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Subject: Re: 5 Year "Cushion"  Date: 4/14/2000 1:55 PM  
Author: telone  Number: 3538 of 19257  
Pixy writes: <<Given the low withdrawal rate you're using, that may work. However, I wonder if you're using 4% of the intial portfolio as increased by inflation each year, 4% of the initial portfolio held constant over the years, or 4% of the portfolio's value each year? It makes a difference. Give me that data, and I'll use that in an analysis I'm constructing for a future article>. Intuitively, I agree that this approach i.e. taking money from the portfolio at a 4% rate would be "better" than trying to "time" the market and take out 5 years or to replenish the 5 years each year at the end of each year (when the market might have tanked) since one cannot know when the best time it would be to "cash out" to give you a new 5 yr cash base. Pixy, I too would like to see your analysis based on taking out 4% (of the initial portfolio) and increasing the 4% by inflation each year. Thus, if one took out 4% of a $100K portfolio at the beginning of year #1 (i.e. $4,000), the following year he would take $4,000 times inflation of 2.5 % plus $4,000 or $4,100 and so on and so on. Pixy, I also endorse the comments about the quality and clarity of your writing. You do excellent work for "such a young person." <grin> 

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