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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76384  
Subject: 4% Rule -- Common Misconceptions Date: 8/31/2011 8:22 PM
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If you're not paying rock-bottom fees and expenses on your investments, you probably should be withdrawing less than 4% -- maybe a lot less.

http://www.retireearlyhomepage.com/four_percent.html

intercst
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Author: StockGoddess Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69486 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 8/31/2011 11:10 PM
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The original 4% rule was based on something called the Trinity Study (google it) which back-tested the market for 50 years and figured that was the average you could depend on with a good mix of stocks and bonds. They showed your chances of outliving your portfolio - even at 4% it wasn't 100%, and it depended on your mix. You could even do 7% and have a 50% chance of success with certain mixes.

Then, if you want to get depressed google the "Life of Riley" index, which says if you want a SAFE return (insured) you're only looking at 2% (inflation adjusted T-bills and bonds).

I give up, I save like crazy, max out my 401Ks and just hope for the best. Might buy a rental or two to hedge my bets, and the occasional lottery ticket so I can dream...I know i do more than most, and do all I can, and that's all I can do. Most folks I know don't even fully retire anymore, they go half-time, to keep insurance. That might be the best we can hope for.

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69487 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 8/31/2011 11:37 PM
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Then, if you want to get depressed google the "Life of Riley" index, which says if you want a SAFE return (insured) you're only looking at 2% (inflation adjusted T-bills and bonds).


and someone posted this a few months back ..

http://boards.fool.com/if-you-want-to-read-about-withdraw-ra...




I give up, I save like crazy, max out my 401Ks and just hope for the best. Might buy a rental or two to hedge my bets, and the occasional lottery ticket so I can dream...I know i do more than most, and do all I can, and that's all I can do. Most folks I know don't even fully retire anymore, they go half-time, to keep insurance. That might be the best we can hope for.


just keep in mind that rentals are Work *

... part-time provides insurance?




* and you can get bit --someone bought the house across the street as a rental at the Absolute peak of the RE bubble .. suspect she's not seeing much cash from it

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69488 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/1/2011 6:33 AM
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Great article, I especially liked the last paragraph:

Indeed, if you're withdrawing 4% for your living expenses and letting your mutual fund manager and investment advisor take another 3% for a total of 7% of assets annually, historically there is less than a 50/50 chance your money will last 30 years. Limiting the investment costs to 0.25% of assets or less allowed a 4% retirement withdrawal to survive for 30 years in every payout period examined from 1871 to 2006. As Warren Buffett once observed, "The average investment manager adds nothing," Buffett said. "He subtracts something from your investment performance. It's almost unique among professions that I can think of."

PS: Besides Ravyt's article you need to remember that 99% of the time you do have money left at the end of 30 years. It's also OK to recalculate periodically if you do "beat" the market (Intercst shows you some examples on his website as well). Do be safe, but don't get discouraged. These are VERY reliable numbers.

Hockeypop

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69489 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/1/2011 8:45 AM
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I start from the proposition that something around or near a 4% withdrawal rate is reasonable. I then

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69490 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/1/2011 8:47 AM
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I think a little reason and common sense go a long way when it comes to determining a reasonable withdrawal rate. I think adjustments over time can take care of the many risks and pitfalls along the way. Keeping costs as low as possible is probably the most important thing a person can do. Good luck to us all.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69494 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/1/2011 1:27 PM
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I also like the idea that if your investments average 8%/yr, that 4% per year looks like it could last a very long time.

As a practical matter we are all painfully aware that the stock market does not move in a steady straight line. There are times when stocks are down or flat, and other times when you can do a lot better than 8%.

I think its important to keep an eye on the market and be sure to participate to the fullest when times are good. In bad times, you have to retreat and hunker down. But ideally you make enough in the good times to cover the bad.

If not we are all destined for jobs as greeters at Walmart. And we will have lots of company. I don't think we will ever be lonely.

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69495 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/1/2011 1:46 PM
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"I think its important to keep an eye on the market and be sure to participate to the fullest when times are good. In bad times, you have to retreat and hunker down. But ideally you make enough in the good times to cover the bad."

The problem here is that market tops and bottoms are not marked. People tend to retreat and hunker down, meaning selling at the bottom. They think the bad times will continue. Technicians call this "capitulation".

And then, when do you get back in? When the market has already come back to where it was before the previous correction?

The best solution, for most of us, is simply to stay invested all the time, and regard it as a buying opportunty when stocks go on sale.

Best wishes, Chris

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69497 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/1/2011 10:51 PM
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I know you are right, Chris.

But if you put a chart of the S&P up there--

http://finance.yahoo.com/q/bc?s=^GSPC&t=2y&l=on&...

most investors had no trouble spotting the up trend from roughly Sep, 2010 to Mar, 2011.

Of course if you waited for the news media to tell you it was happening, you got there late or missed it. But those watching the market had not trouble spotting it.

Similarly when markets get uncertain, some cycle out of their more risky investments and either hold cash or at least move toward industry leaders with solid earnings.

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Author: RetiredFloridian Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69498 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/2/2011 10:09 AM
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The best solution, for most of us, is simply to stay invested all the time, and regard it as a buying opportunty when stocks go on sale.

I agree with both points...staying put and then adding to existing positions when stocks are seriously undervalued. I'd also add that using some level of hedging can dramatically reduce downside risk while not doing too much to impede upside gains. In an earlier post I described a simple timing model I use to set the level of hedging I use. Even without using a timing model, a fixed level of hedging can provide some good protection against market downturns.

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Author: drippinfool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69499 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/2/2011 12:46 PM
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The beauty of buy/hold/rebalance is that if you stick to the plan, you automatically buy equities when they are beaten down far enough and vice-versa.

By the way, try this experiment with the S&P (or any other chart) block out the dates and cover the chart with a piece of construction paper. Then slide the paper gradually to the right to reveal the movement of the chart. Ask someone who thinks they know which way the market will go to predict the shape/slope/direction of the chart. See how they do.

-drip

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69500 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/2/2011 2:35 PM
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Then slide the paper gradually to the right to reveal the movement of the chart. Ask someone who thinks they know which way the market will go to predict the shape/slope/direction of the chart. See how they do.



would be an interesting experiment ..i'd expect four different answers (four different types of investors)

TA guys would say, 'not enough information' (need technical indicators like EMA, and time frame (days or months on the chart?)

Value guys would say, 'not enough information' (need time frame and what the stock is)

Pro pickers would have an answer and (my guess) be wrong 43% of the time

guys like me would say, "it's a bloody crap-shoot, how the heck can anyone predict?"

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69501 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/2/2011 11:37 PM
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Ask someone who thinks they know which way the market will go to predict the shape/slope/direction of the chart. See how they do.

But you can do pretty well simply by watching the 200 day and 50 day moving averages. They will spot changes in market direction and get you in or out for at least the longer trends. Add it a bit of economic predictions for the future and you can further refine the art.

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Author: JLC Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69502 of 76384
Subject: Re: 4% Rule -- Common Misconceptions Date: 9/3/2011 8:47 AM
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The beauty of buy/hold/rebalance...

There are a few systems that work. The key is to stick with them. Especially in the "bad times". No system is perfect, they merely increase the odds into your favor over time.

JLC

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