Conventional SWR analysis is invalid

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Trinity/ REHP the while works. Is it invalid?

Poll ended at Fri Aug 20, 2004 10:16 am

Yes
1
9%
No
10
91%
 
Total votes: 11

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ataloss
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Conventional SWR analysis is invalid

Post by ataloss »

What do you think (no mebbe/ it depends alternative) This is to see how many will qualify for the hocus board
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Ataloss
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Post by hocus »

I voted yes., but I would like to add a point of clarification.

The proposition being tested in the poll question is whether the conventional SWR analysis is invalid. I think that SWR analysis is a powerful tool for helping aspiring early retirees, and have many times recommended that aspiring early retirees make use of the analyses put forward in such studies. If I were to read this question strictly as it was put forward, I would need to vote "no."

But I presume that what you were trying to test here is what the community thinks of my claim that the conventional SWR methodology is invalid. Presuming that that is indeed what you are trying to get at, I voted "yes."

It is my position that the conventional SWR methodology, a methodology that does not give any consideration to the historical data showing that changes in valuation levels affect what is safe, is invalid for purposes of determining what the historical data says is safe.
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Post by ataloss »

But I presume that what you were trying to test here is what the community thinks of my claim that the conventional SWR methodology is invalid


sorry if it was confusing I thought that the Trinity/REHP methodology was an integral part of the studies
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Post by hocus »

I thought that the Trinity/REHP methodology was an integral part of the studies

It is. That's why studies using the conventional methodology generate results that are not in line with what the historical data says.

The fact that the methodology is invalid does not mean that the entire analyses set forth in the studies is invalid, however. There are a lot of insights that can be generated by examining the analyses. I have often urged aspiring early retirees to take advantage of the insights set forth in the intercst study. To pass up the benefits of the study is foolish.

Still, the methodology is invalid. A study using a valid methodology would reveal what the historical data says re what is safe.
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Post by raddr »

I don't think that it is "invalid" but it is ascribed way too much precision by many, including the powers-that-be at the REHP. 130 years of data sounds like a lot but, if you do basic statistical analyses, you'll realize that it is miniscule compared to what you really need to determine an SWR. Even more problematic is that the data we're interested in is at the extreme lower edge of returns sequences - basically only a couple of data points. I think the study is helpful in very broad terms - i.e. showing that the SWR is somewhere below 5% rather than 10 or 15%.

If you want to nail down the SWR with more precision than "below 5%" then you need to use simulation (I prefer my mean-reverting MC model :wink:) or wait another 1000-2000 years to get enough historical data. :lol:

The Trinity study, or intercst's plagiarized version, are both a good starting point but don't get anywhere near the "real SWR" with any precision.

Am I disqualified from the new board. :?::lol:
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Post by hocus »

I don't think that it is "invalid"

the Trinity study, or intercst's plagiarized version, are both a good starting point but don't get anywhere near the "real SWR" with any precision.

The question is whether they aim to get near the real SWR. If the reason why they do not state the true SWR with precision is because there is not perfect data available, that's not cause for calling a methodology invalid. That's just a fact of life. It's perfectly valid for researchers to provide the best answer they can on a question and then make note that the data is imperfect and therefore the results may be off.

It is something else again to deliberately exclude data that you know for a fact affects the question you are purporting to examine. If someone issued a study saying "there are only 100,000 people driving cars in the United States" and the reason why they came up with that result is that they only considered cars that were painted red, that result is inaccurate not because of a lack of data but because of the use of an invalid methodology.

It is not reasonable to expect to be able to determine the number of cars in the U.S. by considering only data on cars painted red. If you want to count only cars painted red, you should call your study "A Study of the Number of Red Cars in the United States." That methodology is invalid for purposes of determining how many cars there are in the U.S.

So it is with SWRs. You can't determine what is safe without looking at the factors known to affect what is safe. If you want to use the conventional methodology to develob a study called "The Sometimes Safe/Sometimes High Risk Withdrawal Rate," that's fine. The conventional methodology can help you examine that question.

But you cannot reasonably expect to be able to determine what the historical data reveals to be safe unless your methodology takes into consideration all factors known for certain to affect the question of what is safe. The conventional methodology is not capable of answering the question posed in a study of Safe Withdrawal Rates.

Am I disqualified from the new board.

There's no one I would rather see participate than you, raddr.

That said, if the group participating at the new board is engaged in duscussions aiming to make progress on the questions that the new board is being formed to address, and you put forward posts distracting us from that purpose, I may have to shut you down. I hope there will be no hard feelings as a result. There certainly will be none on my end.
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Post by raddr »

There's no one I would rather see participate than you, raddr.

That said, if the group participating at the new board is engaged in duscussions aiming to make progress on the questions that the new board is being formed to address, and you put forward posts distracting us from that purpose, I may have to shut you down. I hope there will be no hard feelings as a result. There certainly will be none on my end.


Frankly, I don't see the need for a new board. I think ES has done a great job of monitoring the content and tenor on NFB boards and I intend to keep the NFB FIRE board at the top of my list. However, I do sincerely wish you the best if you do start a new board and I hope it is successful. I'd like to peek in from time to time. :D
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