Christmas Projects

Research on Safe Withdrawal Rates

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JWR1945
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Christmas Projects

Post by JWR1945 »

It is always a good idea to have a couple of projects in the background during the Holiday Season. There will always be lulls between major events and such projects can come in handy.

The first set of projects is to upgrade the Retire Early Safe Withdrawal (Rate) Calculator. The data analysis modifications are especially helpful. See these threads for details.

Modifications to Improve Data Summaries dated Monday, Dec 15, 2003 at 5:56 pm CST. http://nofeeboards.com/boards/viewtopic.php?t=1841

More Data Summary Modifications dated Saturday, Dec 20, 2003 at 9:14 pm CST.
http://nofeeboards.com/boards/viewtopic.php?t=1885

Another set of projects is to upgrade the Retire Early Safe Withdrawal (Rate) Calculator to include the originally intended dual threshold switching capability and also to include TIPS and ibonds with switching as well as commercial paper.

See this post for details: http://nofeeboards.com/boards/viewtopic ... 176#p14176

It is on the Request for assistance (with Excel) thread started on Saturday, Sep 06, 2003 at 11:15 am Central Time. http://nofeeboards.com/boards/viewtopic.php?t=1358

There is a wealth of worthwhile investigations to be made with switching. This is new ground, lightly covered up until now. Everything along these lines is useful and important.

Mike has reported the single, most important finding: that there is no historically based justification for owning any stocks when P/E10 is above 20. But there is much more to discover. We need to look at sensitivities. We need to avoid being critically dependent upon specifics from the past. We need to be sure that our decisions will be close to being right, looking into the future, and that they will not be horribly wrong if we have made a mistake.

I am leaving everything about switching on the table for the next few months. You will not be competing against me.

I have been investigating a new approach. It may turn out spectacularly well. Or, just as likely, it could end up being a complete dud. It requires a tremendous amount of tedious detail. You have benefited from my efforts already. I have written several posts showing how to make number crunching (or data analysis) less difficult.

My new approach is not necessarily any more important than the switching investigations that you can do right now, using the tools that you have available. If I had to choose just one, I would choose to investigate switching. We know for a fact that it works. We know for a fact that such investigations will be useful. Fortunately, I do not have to choose. I can put off my own investigations into switching for now. I do not have to abandon them forever.

In the meantime, y'all have a great opportunity.

Merry Christmas. Have fun.

John R.
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BenSolar
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Post by BenSolar »

JWR1945 wrote:It is always a good idea to have a couple of projects in the background during the Holiday Season.
...
The first set of projects is to upgrade the Retire Early Safe Withdrawal (Rate) Calculator. The data analysis modifications are especially helpful. See these threads for details.
...
Another set of projects is to upgrade the Retire Early Safe Withdrawal (Rate) Calculator to include the originally intended dual threshold switching capability and also to include TIPS and ibonds with switching as well as commercial paper.
...
There is a wealth of worthwhile investigations to be made with switching. This is new ground, lightly covered up until now. Everything along these lines is useful and important.
A call to action, eh? :)

I agree it looks like there is fertile ground to be covered here. I don't think I'll be able to fit it into my schedule of projects this christmas, though Sad ... must get rental ready to rent ...
"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things only hoped for." - Epicurus
JWR1945
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Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

Quoting myself:
I have been investigating a new approach. It may turn out spectacularly well. Or, just as likely, it could end up being a complete dud. It requires a tremendous amount of tedious detail. You have benefited from my efforts already. I have written several posts showing how to make number crunching (or data analysis) less difficult.
The new approach has spun off a new approach for calculating Safe Withdrawal Rates, which will be very useful. And, as indicated, it has also spun off a series of useful calculator upgrades.

I will be reporting on the new Safe Withdrawal Rate methodology in the near future. It produces an estimate complete with confidence limits. To catch your attention, consider these early findings. The new methodology shows that the 30-year Safe Withdrawal Rate for 1966 was 3.73% with 50% stocks and 3.24% with 80% stocks. The Historical Database Rates for 1966 were 4.1% and 3.9%, respectively. Both Historical Database Rates fall within the 90% confidence limits of the Safe Withdrawal Rates. The reason that they were higher than the SWRs was because history produced a LUCKY sequence, not because they were safe.

I have made a preliminary sensitivity study based on JanSz's approach (withdraw 2% of the current balance plus half of the increase in the portfolio balance as compared to 6 years earlier). It turns out that JanSz came up with a good algorithm. It is definitely worth considering.

Of course, this latest sensitivity study would not have been possible without the new calculator upgrades. Those upgrades were necessary spin-offs of my new approach. It may well be that the approach itself will be nothing to brag about. The spin-offs needed to find out may be the most valuable result of my investigations.

Have fun.

John R.
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