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May 13, 2004

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Joined: 26 Nov 2002
Posts: 1697
Location: Crestview, Florida

PostPosted: Thu May 13, 2004 1:17 pm    Post subject: May 13, 2004 Reply with quote

It is two years since hocus first asked a few simple questions that set off what is known as the Great Debate. His request was very simple. It should not have been controversial. He wanted to know Price-Adjusted Safe Withdrawal Rates.

From a technical standpoint, the Great Debate ended on June 24, 2003 when I submitted my post about Safe Withdrawal Rate versus P/E10 Data.

That post has a sticky in recognition that it represents a historical milestone. Subsequent discussions have cleaned up loose ends and advanced the research. But the matter was settled. Hocus's question had been answered. His key assertions had been validated.

There are many factors that affect the safety of withdrawals during retirement. Prices are different from most of the others since you have control of the prices that you are willing to pay for your investments. In retrospect, it seems ridiculously simple and obvious that Price-Adjusted Safe Withdrawal Rates should exist and it should be possible to estimate them using objective, mathematical techniques.

We have cleaned up the method of presenting the concept of Safe Withdrawal Rates. This has included making some precise distinctions between what has happened (i.e., historical database rates and other historical survival rates) and what is likely to happen (i.e., safe withdrawal rates, unsafe withdrawal rates and zero balance rates). We have placed Safe Withdrawal Rates in a proper statistical setting. Previously, the term had been used in a manner that made it meaningless. That is, the reported Safe Withdrawal Rates were certain unless the future is worse than the past but the methodology (virtually) guaranteed that the future will always be worse than the past. We have also found and corrected calculator errors on our way to showing that we can take advantage of the Price-Adjusted Safe Withdrawal Rates.

Looking back, we have made a tremendous amount of progress. Most of it has been here, on the NoFeeBoards. There have been numerous contributors. Admittedly, there are those who continue to deny or trivialize our progress. I see that as being primarily an emotional issue. It is unreasonable to expect a lack of emotions. Life's hopes and dreams are deeply intertwined with retirement finances.

Have fun.

John R.

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