Bogleheads.org

BahamaMan

A 4% annual withdrawal rate will certainly leave you with a better chance of surviving your savings than if you spend 10%/year, though less than if you spend 2%/year, and the math makes sense as well for, say, a 25 year retirement- 25x4=100. And if you are lucky and your investments beat inflation ...

BahamaMan

If you are looking at, say, a 30 year investment horizon, backtesting, even if you rely on the dubious assumption that the recent past (and yes, a century is "recent") is predictive of the future, is statistically invalid.....simply because you don't have enough information. Using, say, 9...

BahamaMan

protagonist wrote: Can you tell me why the US stock market won't crash in July, 2035?

It doesn't matter whether it crashes or not. Perhaps you don't understand the purpose of backtesting. It is also how the '4% rule' was developed by Financial Experts.

BahamaMan

If you are looking at, say, a 30 year investment horizon, backtesting, even if you rely on the dubious assumption that the recent past (and yes, a century is "recent") is predictive of the future, is statistically invalid.....simply because you don't have enough information. Using, say, 9...

BahamaMan

It is also what Guyton's "Decision Rules" from his 2004 paper "Decision Rules and Portfolio Management for Retirees: Is the Safe Initial Withdrawal Rate Too Safe?" addresses. And what the "95% Rule" from 2005's Work Less, Live more addresses. And what Bengen's "Fl...

BahamaMan

I don't think it is that surprising. There is a robust body of research showing that retirees don't actually spend their portfolios. One set of authors sums it up as: "Fear, failure to plan, and a lack of confidence may be significant contributors to the conservative consumption witnessed amon...

BahamaMan

I had my deck rebuilt a couple years ago. The first one lasted about 15 years..... My contractor recommended Cedar again. I would have to pay 3 times that to get a Trex type deck. The wood sure looks nice! --- I can buy two more wood decks for the price of a Trex Deck...... That will last me to the ...

BahamaMan

My question is this … what happens if interest rates rise, in an orderly fashion to 6-7%? Does the 4% rule go up? Or does it remain? The 4% is a guideline. A planning number if you will.... What is going to happen no one knows. But if you use VPW, you can take advantage of a rising market or protec...

BahamaMan

I'm tending to think of our money in two buckets. There is the bucket that with VPW will be the layer on top of social security. We have this layer established. In order to retire early though we need to also establish the floor that would be the equivalent to social security for the 15 years befor...

BahamaMan

Thanks dbr. I guess I could make the question a bit more abstract and about VPW in general. On the one hand, some happy implementers of VPW often suggest that in order to have sufficient funding for retirement (and for using VPW) that one should be able to handle large swings in spending to the tun...

BahamaMan

I always have between $2 to $3 Hundred. Folding money in Front Pocket. Feel naked without it.

No wallet. Just a Credit Card and Drivers license in a card holder.

BahamaMan

You got me, I don't get this. What factors would lead to an increase in portforlio size and conversely what factors would lead to a portfolio decrease? Does this tie into the crossover point concept in portfolios of considerable size? Sorry if I am being dense (math is hard :( ). Rising Stock Marke...

BahamaMan

Not really, 4% Inflation Adjusted Withdrawal will definitely eat into principal. This is wrong. Most of the time a 4% inflation adjust withdrawal rate results in INCREASES in real principal not decreases. Thats the results of using a very conservative number. It is only in the bottom 20% or so of c...

BahamaMan

I've heard the term "critical mass" used which I think basically means the same thing. "Critical Mass" is a term made popular by Bob Brinker, host of ABC Radio's "Moneytalk" and editor of the newsletter called "Marketimer." For investors, your investments are...

BahamaMan

Let me emphasize. We're in 1982. 16 years have elapsed since we retired. We're about to take our 17th withdrawal, with 18 additional withdrawals remaining. Our portfolio has melted by 60%, so far , in inflation-adjusted terms, from $1,000,000 to $396,360, in less than half our planned retirement ho...

BahamaMan

I'm 30% Stocks/70% Bonds --- In the Target Retirement Income Fund.... No plan on Changing.

BahamaMan

novicemoney wrote:What do you all think of the concept? and how useful do you think it can be?

My portfolio cannot produce income greater than my expenses and never will. I am retired and spending down my portfolio, so I think this concept is pretty much worthless.

BahamaMan

The VPW method and Backtesting Tool is the best one I've seen. I am retired and have been using it for 3 years now.

BahamaMan

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VTINX

BahamaMan

As someone that is retired and is actively using VPW, I can say that I am very comfortable with this approach. Before we started our withdrawals about 3 years ago, there was a constant 'drumbeat' of the 4% Rule that really meant 3% because Stocks were overvalued and Bonds had no place to go but down...

BahamaMan

TheTimeLord wrote: I posed the question to a group that essentially has no need to take risk to maintain their standard of living

So, Why Risk it ?

BahamaMan

Not me. I am in retirement and am 30% Stocks. Invested in the Target retirement Income Fund.

Not changing.

BahamaMan

Thanks for your response. So does that mean tax free muni bonds are taxable in 401k but not in other accounts. In which accounts are they tax free? In your Taxable Accounts. In your Tax Deferred accounts all money withdrawn is treated like Regular Income..... Capital Gains taxes do not apply either.

BahamaMan

Well, I don't want to miss out on 4 years of equity, but that's not the only reason. We have to live somewhere, and I'd just assume to have a paid-for home since we want to do things to the landscape that very few landlords, if any, would allow. With our retirement cash-flow being 60k, we don't hav...

BahamaMan

4. Other questions I’m not thinking of….. Your time frames seem quite short to me. I'd simplify and rent a place, until you figure out where you want to live. Buying for the short term is usually more expensive. Decorating, Real estate selling fees, maint etc. Is there some type of formula or rule ...

BahamaMan

I don't like to forecast housing markets but I think that if you are waiting for CA housing prices to "correct" lower it will be a very long wait. I am still waiting for my home's market value to get up to where it was 10 years ago. Is that true of all of Southern California, or just your...

BahamaMan

SurferLife wrote: 4. Other questions I’m not thinking of…..

Your time frames seem quite short to me. I'd simplify and rent a place, until you figure out where you want to live.

Buying for the short term is usually more expensive. Decorating, Real estate selling fees, maint etc.

BahamaMan

One of the Best Investments of my Life was in Africa. My wife and I took an African Photo Safari to Kenya and Tanzania for a couple weeks. It was very expensive. Over $30 Grand, but worth every penny. There is a lot more to life than money!

BahamaMan

Quark wrote: Semantics.

Exactly!

BahamaMan

Using past returns as a guide is implicitly predicting the future will be the same as the past. No, it is only a guideline. The same as what the '4% Rule' is based on. So, you start with a guideline, and then use VPW to execute the plan. You don't have to predict anything. VPW adjusts to real time ...

BahamaMan

Simplegift wrote:Sure, McKinsey’s return forecasts should be viewed with a degree of thoughtful skepticism — but sticking one's head in the sand and assuming that future stock and bond returns will resemble the historical past isn't the answer either.

My head is in the sand, but I assume nothing.

BahamaMan

I did some simple math. Yes, if you wait longer, your SS check is bigger, but at the same time you do NOT have the money that you would have gotten had you started earlier. The simple math said that, no matter when you start, it is around age 76 or 77 when the crossover point occurs. Yup, And if yo...

BahamaMan

The conclusion to me comes back to saving's rates during working years. Yes that doesn't mean much to someone in their 70s right now...but its still important to impart upon future generations. Keep in mind that this forum has a selection bias into the top tiers of Societies. You see a Lot of Docto...

BahamaMan

I would personally like to read more about it because it's scary to think we have a "retirement crisis" on our hands when a majority of these people lived through the greatest bull market in U.S. history. I mean the S&P 500 has returned 10.1% annually over the last 40 years so it's ki...

BahamaMan

But my point is, how much is "as much as I can"? How do I find out how much that is? Saying "Don't look at past returns or future predictions, just save as much as you can" is meaningless. Unless one is living at absolute existential minimum, one can always save more, so how muc...

BahamaMan

"Save as much as you can" doesn't mean anything. I save 2/3 of my take-home salary. I live in a tiny studio apartment without shower, I never eat out, never drink alcohol, don't own a car and don't take vacations. I could save more, of course. I'm not saving as much as I can.-- I'd say th...

BahamaMan

I plugged in the numbers and the first report did say I should wait till 70 to collect mine and take my wife's spousal benefit when I turn 67. But their initial calculations are based on everyone living to 100. When I plugged in realistic ages of death, the report said I should start taking mine th...

BahamaMan

Whenever I have seen predictions about the markets over my investing life of over 30 years, they are most often completely wrong... Sure, it's smart to be skeptical about projections of future returns. However, it makes a big difference whether they are coming from some yahoo selling a book or news...

BahamaMan

We took early SS ... Our investable retirement funds has grown similarly as the S&P. One can calculate the reverse of delaying SS for 5 years and depleting the Retirement Investments. YMMV This is a good example of when taking early can gain an advantage. Imagine having extra cash from 2009- 20...

BahamaMan

VPW can't fail, but it can lead to wide fluctuations in income or, especially if you haven't saved enough, not having enough to support the lifestyle you want. VPW won't lead to wide fluctuations income in most cases. In my case I have a Conservation Asset Allocation, and am Delaying S.S. to age 70...

BahamaMan

How do you figure out how much to save and whether you have saved enough to retire without some prediction of market returns? I never thought about predicting future returns. I saved as much as I could, and I looked at past Market history to see how I would have fared based on my Asset Allocation. ...

BahamaMan

Whenever I have seen predictions about the markets over my investing life of over 30 years, they are most often completely wrong and usually follow this path. 1.) Prediction is made with almost 100% certainty. 2.) Book usually accompanies prediction written by the same author. 3.) the time period el...

BahamaMan

Whether you associate the drop to bonds themselves or to inflation is a matter of interpretation, and doesn't make a difference in real life. When you need to spend your retiree money and your purchasing power drops like a rock for decades to come, you're in deep troubles, period. I wish to nobody ...

BahamaMan

Most of us here Back Test our Portfolios against Market History. Periods of Low interest rates are not the 'Bad Periods' of Market History. Quite the opposite. One of the worst periods was the mid 1970s thru the Early 1980s, Mostly because of Inflation, and my checking account was paying 14% APR in...

BahamaMan

Most retirees will NOT stay the course in a persistent low-yield environment, and will move away from low-income bonds, for better or worse. Same thing applies to accumulators, actually. Hence most savers. Agree, this is a huge concern in a low interest rate environment that lasts for decades. Pers...

BahamaMan

There isn't anything sophisticated or premeditated about all this. LBYM sometimes implies a state of hardship or deprivation: you would like X but you consume less because you want to save for retirement. I think about it a bit differently. Consume whatever makes you happy but not more. I have neve...

BahamaMan

A budget for myself is a formal guideline and gives me something to compare against. I spend basically what I want to and set the budget for the next year..... For myself, it is just something I use to see where I am spending the money. I have done this for over 30 years. When I first started out, I...

BahamaMan

Is it worth it to contact a Travel Agent for Airfare and Car Rental for Australia from the U.S. -- They'll charge $100 for this service (No big deal), but would I do just as well using Expedia?

BahamaMan

You tell me exactly what me and my wife will need in the way of money over the next 40 years and I'll stop living below my means and (hopefully) growing my retirement money. There are little things like unknown medical expenses in all our futures that make living below our means pretty sensible. Un...

BahamaMan

I think this is not quite true. Let's look at the same scenario before but split it up as you suggest. I retire using the 3.5% guideline, giving me $52,500 in income my first retired year. I have it split up into non-discretionary and discretionary as you suggest. $36,750 is non-discretionary — hou...

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