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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 76418  
Subject: Update on the Trinity Study thru 2009 Date: 12/3/2010 3:05 AM
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Survivability of the 4% rule improved from 95% to 96% with the additional data of "The Lost Decade" (2000-2009). Who would've thunk it?

http://wpfau.blogspot.com/2010/10/trinity-study-retirement-w...

intercst
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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: 67774 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/3/2010 3:50 AM
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I just posted this over at the RYR board but it applies here as well:

Thank you Intercst and Rule Your Retirement. I didn't know about this before I enrolled here over six years ago, and it serves as a cornerstone of my retirement planning. Many, many others have caught on since that time, but for me, you were first.

Intercst, your work to explain and disseminate great retirement information is very much appreciated!

Hockeypop


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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67775 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/3/2010 4:12 PM
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...Survivability of the 4% rule improved from 95% to 96% with the additional data of "The Lost Decade" (2000-2009). Who would've thunk it?..


A really big bond rally during those years as I recall.


GReg

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Author: SirTas Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67776 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/3/2010 4:23 PM
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Survivability of the 4% rule improved from 95% to 96% with the additional data of "The Lost Decade" (2000-2009). Who would've thunk it?

Isn't the impact of "The Lost Decade" something that will be felt most by those who retire right at the beginning of it (and maybe soon after)? As I understand it, poor returns are not as destructive of financial survivability in the later years of retirement as they are in the earlier years.

I think this is reflected in the paper you referenced in your second post.

--SirTas

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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: 67777 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/3/2010 8:06 PM
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Isn't the impact of "The Lost Decade" something that will be felt most by those who retire right at the beginning of it (and maybe soon after)? As I understand it, poor returns are not as destructive of financial survivability in the later years of retirement as they are in the earlier years.

Actually I think the other study mentioned by Intercst will be more interesting. But I do have to "contextualize" it. I suspect that only by retiring in 2009 or perhaps 2008 might add another negative data point.

Hockeypop

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67778 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/4/2010 11:58 AM
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As I understand it, poor returns are not as destructive of financial survivability in the later years of retirement as they are in the earlier years.

This and the non-linear consumption habits we tend to have in retirement are the reasons I personally don't pay very much attention to these academic studies with long term 'averages', interesting though they are.

BruceM

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Author: piranha1 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67779 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/4/2010 4:27 PM
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When you look at these studies, the real killer is not the percentage that you take out, but adjusting for inflation.

I retired 1 year ago and ended up taking out 5.6% my 1st year. I do not plan to ever adjust for inflation. My mortgage accounts for close to 50% of my expense and is therefore not subject to inflation. When it is paid out in 10 years, I plan to reduce my withdrawals, if necessary. I ran Monte Carlo simulations and I should be fine with these 3 rules I set up for myself.

I will take out the same amount from my portfolio each year that I took out my 1st year.
1. If that amount is less than 3.5% of my total portfolio, I will give myself a 10% raise.
2. If the value of my portfolio has decreased from the previous year, I will still take out the same amount as long as it represents between 5.3% and 6% of my total portfolio.
3. If my normal withdrawal represents more than 6% of my total portfolio, I will cut my withdrawal amount by 6% plus put another 2% into a rainy day fund for emergencies.

I've gone a lot more conservative in my investments the last 5 years, but still have easily beat the S&P 500 YTD, 1 yr, 3 yrs, 5 yrs and 10 yrs.

I have a built in raise when my mortgage is paid off and am perfectly willing to eat more hamburger and less steak and decrease my discretionary spending in tough times.

Milt

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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: 67780 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/4/2010 5:17 PM
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I have a built in raise when my mortgage is paid off and am perfectly willing to eat more hamburger and less steak and decrease my discretionary spending in tough times.

I guesss I'm the odd one, because I actually prefer a good hamburger over a good steak, so eating hamburger isn't a bad thing. There are so many things you can cook with hamburger, and I've had most of them. I use 93% fat free, so it's almost as healthy as eating chicken or fish.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67781 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/4/2010 10:36 PM
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When you look at these studies, the real killer is not the percentage that you take out, but adjusting for inflation.

I retired 1 year ago and ended up taking out 5.6% my 1st year. I do not plan to ever adjust for inflation.


Well, 5.6% is too high, so maybe you have already built in a "pre-adjustment" for inflation.

The Guyton-Klinger rules put guardrails around your inflation adjustment. The Capital Preservation Rule kicks in if your adjustment would have you taking out too much. And the Prosperity Rule bumps it up if you are taking too little.

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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67782 of 76418
Subject: Re: Update on the Trinity Study thru 2009 Date: 12/5/2010 12:47 AM
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I took 5 to 6% for my first 8 years of retirement. When I was able to draw social security it decreased to about 2 1/2%. Then the market crashed and even though my withdrawal hadn't changed it was 4%. With the market recovery I'll be under 3% again. Sometimes it's all a numbers game but I still like the 4% rule as a guideline. It sure sobbers up some people who think they'd be on top of the world if they just had a million dollars. Tell them they should only spend $40,000 a year and they come down to earth real quick.

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