NoFeeBoards.com!

so the average withdrawal would be tiny.

with the $14 million dolllar portfolio I think I would be doing more than playing canasta

Most important for aspiring early retirees is that it reveals that most SWR studies that have been done to the present date are seriously flawed. Most existing studies do not include an adjustment for valuation, and, without such an adjustment, the numbers produced are invalid I found this excellen...

I am saying that the tool should be set up so that it provides objective results. I am saying that to define what an SWR is so loosely that it can produce anything under the sun as a result is not a good idea because the tool becomes just one more way to engage in subjective evaluations of risk. I ...

5/13/02 was apparently a very important day for SWR at REHP-TMF: Prior to The Great Debate, SWR analysis had always been viewed as an objective tool when it was discussed at the Motley Fool board. Prior to May 13, 2002, there were never suggestions put forward that you could define an SWR to be anyt...

Bob pointed out to me that real returns of 7% gave a swr of 4% so using my estimate of future returns of the s&p 500 of 3.5% he gets a swr of 2% 3.5 *4/7 = 2% Bob doesn't have access to MC simulation but he has a slide rule. Bob asked me why we would limit our investments to US equities if we th...

My hypothesis is that the actual safe withdrawal rate will be close to (25/the current SP500 P/E10 value when over 25)*(the historically based numbers around 4%). That is, the earnings (averaged over the last ten years) that support a 4% withdrawal rate correspond to a P/E10 of 25. Could this apply...

Bob and I are entirely satisfied with the current definition.

Bob tells me that he likes the new definition. He is interested in how we will pick a favorite from competing "best estimates of swr" and how the safety factor will be expressed.

My assertion is that William Bernstein's book "The Four Pillars on Investing" reveals that the "Stocks for the Long Run" claim is invalid at the levels of overvaluation that were reached in the late 1990s. Stocks affect returns as a matter of "mathematical certitude," ...

Wanderer:
I don't think owners of monkeys have any illusions about renting.

JWR1945:
Bob was indeed very interested in the sensitivity of the allocation to the month of withdrawal. He pointed out to me that the Trinity study selected a few allocations (Stocks 100%, 75%, 50%, 25%, 0% ) and looked at the success rate for withdrawals of 3-12%. Bob said something that sounded like "excessive curve fitting and retrospective optimization"￾ but we were at a picnic and I couldn't make out all of it. I am getting the feeling that Bob considers the swr to be a "rule of thumb"￾ and I will try to correct this idea.

BPP:
"Valuation" seems to be a rather vague idea with intuitive appeal, but which seems maddeningly hard to pin down.

I agree.

Ben:

Bob seems to think more clearly that I do. Wish he would write his own posts.

Hocus:
X-Y=Z
If X is the value of the market in the future (assuming dividends reinvested )
And Y is the current value; Z will be the difference (which can be annualized)
Bernstein says that if Y is larger Z will be smaller, This is mathematical certitude.

You notice that he doesn't say (as a matter of mathematical certitude) that future returns will be less than the 6-7% long term historical rate, just that they will be lower than they would have been if the market was lower (when the book was written)

It seems highly likely that the retrospective maximal withdrawal rate for 2003-2033 will be higher than for 2000-2030. Still it is by no means certain the retrospective maximal swr for 2000 won't be 3.7%.

FWIW, I agree that "Stocks for the Long Run"￾ or at least the understanding that stocks had low risk contributed to reduction of the equity risk premium.

1. Hi Chips, I am more concerned about the portfolio shrinking and I think I would be very tolerant to it growing (possibly out of control) :wink: 2. JWR1945 I need some help in understanding something. What do you mean by "best estimate." Is this the same as what hocus is saying? ****** W...

JWR1945: It is much simpler than you think and that is why you are confused.......... ... Valuations matter and higher valuations today mean greater risks going forward. Lower valuations today mean lower risks going forward. Ah, I do recall Bernstein saying that current valuation (or past return) af...

I am back.

In an effort to avoid attributing innocent motives to those presumed guilty, my friend Bob will present the case for historically based swr. He has access to the REHP website and a copy of the FAQ from the TMF REHP board but doesn't know the contents of more than a few of the >100,000 messages there.

It seems to Bob (an engineer btw) that the term "100% maximum swr"￾ can only refer to past data. He notes that there are stated exceptions in application of the data to the future (especially asteroids) making the result less than 100% safe for the future. Bob searched the FAQ and REHP for a guarantee that the past data would apply to the future unless a giant asteroid struck the earth but couldn't find it. Bob wanted to call the result of this analysis the hswr but I wouldn't let him since this is an emotionally charged term.

I asked Bob if it wasn't misleading that the rehp study didn't include valuations. Bob seemed confused. Bob finds that an analysis of historical data is only one way of estimating future returns. He said "the historical results "are what they are."￾ I suggested that they may not apply to the future therefore they were wrong. Bob was starting to get annoyed. He told me that this was my problem since I insisted on calling the result of the historical study the SWR and also required this term to apply to the future. Bob wants to call the result of the rehp study the hdhswr © and he insisted that the result was correct. He says that applicability to the future is another issue.

Parenthetically, Bob explained that in designing highway bridges it was best not to use only historical data. That is, based on bridge collapses one could certify a bridge for a certain truck weight as the "maximum 100% safe transit weight" since a bridge of that design has never failed under a truck of that weight. Bob did not feel comfortable doing that since environmental and other conditions may vary in the future. He recommended what engineers call a "fudge factor"￾ (did I mention that he went to school a long time ago.)

I suggested to Bob that the REHP study was sort of a poor first draft type effort at estimating a SWR. Bob replied that it was a perfectly valid analysis of its type. I told Bob that I could do much better than the REHP. He pointed out that an attempt was made to improve the study by altering the stock allocation based on p/e ratios but it wasn't very successful. He suggests that if it is so easy to improve on the REHP I should show him some data improving on the hdhswr ©

I told Bob that it was plain to see that a 75% stock allocation wasn't ideal in 2000. Bob concedes this but is insisting that retrospectively timing the market is easier than doing it prospectively.

I am very unhappy about being misled. I tried to enlist Bob in my plan to protest the errors of the REHP and similar studies which have resulted in an incorrect swr (I have a letter writing campaign to have the Trinity authors retract their study.) Bob says that the limitations of the approach were/are obvious (I think he is implying that I was not careful in blindly applying past results to the future.) Further, Bob suggests that the 4% rule hasn't been disproved until it fails. I want to argue with this but I am not sure what to say. (Bob is very annoying.)

I am unhappy because it is clear that the REHP gives too high a SWR. Bob is an optimist and pointed out to me that things were bleak in 1932 but 3.7% worked out. http://www.retireearlyhomepage.com/worstre.html

The SWR is the answer to bylo's question: "How much of my savings can I withdraw in each year of my retirement without incurring an undue risk of depleting my assets?" maybe we want to be more precise in the definition of "undue" http://www.bylo.org/saferetr.html

Approximately 75-80%: Is there a chance that there is some reason for the "lucky sequence" that isn't captured by your mean reversion technique? Raddr (from that thread) I will say that I am confident that the simulation comes very close to modeling past market behavior but none of us kno...

Hocus I disagree strongly with the second sentence.SWR analysis has nothing to do with making predictions of future events. I see no langauage referring to the need to make predictions of future events in the Dory36 definition provided above. If the calculation of SWRs is some sort of variation of a...

Although simple, wouldn't the example would have failed in some circumstances (in terms of preservation of spending power)

ataloss
not sure we can be independent of history