are all gone so in the plan there is this largish cash infusion a few years into retirement. I guess it depends on where we end up moving how big that sum will actually be.

Of course at some point we also will want to buy into a CCRC sooooo...
by nigel_ht
Wed Nov 23, 2022 2:24 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Just for giggles, I just compared FIDO's planning tool report created on May 1, 2007 (my retirement date) vs today's report. What I found was that the total value of my/wife's retirement portfolios is 66% higher today than forecast 15 years ago, at the same age on the report. It also shows (correctly) that RMD's forecast wayback then are much lower than what we are actually withdrawing today. Joint SS income is 25% higher at the same age than what was forecast back then. All this shows is that the primary forecast tool we used years ago to help us make retirement decisions greatly underestimated the actual income and portfolio values we have today. It also didn't match reality to decisions on SS (Forecast - both take at age 66 vs. reality ...
by nigel_ht
Tue Nov 22, 2022 12:06 pm
Forum: Investing - Theory, News & General
Topic: submit ?s: Bill Bengen on the 4% rule of thumb
Replies: 47
Views: 6736

Re: submit ?s: Bill Bengen on the 4% rule of thumb

Is the 50-75% stock allocation still required for the 4% rule to work? ... Does the 4% rule still work? :) This isn't really a facetious question. Its quoted many places: https://www.fool.com/the-ascent/personal-finance/articles/why-the-creator-of-the-4-retirement-spending-rule-says-it-no-longer-works/ https://finance.yahoo.com/news/even-inventor-bill-bengen-revisiting-143000007.html After years of the 4% rule creeping upwards we have a lot of articles that now IMPLY Bengen says Nope... And kiplinger says: "Recently, however, Bengen disclosed that he has moved his own personal portfolio to 20% stocks, 10% bonds and the remaining 70% to cash." https://www.kiplinger.com/investing/604802/is-it-time-to-move-to-cash-the-father-of-the-...
by nigel_ht
Tue Nov 22, 2022 11:48 am
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Now suppose stock market returns for 5 consecutive years were over 20%. Monte Carlo simulation will say the odds of a 20+% return in the 6th year is the same as any of the previous years. [Because the sampling is independent!] Common sense might say that after 5 years of abnormally large returns, the market is overvalued and due for a correction. Monte Carlo ignores that. Some might say that's good. Some might say it's a flaw. And the same is true for 5 consecutive big down years. P.S. SP500 returns for 1995-1999 were 34%, 20%, 31%, 27%, 20% (rounded). And were followed by 3 negative years. I would not say this is a flaw but a fairly accurate representation of reality. Humans like to find patterns and antidotal evidence. I understand this....
by nigel_ht
Tue Nov 22, 2022 11:40 am
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Monte Carlo simulations for financial planning typically rely on repeated random sampling of past results to get the statistical likelihood of achieving financial goals . A basic assumption is that the random sampling is independent , e.g. next year's return does not depend on last year's return or the return of any other year. Now suppose stock market returns for 5 consecutive years were over 20%. Monte Carlo simulation will say the odds of a 20+% return in the 6th year is the same as any of the previous years. This last sentence is not true. A Monte Carlo analysis can incorporate any model of stock returns that you can imagine. The distribution of returns need not be "normal" nor must they be i.i.d. And I can imagine one with a...
by nigel_ht
Tue Nov 22, 2022 11:38 am
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

. I can provide the same input into two different Monte Carlo simulations...say one with mean reversion and one without...and get two different results. But those two simulations DO NOT HAVE THE SAME INPUTS! You’ve input different assumptions about the strength of mean reversion so of course you get different results . Nope. The two parts of a Monte Carlo are the inputs and the equation that does the computation. You can use the same input values for the same uncertainty variables in different eqautions. I think anyone who has ever constructed a Monte Carlo simulation will understand how nonsensical this statement is. Simulation 1: Tomorrow Stock Price = Today's Stock Price x e^((Average Daily Return - Variance/2) + random input value) Sim...
by nigel_ht
Tue Nov 22, 2022 11:06 am
Forum: Investing - Theory, News & General
Topic: If we "know" 2023 is going to be a down year........
Replies: 43
Views: 5284

Re: If we "know" 2023 is going to be a down year........

This question should get my flamed (as it is contrary to the BH spirit and smells of market timing).....but........I still find it interesting to ponder and see what others feel. If I am looking to buy a car (but the car I have now is fine such that I dont HAVE to have a new car now), and I KNOW* that the cost of that same car will be lower next year than it is currently, would I be wise to wait to the buy the car? Of course, this means that I wont know when exactly to buy the car (I might buy a tad too late or a tad too early), but in the meantime Ill drive my same car. In short, following this analogy (which is not actually about a car....LOL), what disadvantages are there to just sitting tight on my current car, still making the same pa...
by nigel_ht
Tue Nov 22, 2022 8:33 am
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

. I can provide the same input into two different Monte Carlo simulations...say one with mean reversion and one without...and get two different results. But those two simulations DO NOT HAVE THE SAME INPUTS! You’ve input different assumptions about the strength of mean reversion so of course you get different results . Nope. The two parts of a Monte Carlo are the inputs and the equation that does the computation. You can use the same input values for the same uncertainty variables in different eqautions. Lets take a trivial example anyone can try in excel: Simulation 1: Tomorrow Stock Price = Today's Stock Price x e^((Average Daily Return - Variance/2) + random input value) Simulation 2: Tomorrow Stock Price = Today's Stock Price x e^((Ave...
by nigel_ht
Mon Nov 21, 2022 9:16 pm
Forum: Personal Finance (Not Investing)
Topic: Finally pushed too hard at work - RETIRING!
Replies: 284
Views: 24363

Re: Finally pushed too hard at work - RETIRING!

Is quiet quitting ethical or stealing from your employer? Quiet quitting is a made up term trying to continue to guilt people into going "above and beyond". There's no such thing. A much better term for it is "act your wage" in my opinion. Finally someone mentioned the Act Your Wage term. :sharebeer Correct. From our friends at Wikipedia. Quiet quitting is an application of work-to-rule.[6][7] Despite the name, the philosophy of quiet quitting is not connected to quitting a job outright, but rather, employees avoid going above and beyond at work by doing the bare minimum required and engage in work-related activities solely within defined work hours.[8] Proponents of quiet quitting also refer to it as acting your wage[9...
by nigel_ht
Mon Nov 21, 2022 8:50 pm
Forum: Personal Finance (Not Investing)
Topic: Finally pushed too hard at work - RETIRING!
Replies: 284
Views: 24363

Re: Finally pushed too hard at work - RETIRING!

Beensabu wrote: Sun Nov 20, 2022 3:09 pm
chris319 wrote: Sun Nov 20, 2022 2:41 pm Below are four quarters of dividend history for KO. Note that payment of a dividend does not automatically result in the reduction of the dividend amount:

Code: Select all

Nov 30, 2021	0.42 Dividend
Sep 14, 2021	0.42 Dividend
Jun 14, 2021	0.42 Dividend
Mar 12, 2021	0.42 Dividend
This is not the forum for talking about this. I don't know if there is one. But it's not this one.

There are plenty of secret dividend investors here. Every once in awhile, they'll let people know in the most unnotably passive whisper in the wind way. Just keep it to yourself and join the breadcrumb brigade. It's easier that way.
Yes, but do we really HAVE to whisper "Hail Hydra" or can we say something different from time to time?
by nigel_ht
Mon Nov 21, 2022 8:01 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

The limitations of Monte Carlo isn't just garbage in and garbage out. Sometimes is good data in and garbage out. Or more accurately...I can put good data in and get (almost) any answer I want out if I play with the model enough...like 2% SWR in the JP Morgan example. It's just a tool and only as good or as honest as the person who builds it...Fildelity's seems okay. That's a result of the inability to accurately predict the future historically. That is what the model is telling you, along with what might give you your desired level of safety and at what cost. Nope. In the case of JP Morgan they didn't just put a finger on the scale but a whole body to make it come out the way they wanted...arguably it's not their model that produces their ...
by nigel_ht
Mon Nov 21, 2022 5:33 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Nope. You only talk about inputs being correct but not the model itself which describes the interaction between the inputs to produce the (generallly deterministic) result of a single run. You did it again: said “nope” as a reply to me and then repeated something I already said. Nope. You failed to address the difference between model inputs and the model itself. And you went out of your way to truncate the post to remove the salient point. I can provide the same input into two different Monte Carlo simulations...say one with mean reversion and one without...and get two different results. The limitations of Monte Carlo isn't just garbage in and garbage out. Sometimes is good data in and garbage out. Or more accurately...I can put good data...
by nigel_ht
Mon Nov 21, 2022 2:47 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Think of Monte Carlo analysis as giving you answer to the following question: IF we assume the following range of inputs, WHAT is the range of possible outcomes? It's not telling you which particular outcome you will get, but it WILL tell you the probability of getting a particular outcome conditional upon the model inputs being correct. The more comfortable you are about the inputs being right, the more confident you can be about the output. Nope. It provides: IF we assume the following range of inputs, WHAT is the range of possible outcomes based on the assumptions baked into our model ? You just said "nope" and then restated exactly what I just said. Nope. You only talk about inputs being correct but not the model itself which...
by nigel_ht
Mon Nov 21, 2022 2:15 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Makefile wrote: Mon Nov 21, 2022 12:55 pm Are there particular decisions where a Monte Carlo analysis might be more useful than others? e.g., what percentage of the portfolio to put into a SPIA and how varying that percentage affects the success probability seems more useful than trying to use it to determine savings rate or "can I retire?"
The assumption you make (rates of return, inflation, reversion to mean, impact of valuations on future performance, future relative performance of US vs Global economy/market, etc) impacts both "How much should I put into SPIA?" and "can I retire?".

If you can meaningfully answer one you can likely meaninfully answer the other.
by nigel_ht
Mon Nov 21, 2022 2:08 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

vineviz wrote: Sun Nov 20, 2022 3:37 pm
If there are professionals using Monte Carlo analysis merely because it "looks cool" or whatever, I don't know them.
Amusingly, it is sufficienlty common enough to be a made fun of even within the industry...if you pause Schwab's ad and look at the whiteboard you'll see Monte Carlo is near the top middle. Right next to "normal distribution = HAPPY RETIREMENT!" lol...

You can see the whiteboard clearly at the 4 second mark.

https://www.ispot.tv/ad/Zy2p/charles-sc ... ent-income

Of course Schwab shouldn't be throwing any stones given their SEC settlement...
by nigel_ht
Mon Nov 21, 2022 1:56 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Think of Monte Carlo analysis as giving you answer to the following question: IF we assume the following range of inputs, WHAT is the range of possible outcomes? It's not telling you which particular outcome you will get, but it WILL tell you the probability of getting a particular outcome conditional upon the model inputs being correct. The more comfortable you are about the inputs being right, the more confident you can be about the output. Nope. It provides: IF we assume the following range of inputs, WHAT is the range of possible outcomes based on the assumptions baked into our model ? Using it to do sensitivity analysis is less contentious and more interesting than providing a computed range of outcomes that folks can agree with becau...
by nigel_ht
Mon Nov 21, 2022 1:47 pm
Forum: Personal Investments
Topic: Accuracy of the "Monte Carlo" Simulations?
Replies: 128
Views: 10202

Re: Accuracy of the "Monte Carlo" Simulations?

Yes, mine works the same way I believe. I also didnt include anything re: home equity (as although I know it is tangible, to me the last thing Id want to do is ever rely on a reverse mortgage, etc unless I really had to). At that point, any port in a storm...... Using this mix and an age 62 retirement (we are 50 now), a $10k/mo income requirement (we have no debts and dont plan to have any so this is living expenses) and including SS estimation and a small pension my wife will get (but hey....well take it)--- The simulator says the below is for significantly below average returns----- https://i.ibb.co/Sf7GZCV/Screenshot-2022-11-20-203851.jpg https://i.ibb.co/j4S6tmx/Screenshot-2022-11-20-203932.jpg One quick and dirty check is to use the 4...
by nigel_ht
Fri Oct 14, 2022 10:35 pm
Forum: Investing - Theory, News & General
Topic: 4%+ WR Works Again (Latest ERN Post)
Replies: 97
Views: 9480

Re: 4%+ WR Works Again (Latest ERN Post)

Think about it. If the 12/31/21 retiree started at 4% and follows the system by the book, they’d now be taking close to 6%. And if that’s safe, then retiring today at 6% has to be safe. Sure, by that logic, it would be just about the same level of safety. I guess I shouldn't have declared that 6% is outright unsafe. But the caveat is that it is not always 6%, we're talking about what used to be 4% and now 6%, but the rate remains a variable throughout your retirement. Your chances are of failure are the same (more or less) as the person who retired in January at 4% but obviously with the added info, we know the person who retired in Januaries chances of failure are no longer 5%. Probably something more like 25%. That is basic stats.... Onl...
by nigel_ht
Fri Oct 14, 2022 7:49 am
Forum: Personal Finance (Not Investing)
Topic: How to prepare to buy last home.
Replies: 43
Views: 5015

Re: How to prepare to buy last home.

With respect to the generator I would simply buy a Honda stand alone inverter and a battery system like Goal Zero Yeti and take both with you to wherever you end up. I picked Honda and Goal Zero because they are “premium” brands which tend to have higher customer satisfaction but YMMV. Should still be cheaper than a whole house generator but isn’t as convenient. You can get an electrician to install an automatic transfer switch and a set of protected circuits…in theory you can have something like the Yeti hooked up to an ATS if it can be on standby forever…I never looked seriously at this. I have a manual transfer switch because my battery system is mobile. I dont leave it hooked up. The idea is you can have immediate backup power from the ...
by nigel_ht
Fri Oct 14, 2022 6:48 am
Forum: Investing - Theory, News & General
Topic: 4%+ WR Works Again (Latest ERN Post)
Replies: 97
Views: 9480

Re: 4%+ WR Works Again (Latest ERN Post)

Marseille07 wrote: Thu Oct 13, 2022 8:59 pm
HomerJ wrote: Thu Oct 13, 2022 8:50 pm Most of us actually, because the 25% cut in stocks usually happens after a huge run up.

I'm still working, but I could totally retire today if I had to. Because of the huge run up that happened first, BEFORE the big cut.
Well...let me just say I can retire too, but I'm not aiming for 25x - which is sort of my point.

If I had 33x and didn't retire, I'm not retiring at 25x even though I technically can.
Well…my plan is to retire after a crash after recovery starts…a that point you’ve captured as much of “buy low” as you could and SORR has already occurred so you know the impact.

You just have to hope it’s not a false recovery and 1937 isn’t ahead of you.
by nigel_ht
Fri Oct 14, 2022 6:42 am
Forum: Investing - Theory, News & General
Topic: 4%+ WR Works Again (Latest ERN Post)
Replies: 97
Views: 9480

Re: 4%+ WR Works Again (Latest ERN Post)

Another 25% down, in my portfolio? ... "Would you like fries with that?" I was talking about this downturn which started in January of 2022. Basically, if you didn't have enough to retire then, you certainly don't have enough to retire now. Then, what's the point of ERN's article saying "retiring now is safer"? Conversely, if someone had enough to retire in Jan 2022, then retiring now is no safer than retiring then. Right, for the same guy worse is not better. It is just our faith in the 4% that is abstractly restored. Pay no attention to that island nation in the Pacific that seems to be three decades ahead of us demographically. You mean the island nation that doesn’t even like immigrants with the same ethnicity as th...
by nigel_ht
Fri Oct 14, 2022 6:28 am
Forum: Investing - Theory, News & General
Topic: Is "Stay The Course" dead?
Replies: 416
Views: 48508

Re: Is "Stay The Course" dead?

AnnetteLouisan wrote: Fri Oct 14, 2022 2:18 am
Beensabu wrote: Thu Oct 13, 2022 11:49 pm
newyorker wrote: Thu Oct 13, 2022 10:45 pm Whos buying now???
I am. Every pay check. Happily buying. So are lots of people.

Buy 'em when they're up, buy 'em when they're down, buy 'em all around. :wink:
Yes. It was always, “buy low, sell high,” a rule each part of which consistently eludes people. This is exactly when we should be buying, isn’t it? I lack the courage too to invest as much as I could, but at least I am investing.
People fear long or no recovery which is natural…
by nigel_ht
Wed Oct 12, 2022 7:30 am
Forum: Investing - Theory, News & General
Topic: Comparing 2008-9 and 2022
Replies: 130
Views: 10143

Re: Comparing 2008-9 and 2022

Marseille07 wrote: Tue Oct 11, 2022 6:01 pm
Lawrence of Suburbia wrote: Tue Oct 11, 2022 5:57 pm The one thing 2008-2009 and 2022-2023(?) have in common is, they'll both be in the past soon. Life will go on; its joys and sorrows unaffected by financial year-end statements.
We still have big reports coming up though. PPI & FOMC minutes tomorrow, CPI on Thursday. IOW we don't know if it's going to be over soon.
Soon is relative…nobody guarantees 2 years but 20 years is a solid bet. Even for Nikkei the market returned to “normal” even if it never recaptured its peak.
by nigel_ht
Mon Oct 10, 2022 2:16 pm
Forum: Investing - Theory, News & General
Topic: Comparing 2008-9 and 2022
Replies: 130
Views: 10143

Re: Comparing 2008-9 and 2022

goingup wrote: Sat Oct 08, 2022 12:36 pm
Leesbro63 wrote: Sat Oct 08, 2022 9:38 am I've been thinking about 2008-9 versus 2022. And I think I have concluded that 2022 is worse (so far) for the average Boglehead.
I can't speak to the "average Boglehead" experience, but my personal assessment is that the GFC of 2008/09 was terrifying. So far this downturn seems disheartening but not devastating.
Same for me. As BH'ers we're inclined to be ambivalent about normal downturns...even with a touch of inflation. Even if 2022 proves to be the next 1966 it isn't as scary yet and we won't really know until we discover if the Fed can tame inflation or not.
by nigel_ht
Sat Oct 08, 2022 10:14 am
Forum: Personal Consumer Issues
Topic: Marine Corps NROTC program for daughter
Replies: 67
Views: 6716

Re: Marine Corps NROTC program for daughter

All the U.S. armed services have terrible reputations for their treatment of women. Why would she think she wouldn't experience this? There are plenty of other ways to improve the world. There are multiple women in my family who are proud military veterans, my sister-in-law is still serving (the army paid 100% for her nursing degree), and my 19yr old sister is strongly considering enlisting. Generalizations and attitudes like this are exactly why the armed forces are having such a difficult time recruiting. We should encourage our country's best and brightest young people to consider service, especially if they want to serve. Given what’s in the news it is a consideration…my daughter considered service and I’m not too upset she decided no....
by nigel_ht
Sat Oct 08, 2022 9:53 am
Forum: Personal Consumer Issues
Topic: Marine Corps NROTC program for daughter
Replies: 67
Views: 6716

Re: Marine Corps NROTC program for daughter

Serviceacademyforums.com has very good information about the service academies (applications, culture, academics, etc.) and ROTC options. May want to take a bit and read through some of their information. Yah, I’d research them all…my colleague’s daughter is In Annapolis and seems happy. And free :) I would look at Texas A&M and Virginia Tech…good engineering schools that are also senior military colleges… My kid picked VT because of the Corps of Cadets. It’s not quite as hardcore as some place like VMI…you get a hybrid experience where freshman year is more cadet like than normal ROTC but junior/senior year more normalish college experience. What I wouldn’t do is enlist…my kid’s buddy did Army Reserve, ended up forced to take tech sch...
by nigel_ht
Sat Oct 08, 2022 9:39 am
Forum: Personal Consumer Issues
Topic: Marine Corps NROTC program for daughter
Replies: 67
Views: 6716

Re: Marine Corps NROTC program for daughter

Mel Lindauer wrote: Sat Oct 08, 2022 12:42 am I don't think there is anything wrong with what the recruiter is telling her. ROTC and other future Marine Corps officers actually do summer training at Quantico VA at Officer's Basic School. It's like a boot camp for future officers to see if they have the right stuff to wear the Marine Corps uniform. It's totally separate from the Marine Corps enlisted training at Parris Island SC.
Thought that was sophmore summer? No, this doesn’t sound right.

My kid is AFROTC but I can pass questions to him to ask his roommate who is NROTC.
by nigel_ht
Fri Oct 07, 2022 10:06 am
Forum: Personal Finance (Not Investing)
Topic: Fed to FAANG [Employment]?
Replies: 45
Views: 5362

Re: Fed to FAANG?

Hopefully not Facebook...rumor has them downsizing 12K folks.
by nigel_ht
Thu Oct 06, 2022 1:30 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

On the topic of SWR, howabout address the relationship between SWR and valuation. We know that if you cut the expected return values in a parameterized Monte Carlo simulation, the SWR comes down. Are there novel and interesting ways to map the relationship between valuation and SWR using historical data sets, or more particularly the method used by the authors here? Generally, it seems obvious that valuations affected expected return and hence would adjust SWR, but it might not--there could be relatively quick reversions to the mean; the equity risk premium might not be constant; or most of the SWR shocks could be exogenous (even if we expected valuation plays a role by adjusting expected return, it might be that most of the SWR problems c...
by nigel_ht
Thu Oct 06, 2022 9:43 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

I'm not suggesting that the right reaction to this paper is to keep saving until you've accumulated 50x expected withdrawals, but rather that research like this provides useful context for the exceptional luck US investors have had over the past 80 years or so. What you call “exceptional luck” I call “dominant global position”. The luck is to live and invest in the country that had "dominant global position" as you call it. US investors didn't choose that, they were just lucky enough to have been born here or to see this as the best immigration option, usually for other reasons than stock market returns. Importantly, they are unlikely to be in a market with "dominant global position" for the next 80 years. Yes, 80 years...
by nigel_ht
Thu Oct 06, 2022 8:07 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

vineviz wrote: Thu Oct 06, 2022 8:02 am I'm not suggesting that the right reaction to this paper is to keep saving until you've accumulated 50x expected withdrawals, but rather that research like this provides useful context for the exceptional luck US investors have had over the past 80 years or so.
What you call “exceptional luck” I call “dominant global position”.
by nigel_ht
Thu Oct 06, 2022 8:06 am
Forum: Investing - Theory, News & General
Topic: Go-Go Years Retirement Strategy
Replies: 56
Views: 8145

Re: Go-Go Years Retirement Strategy

Quick update. It was mentioned in another thread (thanks AlohaJoe) that it’s hard to take into account things like divorce when estimating expenses. And it’s true. I actually have a couple plans fleshed out…one for the Most Likely and one for Most Dangerous. The Most Likely is what is in the original post. For significant events like divorce, early death of a spouse, one of the kids needing lifelong care, etc you’d want a separate contingency plan. The Pentagon has more than one war plan sitting on a shelf, so can you. Obviously we spent the most time on the Most Likely outcome but there are a few skeleton “What If” plans with the general things sketched out. We DIDN’T do divorce…lol. I can’t think of a more common “Most Dangerous” scenario...
by nigel_ht
Thu Oct 06, 2022 7:52 am
Forum: Investing - Theory, News & General
Topic: Why don't you factor tilt?
Replies: 882
Views: 56532

Re: Why don't you factor tilt?

Apathizer wrote: Tue Oct 04, 2022 10:24 pm But if you have so much capital that capital gains would literally be hundreds of thousands of dollars, it doesn't matter at all. You could literally just keep everything in a savings account and you'd be fine.
Lol…while I’m sure paying hundreds of thousands in cap gains is an annoyance, it’s an annoyance I wouldn’t mind having.

It certainly is more fun than TLH…
by nigel_ht
Thu Oct 06, 2022 7:42 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

One reason that WR gets a lot of attention is that when you retire your starting portfolio is now set…and SWR gives you a planning number for what you can expect it to support in the worst case without running out of money. So? Unless you can show that constant spending is predictable 30 years out the number is not that useful as a planning number. SWR isn’t a planning number for constant spending…it’s commonly used as your constant dollar WR number but it provides two things: A ceiling for how much you can spend in a year and not deplete your portfolio in the historical worst case. You can spend less if you want to which most folks seem to ignore when talking about SWR as a withdrawal strategy. A working number for what you can reasonably...
by nigel_ht
Thu Oct 06, 2022 7:13 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

Ideally I'd love to see WR as a bounding problem. Given a set of risk(s) we know the SWR can't be below X and above Y. This research appears to be setting a SAFEMIN @ 1.9%(though I admit I haven't had a chance to read it all yet). … Like McQ's comments, can we drop some risks and lower SAFEMAX or raise SAFEMIN? i.e. if we exclude world wars from our risk pool, then can SAFEMIN go up another 1%/yr? The issue with the methodology is that trying to determine the lower bound of SWR for a country like the US by including much smaller countries into the data set doesn’t seem valid because there are things we can do that other countries cannot…and just the sheer size of the economy and landmass means that we have both financial and natural resour...
by nigel_ht
Thu Oct 06, 2022 6:49 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

On the topic of SWR, howabout address the relationship between SWR and valuation. We know that if you cut the expected return values in a parameterized Monte Carlo simulation, the SWR comes down. Are there novel and interesting ways to map the relationship between valuation and SWR using historical data sets, or more particularly the method used by the authors here? Generally, it seems obvious that valuations affected expected return and hence would adjust SWR, but it might not--there could be relatively quick reversions to the mean; the equity risk premium might not be constant; or most of the SWR shocks could be exogenous (even if we expected valuation plays a role by adjusting expected return, it might be that most of the SWR problems c...
by nigel_ht
Thu Oct 06, 2022 6:44 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

I think the paper we are discussing provides ample evidence that the "bounds" that people have previously inferred about historical SWRs are possibly biased due to the ex-ante elimination of unfavorable data. The paper provides no evidence that historical SWRs are biased due to the elimination of unfavorable data. They didn't look at that problem at all. I disagree. The paper shows us what happens to withdrawal rates when we incorporate left-tail events at something close to their historic frequency instead of systematically excluding them. And again, these events don’t matter for retirement planning and should be excluded. Of course unfavorable outcomes “matter”. I’m not suggesting that anyone needs a plan that works even in a n...
by nigel_ht
Wed Oct 05, 2022 4:33 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

I think the paper we are discussing provides ample evidence that the "bounds" that people have previously inferred about historical SWRs are possibly biased due to the ex-ante elimination of unfavorable data. The paper provides no evidence that historical SWRs are biased due to the elimination of unfavorable data. They didn't look at that problem at all. I disagree. The paper shows us what happens to withdrawal rates when we incorporate left-tail events at something close to their historic frequency instead of systematically excluding them. And again, these events don’t matter for retirement planning and should be excluded. If these left tail events occur then your retirement portfolio is the least of your worries. Nor is there a...
by nigel_ht
Wed Oct 05, 2022 4:25 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

Ideally I'd love to see WR as a bounding problem. Given a set of risk(s) we know the SWR can't be below X and above Y. This research appears to be setting a SAFEMIN @ 1.9%(though I admit I haven't had a chance to read it all yet). … Like McQ's comments, can we drop some risks and lower SAFEMAX or raise SAFEMIN? i.e. if we exclude world wars from our risk pool, then can SAFEMIN go up another 1%/yr? The issue with the methodology is that trying to determine the lower bound of SWR for a country like the US by including much smaller countries into the data set doesn’t seem valid because there are things we can do that other countries cannot…and just the sheer size of the economy and landmass means that we have both financial and natural resour...
by nigel_ht
Wed Oct 05, 2022 3:48 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

randomguy wrote: Wed Oct 05, 2022 2:37 pm
Can you use valuations to make predications where you are likely to fall? I would argue yes. I think our odds of ending clustered around say 4.5% are a lot higher than ending up clustered around that historical ~6% given current conditions. The next step of predicting that valuations say we are getting <3% SWR gets a lot more contentious.
Except that clustering around 4.5% instead of 6% doesn’t mean your retirement will fail…just that your terminal portfolio will be smaller…

If folks want to say super high valuations will result in a Nikkei style crash so you should do a 3% SWR I would say that’s reasonable…of course we aren’t at super high valuations sooooo…
by nigel_ht
Wed Oct 05, 2022 3:38 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

I'd suggest that determining spending is actually far more important, and probably more difficult, than determining withdrawal rates. I spent the 5 years prior to retirement logging all expenditure in an effort to categorise and estimate my post-retirement expenditure. This, to me, is the biggest problem with the somewhat myopic focus on withdrawal rates. I am far, far more data oriented than the average person, I've been tracking my expenses for years. I could look them up in a minute, if I cared to. But if you asked how closely they'd been tracking CPI-U....uh....dunno...give me a minute to, uh, figure that out. (According to a quick Excel calculation, the correlation between my actual spending and a theoretical CPI-U adjusted spending f...
by nigel_ht
Wed Oct 05, 2022 3:30 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

On the topic of SWR, howabout address the relationship between SWR and valuation. We know that if you cut the expected return values in a parameterized Monte Carlo simulation, the SWR comes down. Are there novel and interesting ways to map the relationship between valuation and SWR using historical data sets, or more particularly the method used by the authors here? Generally, it seems obvious that valuations affected expected return and hence would adjust SWR, but it might not--there could be relatively quick reversions to the mean; the equity risk premium might not be constant; or most of the SWR shocks could be exogenous (even if we expected valuation plays a role by adjusting expected return, it might be that most of the SWR problems c...
by nigel_ht
Wed Oct 05, 2022 7:49 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

4. It seems to me quite appropriate to include “war loss years” in that earlier paper. No investor can know ex ante whether they reside in something like the USA 1940, Germany 1914, or Russia 1916. Stock investors are stock investors, regardless of date/location. It could all go south, and sometimes it did. All market events, weighted by their probability of occurrence, should figure in calculating the odds that a risk taker will succeed in amassing wealth of a specified magnitude. … 6. Here, I submit that for a US retiree, it does not make sense to include “war loss years.” The logic, laid out by multiple posters in this thread and others, is very clear. a. If the United States loses a war—not the Vietnamese war, but suffers the fate of G...
by nigel_ht
Wed Oct 05, 2022 7:30 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

I'm pretty sure I agree with everything you say. I'd suggest that determining spending is actually far more important, and probably more difficult, than determining withdrawal rates. I spent the 5 years prior to retirement logging all expenditure in an effort to categorise and estimate my post-retirement expenditure. It has always been my contention that the probability that you screwed up your expense estimates is much higher than the probability that you will encounter a worse than worst historical case… Any major health issue can derail your estimate…perhaps not in the UK. :) Long term care is a big question mark when you are planning in your early 60s as to what your late 70s might look like. ps I've now updated my code to R6 of the JS...
by nigel_ht
Tue Oct 04, 2022 11:07 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

I posted before seeing Lady Geeks message so I removed the response.

I will simply point out that while the historical record certainly contains cases where SWR can be 0%, the Nikkei crash, with extremely high valuations, isn’t one of them. Nor is the Dot Bomb which also had very high valuations.

So valuation does not appear to be the driving factor for SWR failures.

Inflation appears to be the driving factor.

Well that and world wars…
by nigel_ht
Tue Oct 04, 2022 3:31 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

Not sure why you think it’s “emotional” and also not sure why you ignore the quoted market watch article that’s promotes this “research” as guidance. I always treat MarketWatch (and most other second-hand sources) are less interesting and less informative than the primary research. When I can read and analyze the the actual research, of course I prefer that. My point is that the research has value. It's examining new data in a new way, and there are things we can learn from it. When people criticize it without even reading it then, yes, I see that as an emotional response. What makes you think I didn’t read it and their other paper that talks more about their methodology. It’s deeply flawed and structured to produce sensationalist headline...
by nigel_ht
Tue Oct 04, 2022 3:23 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

The historical SWR is not ANY KIND of "guarantee" and is also NOT a "planning number". I agree it's not any kind of guarantee, but it's definitely a planning number. Maybe in the sense that some people treat it this way, but that is certainly not how it SHOULD be used. So your contention is that the 4% rule (of thumb) is not a mainstay of financial planners and that Bengen (and many other financial planners/advisors) was incorrect to advise his clients in using 4% as a planning number and that the gazillion of articles in financial planning journals (like from the FPA) that talk about SWR as a planning tool, and all those retirement calculators using 4% SWR are all doing it wrong because they shouldn’t be treating it as...
by nigel_ht
Tue Oct 04, 2022 3:01 pm
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

SWR isn't an ironclad guarantee and IS a planning number to use that says "if you don't withdraw more than this a year, in the historical worst case you didn't run out of money". The historical SWR is not ANY KIND of "guarantee" and is also NOT a "planning number". Sure it is. 25x expenses is a reasonable target for a 30 year retirement and that’s computed from a 4% SWR which a reasonable planning number even if not SAFEMAX. Planning number. It’s like knowing you can get about 450 miles on a tank of gas from past experience. Sometimes you get more. Sometimes you get less with 400 being the lowest so far. So 400 miles is a good conservative planning number for how far you get on a tank of gas. Doesn’t mean ther...
by nigel_ht
Tue Oct 04, 2022 11:36 am
Forum: Investing - Theory, News & General
Topic: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]
Replies: 260
Views: 26670

Re: Maybe Wade Pfau was over-optimistic … [New study on Safe Withdrawal Rate]

I think that the lesson of these studies is not the SWR is {some low number} and you should adjust your plans downwards. I think it’s that there is no such thing as an absolutely safe withdrawal rate and we are all going to need to live in uncertainty and adjust our plans in response to a changing world until the day we die. Uncertainty is scary! I understand why people want ironclad guarantees that their retirement plans will survive any circumstance. But throwing out bad circumstances from the data so that you can tell yourself that you have a stable SWR that is acceptably high seems like a psychological coping mechanism rather than good planning. SWR isn't an ironclad guarantee and IS a planning number to use that says "if you don'...