No. of Recommendations: 4
A nest egg of $1,500,000, and an annual withdrawal of $28,800 is only a 1.92%/yr withdrawal rate.

Last summer I met with a CPA (the boss of my tax preparer). He had similar stories of clients who had $1,000,000 in early 2000 but now have $500,000, or worst case was turning that $1,000,000 into $100,000 after making a $100,000 withdrawal. Yes, 100% equities and, worse, 100% in high tech, and then selling low.

Unfortunately, I didn't notice specifically what Phil Horstman did wrong, but he would be typical of what the CPA told me last summer.

Concepts like asset allocation, diversification among different asset types (mine: domestic stocks, international stocks, bonds, real estate investment trusts) and rebalancing were foreign to those clients the CPA talked about (the CPA didn't name names, of course), and the concepts seemed foreign to the CPA. Those concepts are probably foreign to the majority of individual investors, as the Dalbar study of funds flow seem to support.

So when I handed my paperwork to my tax preparer last Friday, she told me that my Schedule D is pretty simple. "[The CPA] is really worried and is pulling out his hair about some of his clients--they have pages and pages of trades." "You mean like turning $1,000,000 into $500,000?" "Worse--one had quit his job to day trade, turned $1,500,000 into $50,000, and since he had quit, he doesn't have any other income coming in." "I bet that I, practicing asset allocation and diversification, with relatively little sell activity, and usually having minimal losses, fly under [the CPA's] radar." "Yes."

(Reminds me of Sigmund Freud trying to figure out what a healthy person is by studying the mentally ill.)
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.