No. of Recommendations: 35
Hocus why don't you post your retirement ideas again for those who weren't around when you did the first time and for those of us with just a vague memory of what it was you were trying to discuss, that is now clouded with months of discussing whether or not you were allowed to discuss it.

Also keep it short so everyone will be able to read it.

Here's an example of a short description on Intercst's plan:

Based on historical data, the highest safe withdrawl rate for a 30 year period is about 4%. This is achieved with an 80/20 stock/bond allocation, rebalanced annually.

Hint: If you have a scroll bar on the window where you type your message, your message is probably to long.
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No. of Recommendations: 6
I was always taught that if you can't explain your idea in one or two sentences, you don't have one.

nmckay
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No. of Recommendations: 33
Why don't you post your retirement ideas again for those who weren't around when you did the first time and for those of us with just a vague memory of what it was you were trying to discuss

Some portion of your investment portfolio needs to be absolutely safe, but not all of it. For example,I don't want to take any chances with the money used to finance the grocery or heating bills. But I am not so worried about the portion of my portfolio that supports my annual beach vacation.

So I believe it is a good thing to know the safe withdrawal rate for various asset classes. I don't always go with the asset class that provides 100 percent safety, because those tend to be asset classes with low long-term growth potential. But I need to know the safe withdrawal rate for the various classes to make effective comparisons between them.

Stocks, because of their volatility, have a low safe withdrawal rate. There is no one number- it varies from time to time and from circumstance to circumstance. But the number today appears to be something around 2 percent. That doesn't mean I don't like stocks. I love stocks. I just can't afford to put 80 percent of my money in an investment class with a 2 percent safe withdrawal rate.

My goal is to determine the mix of assets that provides a reasonable overall withdrawal rate (in my case 4 percent) combined with the highest possible potential for long-term growth. For most investors, my expectation is that would be something near a 50 percent stock allocation.
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No. of Recommendations: 4
I love stocks. I just can't afford to put 80 percent of my money in an investment class with a 2 percent safe withdrawal rate.

My goal is to determine the mix of assets that provides a reasonable overall withdrawal rate (in my case 4 percent) combined with the highest possible potential for long-term growth. For most investors, my expectation is that would be something near a 50 percent stock allocation.


If 50% of your assets can support a 2% safe withdrawal rate, then the other 50% must be able to support a 6% safe withdrawal rate if overall withdrawal is to be 4%. Which asset class(es) are you counting on to yield the 6% component?

sydsydsyd
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No. of Recommendations: 0
have you thought of stocks with good dividend yields? Mo is yielding close to 7%.

2828
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No. of Recommendations: 7
I was always taught that if you can't explain your idea in one or two sentences, you don't have one.

Intercst didn't consider several factors critical to the determination of a safe withdrawal rate in his study.Thus, it would be a terrible mistake for anyone to put together a retirement plan based soley on what is in the study, and people on this board should be looking at the factors intercst ignored.

Two sentences, nmckay.

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<<I was always taught that if you can't explain your idea in one or two sentences, you don't have one.>>

Intercst didn't consider several factors critical to the determination of a safe withdrawal rate in his study.Thus, it would be a terrible mistake for anyone to put together a retirement plan based soley on what is in the study, and people on this board should be looking at the factors intercst ignored.


One of the factors you mentioned is valuation. The latest "study" now includes valuation as a factor during calculation.

What else is missing ?
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No. of Recommendations: 3
Hocus Rants >>>>>
There is no one number- it varies from time to time and from circumstance to circumstance. But the number today appears to be something around 2 percent.
>>>>>

Two words:

Seek Help

-reb
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No. of Recommendations: 10
If 50% of your assets can support a 2% safe withdrawal rate, then the other 50% must be able to support a 6% safe withdrawal rate if overall withdrawal is to be 4%. Which asset class(es) are you counting on to yield the 6% component?

This is a good question, sydsydsyd but it is not a simple one. There are dozens of possible strategies for coming up with the right final asset mix.

Personally, I do not have a 50 percent stock allocation, partly because of the issue you are raising here. The more I put into stocks at today's prices, the longer I would have had to hold off on my retirement. I was in a hurry, so I went with a lower stock allocation. But I pay a price for that. The price is that, with my current asset mix, I will have lower long-term growth potential. I presume that most would continue working longer, acquire more assets, and be able to go with higher stock allocations.

There are lots of moving pieces to this puzzle, syfsydsyd. As you move the stock allocation down to 50 percent, the SWR for stocks moves up; as you move it higher than that, the SWR moves down; as you get into times of higher stock valuations, the SWR comes down; as you moce to times of lower stock valuations, it moves up.

I can't possibily go into all of the possibilities in a single short post. Frankly, it would take a book-length treatise. The board as a whole should be working on gaining the insights needed to assemble that book-length treatise at this very moment. I have comments to offer to get things started, but there are lots of people here who can offer insights that I cannot.

If you demand to hear it all from one person, you will get an inferior product. I focused on the asset classes that made sense for me at the time I put together a plan. I have not yet written a book length treatise on the subject.

But the board seems to have lots of free time for off-topic threads. It's a bit of a mystery to me why the board as an entity could not put some of its energies into answering all sorts of interesting questions along the lines of the one you pose.

Step One is to reach a consensus that ridicule campaigns are out, and learning togeher is in. Get over that hurdle,and it all works. Fail to get over that hurdle, and you just go around and around in circles. Anyone who doesn't believe me should take a look at the debate transcript of the past six months.

Ridicule does not work as an effective learning strategy.
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No. of Recommendations: 52
I suppose I'm a lurker on this board in all respects, but I'm certainly interested in getting FIRE'd. With that said, I'm disappointed in the recent 'war' going on here and ITF. I have no horse in this race but the personal attacks are sickening.

Calling Hocus a 'psyched out freak who forgot to take his meds' or any other name (subtle or not) is not constructive to this board and does nothing to further the poster's image as well. Seeing two days (and counting) of this garbage is sad. I wasn't here for the 'Great Debate' and perhaps I should review it, but, even so, that still doesn't necessitate the personal attacks against him. Sure, his posts are long, but I choose to read them. Unfortunately, only a few have anything constructive for me as most are devoted to responding to unnecessary personal attacks.

If hocus has a point to add or debate, I say let him. That is the nature of the boards. However, to inundate him with personal attacks for speaking his mind will not further the debate and only prolong the agony. I really don't want to watch a game of he said/she said. I can go to kindergarten to see that.

Mark
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No. of Recommendations: 0
I love stocks. I just can't afford to put 80 percent of my money in an investment class with a 2 percent safe withdrawal rate.

My goal is to determine the mix of assets that provides a reasonable overall withdrawal rate (in my case 4 percent) combined with the highest possible potential for long-term growth. For most investors, my expectation is that would be something near a 50 percent stock allocation.

If 50% of your assets can support a 2% safe withdrawal rate, then the other 50% must be able to support a 6% safe withdrawal rate if overall withdrawal is to be 4%. Which asset class(es) are you counting on to yield the 6% component?


It doesn't work quite that way.

It's more a matter of offsetting weaknesses. Stocks have a nice average return, but the volatility pulls down the safe withdrawal rate. Bonds don't have much of a problem with volatility, but their return is so poor that the safe withdrawal rate is even lower than for stocks.

The COMBINATION, though, has a much higher return than bonds and a lower volatility than stocks, and therefore will support a higher safe withdrawal rate than either one alone.
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The latest "study" now includes valuation as a factor during calculation.

Are you saying that intercst has now acknowledged that the safe withdrawal rate for his preferred allocation is 2 percent? I hadn't seen that. If this is so, it is breakthrough.
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>>>>>
Calling Hocus a 'psyched out freak who forgot to take his meds' or any other name (subtle or not) is not constructive to this board and does nothing to further the poster's image as well.
>>>>>

I actually rec'd Galeno's post. I thought he was being complementary. What's your beef again? lol

-reb
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No. of Recommendations: 4
to inundate him with personal attacks for speaking his mind will not further the debate and only prolong the agony. I really don't want to watch a game of he said/she said.

Thank you so much for saying that, crazylegs883. Yours is a voice of common sense, and we need a big dose of that oh so bad at this place.
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No. of Recommendations: 3
It doesn't work quite that way.

How about if you tell the board how it "works" for you, warrl, and I tell the board how it "works" for me, and then each board reader decides for himself or herself how it works for himself or herself?

It's a wacky idea, but it just might work!
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Sorry, you can only recommend a post to the Best of once.


I'm disappointed in the recent 'war' going on here and ITF. I have no horse in this race but the personal attacks are sickening. ...
Sure, his posts are long, but I choose to read them. Unfortunately, only a few have anything constructive for me as most are devoted to responding to unnecessary personal attacks. ...
to inundate him with personal attacks for speaking his mind will not further the debate and only prolong the agony.


HEAR HEAR!!

Ben
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Two words:

Seek Help

-reb



six words: people who live in glass houses......

nas90skog
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nas90skog quips uninvited from a *very* safe distance by taunting:
>>>>>
six words: people who live in glass houses......
>>>>>

Oh very creative! Are you sticking your tongue out too? lol

-reb
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No. of Recommendations: 9
nas90skog quips uninvited from a *very* safe distance by taunting:
>>>>>
six words: people who live in glass houses......
>>>>>

Oh very creative! Are you sticking your tongue out too? lol

-reb



It is regrettable that I need to bring this to your attention again, but my "uninvited quip from a safe distance" came only after running across too many of your "uninvited lame**s attempts at frat boy humor and snide comments delivered from a safe distance." It was nothing more than an attempt to save you from becoming the poster boy for the old adage...."The longer ignorance goes unchecked, the stronger it becomes." It appears that I am too late.

nas90skog
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No. of Recommendations: 6
crazylegs wrote:
I wasn't here for the 'Great Debate' and perhaps I should review it, but, even so, that still doesn't necessitate the personal attacks against him. Sure, his posts are long, but I choose to read them. Unfortunately, only a few have anything constructive for me as most are devoted to responding to unnecessary personal attacks.

The only Great Debate that occured was in "The Great Debator's" own twisted mind. The only debate I had (and have today) is whether the poor soul id extremely neurotic or borderline psychotic.

There is no debate on this: he definately needs to be under psychiatric care.
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Are you saying that intercst has now acknowledged that the safe withdrawal rate for his preferred allocation is 2 percent? I hadn't seen that. If this is so, it is breakthrough.

No. We are saying that intercst is Napoleon. You must be the Virgin Mary. That is the consensus conclusion.
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<<The latest "study" now includes valuation as a factor during calculation.>>

Are you saying that intercst has now acknowledged that the safe withdrawal rate for his preferred allocation is 2 percent? I hadn't seen that. If this is so, it is breakthrough.


I am absolutely amazed that you haven't yet looked at the updated study !

Take a look at an earlier reply from me and you will see a link to the study and links to various threads discussing the results of the updated study. I can't believe you missed it, especially after being the one to provide the impetus to add valuation data to the study.

Sometimes I think you secretly prefer to discuss board dynamics rather than RE related issues :-)
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No. of Recommendations: 18
again we go with hocus

hocus: Some portion of your investment portfolio needs to be absolutely safe, but not all of it.

NOthing is absolutely safe for a 30 year withdrawal period. CDs/MMF can kill you in high inflation.

Other than a 5 year ladder, which has been the topic of discussion for over two years, you haven't said anything.

For example,I don't want to take any chances with the money used to finance the grocery or heating bills. But I am not so worried about the portion of my portfolio that supports my annual beach vacation.

You can't win. NOthing is 100% safe for 20 or 30 years.

And we know from historical data that the most risky strategy is putting all your eggs into a 'safe' investment like CDs (2% withdrawal ratre) or all stocks (under 2.5% SWR).

Which means a mixture.....



So I believe it is a good thing to know the safe withdrawal rate for various asset classes. I don't always go with the asset class that provides 100 percent safety, because those tend to be asset classes with low long-term growth potential. But I need to know the safe withdrawal rate for the various classes to make effective comparisons between them.

Again, you fail to understaid (and berstein makes it perfectly clear) there is no 100% asset class. Major problem with you and your posts.

And the data is all in Berstein and elsewhere to determine the SWR for each and every asset class, with the PROBABILITIES and CROSS CORRELATION factors.

Of course , you admit you have no understanding of probability or cross correlation, so all of Bernstein's work and the Trinity study mean nothing to you.


hocus Stocks, because of their volatility, have a low safe withdrawal rate.

NO lower than all bonds over 30 years! See your Bernstein! Wrong again.

hocus There is no one number- it varies from time to time and from circumstance to circumstance. But the number today appears to be something around 2 percent.

THen why are you taking 4% out of your portfolio??

Again, why should we believe a thing you say?


That doesn't mean I don't like stocks. I love stocks. I just can't afford to put 80 percent of my money in an investment class with a 2 percent safe withdrawal rate.

Again, you totally fail to see cross correlation and risk reduction by diversification in asset classes.

Clearly a case of major inability to understand the basics in chapter 1 of BErnstein and others.

Without that understanding , you misinterpret a 2% SWR for all stock as that you get with a mixed portfolio

Major blunder. Your credibility drops to below zero at this point.




My goal is to determine the mix of assets that provides a reasonable overall withdrawal rate (in my case 4 percent) combined with the highest possible potential for long-term growth. For most investors, my expectation is that would be something near a 50 percent stock allocation.

Golly Gee....tens of thousands of dollars and tens of thousands of hours went into the Trinity STudy and Bernstein's work, and they produced nice 'efficient frontier' curves.....

ANd 'for most investors' you lump all sorts of people into one category, another major blunder. For 20 year olds, the time frame and mix is much likely different than a 75 year old. Or a retired early person with 50 year SWR period.

Again, you pontificate about 'most' when the 'average 'investor is not going to be served by the 'average case'. The 'average' income on this board has absolutely nothing to do with the specifics of your case and your portfolio. Same for 'average' investor and the portfolio mix he/she should have.

really amazing that you continue to post this stuff when it is so wrong!
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telegraph states:
really amazing that you continue to post this stuff when it is so wrong!

It's not amazing. You obviously have never seen a real manic depressive up close. Our tormentor is a classic text book case.
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hocus asks,

<<<The latest "study" now includes valuation as a factor during calculation.>>>>

Are you saying that intercst has now acknowledged that the safe withdrawal rate for his preferred allocation is 2 percent? I hadn't seen that. If this is so, it is breakthrough.


It's only 2% if you live in hocusland. On every other planet it's still 4%.

The hocus "stock switching" model that is now included in the Excel spreadsheet shows that "switching" reduces the safe withdrawal rate, see link:

http://rehphome.tripod.com/re60.html

intercst
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No. of Recommendations: 8
Hint: If you have a scroll bar on the window where you type your message, your message is probably to long.

And maybe you need a little longer attention span.

One thing I've noticed about investing, it's what you miss that costs you money.

While some of the posts on this board are rather long and technical, I wouldn't want them anywhere else, because they are all about FIRE.

Post on, Hocus.

JB
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No. of Recommendations: 3
While some of the posts on this board are rather long and technical, I wouldn't want them anywhere else, because they are all about FIRE.

Post on, Hocus.


That was a kind thing for you to say, SlowProcess. Thank you.
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No. of Recommendations: 15
One thing I've noticed about investing, it's what you miss that costs you money.

While some of the posts on this board are rather long and technical, I wouldn't want them anywhere else, because they are all about FIRE.


That would be fine if they were about investing or FIRE. They're not. They're about who gets to be "board general", or how he could tell us his secret undiscovered investing method but won't until we have a discussion on whether everybody really "loves" him, or he posted something once that got a lot of recs (though for a fair analogy more people have read a romance novel than have read a finance book but that won't help us FIRE).

Hyperborea
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No. of Recommendations: 4
The hocus "stock switching" model that is now included in the Excel spreadsheet shows that "switching" reduces the safe withdrawal rate, see link:
http://rehphome.tripod.com/re60.html


Your conclusion is not warranted, intercst. Perhaps you missed this post; http://boards.fool.com/Message.asp?mid=18128601 , in which I provided figures on two different series of switches based on a low and high PE. In both I found an improved SWR when the switch was made in a broad range of PEs.

The results are neither dramatic or conclusive, but they do exist and they provide some support for Schiller's findings that Price/long term average Earnings is predictive of long term stock market results.

Ben
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No. of Recommendations: 5
Your conclusion is not warranted, intercst.

Yoo're a champ, BenSolar. Saying things like that will get you tossed out of this place in time, but you go right ahead and say it because you know you owe it to the board as a whole. You've done the right thing here before and now you have done it again.

You may find, however, that that "warranted" business will grow tiresome after you have tried over the course of 600 or 700 posts to get "the other side" to play fair. After 600 or 700 posts of breaking your ass trying to save this board from falling off of a cliff from which it will probably never return, you get to a point where there's nothing left but to call a spade a spade.

You know what I'm getting at here, BenSolar. Intercst didn't "miss" the earlier post, or "forget" the earlier post, or "misunderstand" the earlier post. Both of us could believe in those sort of explanations if this kind of thing had happened once, twice, three times. When it happens as many times as it has happened in the course of this particular debate, it's deliberate deception.

I won't mention it to any of the others. But I didn't want you thinking I was just plain dumb or something.
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No. of Recommendations: 18
BenSolar says:

Your conclusion is not warranted, intercst. Perhaps you missed this post; http://boards.fool.com/Message.asp?mid=18128601 , in which I provided figures on two different series of switches based on a low and high PE. In both I found an improved SWR when the switch was made in a broad range of PEs.


One of the problems I have with these alternate proposals is the lack of mathematical rigor I sometimes see. If you or intercst or hocus want to propose any model, then all of you are going to be questioned on details. If your model holds up under scrutiny, then I'll be the first to give you a rec.

I don't understand the post to which you refer. In that post, you gave the results of your work, and part of one of your tables had these entries in it:

14 4.13 40 year SWR: 4.21! Inversion here showing effects
of the current bear market on 30 year but not 40
year withdrawal periods. Interesting!
15 4.12 40 year SWR: 4.19
16 4.15 40 year SWR: 4.20
17 4.23 40 year SWR: 4.06
18 4.31 40 year SWR: 4.09
19 4.06 40 year SWR: 4.15 The first time our stock
switching strategy falls below the static
allocation for a 30 year withdrawal period.

Some of these scenarios seem to indicate that a 40-year SWR is higher than a 30-year SWR. Surely you don't believe that?

If the portfolio goes bust at 30 years at some withdrawal rate, how could it last 40 years if only you'd withdrawn more? That just doesn't make sense.

Maybe I do not understand what "SWR" means. Maybe if you explained what you mean when you say it, I wouldn't see a contradition. I certainly am making some assumptions about what you mean, so please feel free to explain where I'm missing the proper view. Hey, if I could get a bigger withdrawal rate by switching on PE, that would be great, so in some sense, I hope you are right and intercst is wrong.

I worry that your study doesn't bound the SWR properly. Every partial period less than 30/40 years must be evaluated to see at what rate the portfolio goes bust, including the short periods at the end of the data. The SWR must be bounded by ALL of those values, not just the values for complete 30/40 year periods.

I also begin to be suspicious that your 30 year rates are similarly too high, because I suspect that you may not have evaluated shorter periods starting beyond 1971.

What I don't know is whether it is intercst's spreadsheet that is wrong, or something you are doing that is wrong. I freely admit that I have not looked at the programming behind any of intercst's spreadsheets.

What I do know is that I don't find this kind of lack of rigor in intercst's results. I also pick his results to pieces. I haven't posted anything about that, though, because I haven't found anything that didn't hold up to scrutiny.

If you can clear up my confusion, if you see something I am missing, I would certainly welcome the instruction.

-
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telegraph, hello.

Which of Bernstein's books would best outline the diversification and the "cross correlation and risk reduction by diversification in asset classes" you mentioned?

I would like to understand this important concept for myself.

Thank you, telegraph.

Petey



Again, you totally fail to see cross correlation and risk reduction by diversification in asset classes.

Clearly a case of major inability to understand the basics in chapter 1 of BErnstein and others.

Without that understanding , you misinterpret a 2% SWR for all stock as that you get with a mixed portfolio

Major blunder. Your credibility drops to below zero at this point.
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No. of Recommendations: 2
Jb / Slow Process,

While I disagree with the posts which are aimed at hocus directly rather than what he writes specifically (the posts are aimed at him because of what he writes), I have to disagree with your comments.

hocus does seem to write incredibly long. I find often I surf the boards late at night shortly before retiring to bed (Retiring in life comes later :-). I just don't have the energy sometimes to wade through them. There are few if any other posters I find that I have this response to, and I do actually like hocus and have enjoyed his posts in the past.

So far in this discussion I have read abusive posts at hocus, a hocus investment plan, a couple of responses, but nothing that provides any information that I can digest to tell me whether a diversified portfolio of bonds and stock will increase or decrease a withdrawal rate. I would have to read Bernstein's book(s) to get a better understanding of what is being discussed. However, currently no new knowledge is really filtering through. Hocus's posts are not concise enough to give people the patience to go through the data (which he has not supplied).

Pete


And maybe you need a little longer attention span.

One thing I've noticed about investing, it's what you miss that costs you money.

While some of the posts on this board are rather long and technical, I wouldn't want them anywhere else, because they are all about FIRE.

Post on, Hocus.

JB
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No. of Recommendations: 4
I don't understand the post to which you refer. In that post, you gave the results of your work, and part of one of your tables had these entries in it:
PE       30 year SWR   Notes
14 4.13 40 year SWR: 4.21! Inversion here showing
effects of the current bear market on 30 year but not 40 year
withdrawal periods. Interesting!
...

Some of these scenarios seem to indicate that a 40-year SWR is higher than a 30-year SWR. Surely you don't believe that?

If the portfolio goes bust at 30 years at some withdrawal rate, how could it last 40 years if only you'd withdrawn more? That just doesn't make sense.


I see I should have been more clear with my notes.

Of course the 40 year SWR can't be higher than the 30 year SWR. So what's with my results? They reflect history, not logic.

We have historical results for 30 year periods starting 1963-1972 for which the 40 year results aren't decided yet. The 'inversion' in SWRs that I found reflect the fact that the 30 year SWR is being set by the start date of 1966, while we don't have a 40 year historical SWR for a 1966 start date. Now we can logically say that the 40 year SWR for 1966 will be no greater than the 30 year of 4.13, but I thought the results (that the switching mechanism made the SWR for historically compete 40 year periods that high) were interesting enough to report in their raw form.

I also begin to be suspicious that your 30 year rates are similarly too high, because I suspect that you may not have evaluated shorter periods starting beyond 1971.

What I don't know is whether it is intercst's spreadsheet that is wrong, or something you are doing that is wrong.


While intercst's spreadsheet doesn't specifically flag these 'inversions', you can see them in the 'selected results' as you are narrowing down to the highest SWR. I could see the 'survivability' drop to 99% for the 30 year period while it was 100% for 40 years. I did not see any similar 'inversion' for the 10 or 20 year periods when determining the 30 year SWR. I don't think checking on smaller increments is feasible with the spreadsheet.

FWIW, I think that without the switching this hasn't been an issue. The switching lets one avoid the worst of the 1929 crash, but doesn't help much with the 60's-70's bear / sideways market + high inflation. Without switching the 1929 bear makes sure that you don't see an 'inversion' in the rates. For instance without switching the 40 year historical SWR is set at 3.96% (using the parameters as in the post we're talking about) by the 1910 start date.

Finally, I would like to point out that this discussion is a nice illustration why it isn't foolproof to rely on historical data. 131 years of data seems like a lot, but it's not really a very large sample to be making rules from. Reporting these withdrawal rates to the second decimal place is absurd, really.

As I have emphasized in each of my posts about these results: they are not comprehensive or conclusive. I'm not suggesting that anyone try to implement a similar scheme and take a higher withdrawal. However, I stand by my statement that intercst's conclusion based on 7 data points that switching based on valuation lowers the SWR is not warranted when I've provided 20 data points that show the SWR may in fact be raised a fraction in some scenarios. To draw a firmer conclusion, dozens or even hundreds more series would need to be run to see if the improvement is broad based or narrow.

Regards,
Ben
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As I have emphasized in each of my posts about these results: they are not comprehensive or conclusive. I'm not suggesting that anyone try to implement a similar scheme and take a higher withdrawal. However, I stand by my statement that intercst's conclusion based on 7 data points that switching based on valuation lowers the SWR is not warranted when I've provided 20 data points that show the SWR may in fact be raised a fraction in some scenarios. To draw a firmer conclusion, dozens or even hundreds more series would need to be run to see if the improvement is broad based or narrow.

But given the existing data, would you be willing to concede that the SWR likely cannot be raised appreciably by the various switching methodology ?
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But given the existing data, would you be willing to concede that the SWR likely cannot be raised appreciably by the various switching methodology ?

What is your reason for insisting that this question be addressed now, Mark33?

What is wrong with my proposal that we first take a look at the data, and then determine what conclusions can be drawn from it?

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One of the problems I have with these alternate proposals is the lack of mathematical rigor

Mathemtical rigor is a good thing, tmeri and it certainly is a good idea to point out the lack of rigor in any analysis that lacks it. But what are we going to do, give up our dreams of early retirement because the data needed fo achieve mathematical rigor is not publicly available (See "We've Found the Data!" post for background).

The intercst study is woefully lacking in rigor, but there are many people on this board (including me) who use it in their planning. Is there any reason why those on the board seeking to learn about other approaches with at least equal rigor as the intercst approach should not be able to have the conversations needed to be able to do so?

If you or intercst or hocus want to propose any model, then all of you are going to be questioned on details.

I hope there is no one on this board who argues that it should be done some other way. Are you willing to support me in my claim that the thumbs up or down should be delivered after the model is developed and proposed, not before?

Maybe I do not understand what "SWR" means.

This is a huge problem on this board. Before we can hope to come to understand what the number is, we need to bring people up to speed on the purpose of the exercise. It is a small fraction of the board that possesses a full understanding of this today. I may make this the very first thread on the new board. You have put your finger on an extremely important aspect of this issue.

Hey, if I could get a bigger withdrawal rate by switching on PE, that would be great, so in some sense, I hope you are right and intercst is wrong.

That's precisely the right attitude to take. If these discussions go forward, there is a chance that you will learn something that will allow you to retire earlier than you now can. Thatv would be a big plus. The worst that could possibly happen is that the discussions would yield nothingof value, and you would still have the intercst study to make use of. There's huge potential on the upside, and zero possibility of any downside.

On top of that, allowing the discussion would bring the board back to life.

What I do know is that I don't find this kind of lack of rigor in intercst's results.

In that event, you have not looked closely. Every single individual I know who has looked at the intercst study closely has come to the conclusion that it is full of holes. It's impossible for me to believe that each and every one of these very smart people is getting it wrong. The intercst study has serious limitations. It doens't do what he says it does, it doesn't even come close.

I also pick his results to pieces. I haven't posted anything about that, though, because I haven't found anything that didn't hold up to scrutiny.

Vote for having the debate go forward, tmeri and I guarantee you that there will be a number of smart people (I don't mean me, off course) who will methodically expose the limitations of the intercst study as part of the debate. I've spoken to some who are willing to help out if the board as a whole will voice a desire to put the intercst study to the test.
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Currently no new knowledge is really filtering through. Hocus's posts are not concise enough to give people the patience to go through the data (which he has not supplied).

Petey:

It's not a fair thing to ask for the conclusions of a study before the process of deciding how to gather the data has commenced. I think you are putting the cart before the horse here.
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But given the existing data, would you be willing to concede that the SWR likely cannot be raised appreciably by the various switching methodology?

Geez ameez! Why do I feel like I am a little bug being chased with a collector's pin?

OK, if you want to try to pin me down first you have to give me your definitions for: 'SWR' and 'appreciably'.

On the other hand, if you want my thoughts even if they are not a formal concession I'm happy to share them <grin>.

I think that when the longer term results are in for historical SWRs that have a start in the 1966 time frame, those will set the bar, just as they already do for 30 year withdrawal periods. That time period was characterized by a very long sideways movement in stock price and very high inflation without serious overvaluation of stocks. A switching strategy based on valuation is not much help there. So, I do not expect that a switching strategy based on PE (10 year earnings average) will significantly improve the '100% historically safe withdrawal rate'.

However, I think a PE (10) switching strategy does have the potential to significantly improve a FIRE's actual withdrawals. By being more conservative when the market is valued very high, and being more aggressive when the market is valued low, one can avoid the worst ravage's of a valuation bubble while still capturing lots of growth from stocks. Then one can 'reset' the withdrawal rate as your balance grows to increase your withdrawal amount.

In summary: improve '100% safe historical SWR' significantly - no because of the nature of the 1966 bear. Improve one's results in a valuation based bear such as the one we are going through - definitely.

Ben
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Vote for having the debate go forward

hocus, there are very specific rules for debating, one of which is: state your premise--clearly and concisely.

What is your premise?

If you state it, you may actually find that the debate will begin.

Then you'll just have to ignore intercst. That's what the P-box is for.
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CatherineCoy writes,

<<<Vote for having the debate go forward>>>>

hocus, there are very specific rules for debating, one of which is: state your premise--clearly and concisely.

What is your premise?

If you state it, you may actually find that the debate will begin.

Then you'll just have to ignore intercst. That's what the P-box is for.


Excellent idea!

I've always imagined that if more people (think subliminal) ignored intercst the world world be a much better place. <grin>

intercst
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Hey folks. Please read this. From the very beginning, this, in my mind , has always been the objective. I will concede that the message may have been mangled which has led to regrettable consequences, but this has always been the objective. I fail to see the wrong in it.

A switching strategy based on valuation is not much help there. So, I do not expect that a switching strategy based on PE (10 year earnings average) will significantly improve the '100% historically safe withdrawal rate'.

However, I think a PE (10) switching strategy does have the potential to significantly improve a FIRE's actual withdrawals. By being more conservative when the market is valued very high, and being more aggressive when the market is valued low, one can avoid the worst ravage's of a valuation bubble while still capturing lots of growth from stocks. Then one can 'reset' the withdrawal rate as your balance grows to increase your withdrawal amount.

In summary: improve '100% safe historical SWR' significantly - no because of the nature of the 1966 bear. Improve one's results in a valuation based bear such as the one we are going through - definitely.

Ben
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Then you'll just have to ignore intercst. That's what the P-box is for.

Excellent idea!

I've always imagined that if more people (think subliminal) ignored intercst the world world be a much better place.
<grin>

intercst


Motion seconded. Heck if I'd listened to intercst, I wouldn't have a wonderful wife of 26 years, 4 great kids, and an eccentric purebed non sporting dog. My portfolio would have grown to half the size that it did (and I would have lost half of that in the last 3 years), I'd be driving a "mature" car instead of what I actually drive, I'd be living in a rental instead of a home of a size and location that has very little "bubble risk" and has brought me sizable returns, and it all started about 26 years ago when my first home was an owner occupied duplex. All of this and I have the FI to choose whether to embrace the RE lifestyle or join up with a couple of career buddies to try and turn around a struggling business. Other than that, I do appreciate his links to articles of interest that I would never have time or inclination to wade through.

nas90skog
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What is your premise?

Knowing the true safe withdrawal rate is a valuable tool in an effort to put together an effective plan for early retirement.
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<<But given the existing data, would you be willing to concede that the SWR likely cannot be raised appreciably by the various switching methodology ?>>

What is your reason for insisting that this question be addressed now, Mark33?


It doesn't have to be answered now (or by anyone in particular), the question just naturally followed from Bens earlier comments, namely "when I've provided 20 data points that show the SWR may in fact be raised a fraction in some scenarios."

Now we should all keep in mind that even a small fraction can mean real money for an early retiree to spend on some "extras". If that small fraction were only 1/10%, on a $1,000,000 portfolio, that would be an extra $1000/yr, or enough for an additional [short] vacation.

What is wrong with my proposal that we first take a look at the data, and then determine what conclusions can be drawn from it?

Nothing at all, but I am interested, though, in your initial observations about the data. The updated spreadsheet has been available for a few months now, see -

http://boards.fool.com/Message.asp?mid=17785101

for the link.
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Catherine:Then you'll just have to ignore intercst. That's what the P-box is for.

intercst: Excellent idea!
I've always imagined that if more people (think subliminal) ignored intercst the world world be a much better place. <grin>


Another way this could work is if you would put me in your P-Box.

Then you wouldn't know when I started a thread on an investment topic and would not be able to come the thread to disrupt it.

Then I would have nothing to complain about.

Sound at all promising?
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hocus:What is wrong with my proposal that we first take a look at the data, and then determine what conclusions can be drawn from it?

MArkr33:Nothing at all, but I am interested, though, in your initial observations about the data


No offense, but II'm a little busy trying to field questions on another subject at the moment..
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Your conclusion is not warranted, intercst. Perhaps you missed this post; http://boards.fool.com/Message.asp?mid=18128601 , in which I provided figures on two different series of switches based on a low and high PE. In both I found an improved SWR when the switch was made in a broad range of PEs.

I'm not as convinced. In looking at the data, the improvements seem fairly arbitrary. For example, there's a big drop-off in SWR when you go from PE 13 to 14, improves greatly at PE 17, and then drops from PE 18 to 19. In fact, PE 18 gives the third best SWR, but PE 19 is the worst of the series. If there were a real phenomemon and not just noice in the data, I think we'd probably see a much smoother curve towards some optimal PE, rather than the bumpy set that we see. I'm really not a stat guy, but I suspect the original data just aren't granular enough to resolve this kind of detail. Let me say that I do appreciate the work you've done so far and I hope you have time to continue looking at this issue.

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<<But given the existing data, would you be willing to concede that the SWR likely cannot be raised appreciably by the various switching methodology?>>

Geez ameez! Why do I feel like I am a little bug being chased with a collector's pin?


I don't know, why do you feel that way ?

On the other hand, if you want my thoughts even if they are not a formal concession I'm happy to share them <grin>.

Glad to hear them.

I think that when the longer term results are in for historical SWRs that have a start in the 1966 time frame, those will set the bar, just as they already do for 30 year withdrawal periods. That time period was characterized by a very long sideways movement in stock price and very high inflation without serious overvaluation of stocks. A switching strategy based on valuation is not much help there. So, I do not expect that a switching strategy based on PE (10 year earnings average) will significantly improve the '100% historically safe withdrawal rate'.

However, I think a PE (10) switching strategy does have the potential to significantly improve a FIRE's actual withdrawals. By being more conservative when the market is valued very high, and being more aggressive when the market is valued low, one can avoid the worst ravage's of a valuation bubble while still capturing lots of growth from stocks. Then one can 'reset' the withdrawal rate as your balance grows to increase your withdrawal amount.

In summary: improve '100% safe historical SWR' significantly - no because of the nature of the 1966 bear. Improve one's results in a valuation based bear such as the one we are going through - definitely.


Good point. I absolutely agree that it is possible that using a P/E switching strategy in 1999/2000 or beyond, ones safe withdrawal percentage is likely to be higher.

This is important enough to have its own thread, which I took the libert of starting at -

http://fireboards.fool.com/Message.asp?mid=18193298
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What is your premise?

Knowing the true safe withdrawal rate is a valuable tool in an effort to put together an effective plan for early retirement.


You could've reduced that to:

Knowing the true safe withdrawal rate is a tool [all tools are inherently effective] for an effective plan for early retirement.

But, be that as it may, that's not a premise, that's an opinion. A premise is a statement assumed to be true and used to draw a conclusion.

Intercst's premise is: 4% is a safe withdrawal rate.

And, so far, he believes he's done an effective job of defending his premise. But you have failed to even state your premise, which is why everyone is so exasperated with you.

If you believe otherwise, state it as a premise and then begin to debate it. No one's going to deny you that; indeed, if you can debate your premise persuasively, YOU'LL be the one up for the Nobel Prize, not intercst.

This may be helpful:

http://tinyurl.com/2xrv




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sykesix writes,

<<<BenSolar: Your conclusion is not warranted, intercst. Perhaps you missed this post; http://boards.fool.com/Message.asp?mid=18128601 , in which I provided figures on two different series of switches based on a low and high PE. In both I found an improved SWR when the switch was made in a broad range of PEs.>>>>

I'm not as convinced. In looking at the data, the improvements seem fairly arbitrary. For example, there's a big drop-off in SWR when you go from PE 13 to 14, improves greatly at PE 17, and then drops from PE 18 to 19. In fact, PE 18 gives the third best SWR, but PE 19 is the worst of the series. If there were a real phenomemon and not just noise in the data, I think we'd probably see a much smoother curve towards some optimal PE, rather than the bumpy set that we see. I'm really not a stat guy, but I suspect the original data just aren't granular enough to resolve this kind of detail. Let me say that I do appreciate the work you've done so far and I hope you have time to continue looking at this issue.


Exactly!

intercst

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sykesix wrote: I'm not as convinced. In looking at the data, the improvements seem fairly arbitrary. For example, there's a big drop-off in SWR when you go from PE 13 to 14, improves greatly at PE 17, and then drops from PE 18 to 19. In fact, PE 18 gives the third best SWR, but PE 19 is the worst of the series. If there were a real phenomemon and not just noice in the data, I think we'd probably see a much smoother curve towards some optimal PE, rather than the bumpy set that we see. I'm really not a stat guy, but I suspect the original data just aren't granular enough to resolve this kind of detail.

intercst responded: Exactly!


Hey, I'm not convinced either, but I don't think that it's been proven to not work. I agree that the granularity is an issue in providing better results. Monthly checks might be decent.

Intercst, can you tell me when the spreadsheet performs the switching calculation? I think it is annually on the anniversary of the start. Is that correct?

While the lumpiness you mentioned is there, do you not find it interesting that every data point in the series I posted with a switch at PE(10 year) below 19 was equal to or higher than the 4.12% returned using a static allocation? I think it is enough data to say the question is still open.

Ben
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BenSolar asks,

Intercst, can you tell me when the spreadsheet performs the switching calculation? I think it is annually on the anniversary of the start. Is that correct?

Yes

While the lumpiness you mentioned is there, do you not find it interesting that every data point in the series I posted with a switch at PE(10 year) below 19 was equal to or higher than the 4.12% returned using a static allocation? I think it is enough data to say the question is still open.

Every question is still open if people are willing to spend time on it and do the research. For me, it's a matter of "Is it worth the time?" My preliminary analysis (and the large volume of research showing the futility of "market timing") tells me it isn't. Perhaps someone wants to run with the ball and prove me wrong?

I suspect that if I tried a similiar study doing stock switching on "interest rates" instead of P/Es I'd find a few points where a switch at a certain interest rate level would improve the SWR. You'd have to run some kind of multivariate analysis to determine whether you found something "real" or just a random occurance.

intercst
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Then you wouldn't know when I started a thread on an investment topic and would not be able to come to the thread to disrupt it..

But I haven't seen you start a thread on an investment topic in all the time I've been visiting this board. The majority of your threads have been about how you HAVEN'T been able to start a thread on an investment topic.

Personally, I have never disrupted one of your threads about investment topics. I've always encouraged you to state your case briefly and concisely, as not doing so is driving everyone crazy and alienating you here on the board. Maybe you consider that "disruption."
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Well in that case, how can you question the intercst study when you have no comparible study to compare it to?

Petey


It's not a fair thing to ask for the conclusions of a study before the process of deciding how to gather the data has commenced. I think you are putting the cart before the horse here.
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Catherine: What is your premise?

hocus: Knowing the true safe withdrawal rate is a valuable tool in an effort to put together an effective plan for early retirement.

Catherine: That's not a premise, that's an opinion. A premise is a statement assumed to be true and used to draw a conclusion.

Intercst's premise is: 4% is a safe withdrawal rate.


OK, then, Catherine, make my premise "4 percent is not a safe withdrawal rate."

My goal is to have more on-topic discussions on this discussion board. The rest is up to you guys. You tell me what words I need to say to make that happen, and I will say them.
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Hocus declares,

My goal is to have more on-topic discussions on this discussion board. The rest is up to you guys. You tell me what words I need to say to make that happen, and I will say them.

How bout' just saying goodbye?

Golfwaymore

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LOL declares:
My goal is to have more on-topic discussions on this discussion board. The rest is up to you guys. You tell me what words I need to say to make that happen, and I will say them.

GWM suggests:
How bout' just saying goodbye?

Great suggestion! Goodbye would be the perfect word for LOL.
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My goal is to have more on-topic discussions on this discussion board. The rest is up to you guys. You tell me what words I need to say to make that happen, and I will say them.
-----------------------------
How bout' just saying goodbye?


Err, if he actually took you up on this idea, I fear he might write it at least a thousand times. Brevity isn't one of hocus' strong points.
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make my premise [is] "4 percent is not a safe withdrawal rate."

My goal is to have more on-topic discussions on this discussion board. The rest is up to you guys. You tell me what words I need to say to make that happen, and I will say them.


Alrighty! What do you think IS a safe withdrawal rate, and why?

And the more succinct and cogent your arguments are--with the fewest words possible--the more debate we'll have.
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