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Author: methree One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 741335  
Subject: My graditute to this board Date: 1/28/2000 9:22 PM
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At the end of December I asked if I should take the money out now to pay down the house or wait until march when I needed it. several people on this board avocated pulling it out NOW rather than later and not try to time it. I pulled out the money I needed the 3rd day of January and the rest out monday to pay the taxes on it, and boy am I glad I did. I'm sleeping very well lately even with the market decline.

Thanks for your most valuable advice. This message board has been so valuable to me. I appreciate everybody who take the time to reponds.
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Author: arrete 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: 2684 of 741335
Subject: Re: My graditute to this board Date: 1/28/2000 9:42 PM
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Wish I had been that smart. But I keep telling myself I'm in for the long haul. If I would only listen...

arrete

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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: 2685 of 741335
Subject: Re: My graditute to this board Date: 1/28/2000 10:08 PM
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arrete wrote,

Wish I had been that smart. But I keep telling myself I'm in for the long haul. If I would only listen...<.i>

It depends when you need the money.

I don't put any funds that I'll need in less than 5 years in the stock market, but I have everything else IN the stock market.

intercst



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Author: gurdison Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2690 of 741335
Subject: Re: My graditute to this board Date: 1/29/2000 1:32 PM
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<At the end of December I asked if I should take the money out now to pay down the house or wait until march when I needed it.>

As stated by many others before me, but always worth repeating: Any funds needed for SHORT TERM obligations should NEVER be invested in the market. Some may disagree on the length of short term periods, but I would say the consensus is between 2 and 5 years. If you needed some of your funds in March and still had them invested in January, you were playing with fire.

Last summer on another board, I came accross a person who had to cancel their purchase of a new home. In April they "parked" their house money (170k) in AOL stock. By August the stock had gone from 170 to 85, giving them an 85k bath. They foolishly thought they would make an extra return on their money while waiting for the closing on the house. I don't know whether they bailed out or stayed in for the big ride back up (and the recent stumble), but their experience hammers home the above point. Risk and reward are joined at the hip. FOOLS heed the advice; fools do not.

BRG

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Author: galeno Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2695 of 741335
Subject: Re: My graditute to this board Date: 1/29/2000 5:57 PM
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gurdison wrote:
As stated by many others before me, but always worth repeating: Any funds needed for SHORT TERM obligations should NEVER be invested in the market. FOOLS heed the advice; fools do not.

This is worth repeating--a lot. I agree with intercst again (so what's new???). MONEY NEEDED IN FIVE YEARS OR LESS HAS NO BUSINESS BEING IN THE STOCK MARKET.

As for this board, anybody who is retired and has money in the stock market that they need in 5 years or less is is OUT OF HIS MIND!! That is, if he wants to stay retired.

For early retirees who don't mind the idea of going back to work, or for those who can tolerate LOTS of income fluctuation (I can) you can reduce it to 3 years.

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Author: duggg Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2705 of 741335
Subject: Re: My graditute to this board Date: 1/30/2000 12:41 AM
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Gurdison pointed out,

As stated by many others before me, but always worth repeating: Any funds needed for SHORT TERM obligations should NEVER be invested in the market.

You might also consider parking all of your long term assets in a MMF a month before that all-important date: the one on which your SEPPs are based, especially if you intend to use the fixed-payment annuity or amortization methods.





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Author: Daryll40 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5590 of 741335
Subject: Re: My graditute to this board Date: 3/6/2000 6:36 AM
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Intercst,

Excuse me finding an old topic to reply to...I haven't figured out yet how to find someone for private email (in addition to public posting) for a NEW topic.

Anyway, I've been thinking about your plan where your "initial" withdrawal amount increases in years starting just after your portfolio reaches a new all time high in prior years.

Here's my question:

If you had $1M in 1972 and retired two years later in the summer of 1974, could you still safely withdraw $40,000 plus an inflation kicker for the years '72-'73 (heafty inflation)? Could you then continue to do that, again with annual big kickers for those inflationary times, until the market "came back" in the late '70's or early 80's (the recovery time would obviously depend on the exact mix of the portfolio)?

In other words, my money does not know that I didn't actually retire in 1972, but my scenario above would be pretty much the same as if I retired in 1972, even though the pot had shrunk by nearly half.

Or, put another way, can I safely assume that I could retire at some point in the future, perhaps in many years from now, even after a bear market grinds my current hypothetical $1M down to $500K, with an initial withdrawal amount never less than 4% (or whatever number you choose for the safety comfort level) of the value last Friday (which was an all time high for my portfolio)?

That was a run on but you catch my drift!


















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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: 5591 of 741335
Subject: Re: My graditute to this board Date: 3/6/2000 6:52 AM
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Daryll40 asks,

If you had $1M in 1972 and retired two years later in the summer of 1974, could you still safely withdraw $40,000 plus an inflation kicker for the years '72-'73 (heafty inflation)? Could you then continue to do that, again with annual big kickers for those inflationary times, until the market "came back" in the late '70's or early 80's (the recovery time would obviously depend on the exact mix of the portfolio)?



Yes. If you had $1 million in 1972 and could live on the "100% safe" withdrawal rate for your pay out period (say 3.54% for 40 years), you could still retire in 1974 after your portfolio had dropped considerably. Actually, you'd be slightly better off than a neighbor who did retire in 1972 -- your portfolio would be larger by the amount of 2 annual withdrawals.

intercst

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Author: Daryll40 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5603 of 741335
Subject: Re: My graditute to this board Date: 3/6/2000 10:37 AM
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Tanks for the reply. Not to be a pest and to belabor the point (I just wanna be sure I understand this)...but if the "retire in 1974 scenario" is true, then how about THIS:

No matter WHAT one's portfolio is worth on the day they retire, the "safe" withdrawal amount is to be calculated on what the same portfolio had been worth at it's peak, even if it was years prior.

I wonder if this would have worked retiring in 1933, using the pre-'29-crash numbers?

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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: 5641 of 741335
Subject: Re: My graditute to this board Date: 3/6/2000 6:50 PM
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Daryll40 asks,

Tanks for the reply. Not to be a pest and to belabor the point (I just wanna be sure I understand this)...but if the "retire in 1974 scenario" is true, then how about THIS:

No matter WHAT one's portfolio is worth on the day they retire, the "safe" withdrawal amount is to be calculated on what the same portfolio had been worth at it's peak, even if it was years prior.

I wonder if this would have worked retiring in 1933, using the pre-'29-crash numbers?


The model was based on the Dec 31st portfolio value. You should base your withdrawal calculation on that date rather than the intra-year peak value.

If your portfolio peak value was Dec 31st 1998 and your retired on Jan 1st 2001. You would add 2 years worth of inflation to the safe withdrawal amount.

Using this interpretation, the worker that retired in 1933 who used his 1929 peak value would add for years of inflation. (except in that case, there was actually DEFLATION from 1929 to 1933, so his safe withdrawal rate would be reduced somewhat.

intercst



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Author: Daryll40 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5642 of 741335
Subject: Re: My graditute to this board Date: 3/6/2000 6:58 PM
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"If your portfolio peak value was Dec 31st 1998 and your retired on Jan 1st 2001. You would add 2 years worth of inflation to the safe withdrawal amount.

Using this interpretation, the worker that retired in 1933 who used his 1929 peak value would add for years of inflation. (except in that case, there was actually DEFLATION from 1929 to 1933, so his safe withdrawal rate would be reduced somewhat."



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Author: Daryll40 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5643 of 741335
Subject: Re: My graditute to this board Date: 3/6/2000 6:59 PM
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"If your portfolio peak value was Dec 31st 1998 and your retired on Jan 1st 2001. You would add 2 years worth of inflation to the safe withdrawal amount.

Using this interpretation, the worker that retired in 1933 who used his 1929 peak value would add for years of inflation. (except in that case, there was actually DEFLATION from 1929 to 1933, so his safe withdrawal rate would be reduced somewhat."

Wow! That is fascinating. It allows one (if you believe in the model) to "lock in" a retirement amount even if the markets go to hell in a handbasket. My guess, in the real world, however, is that one would spend much less in a depression enviornment anyway. No need to "keep up with the Joneses" even though we don't do that anyway on this board.



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