SWR Semantics
Posted: Tue Jan 21, 2003 9:20 am
SWR Semantics
There is a minor semantics argument about the definition of the term Safe Withdrawal Rate on the How do we handle dividends? thread. It has produced some really good comments such as FMO's list of six limitations related to implementing the Retire Early Safe Withdrawal Rate study. However, I wish to move away from arguments based on semantics alone.
At one time and elsewhere, I suggested that hocus move away from his use of the words Safe Withdrawal Rate since the definition was used in arguments against him. Over time, I noticed that the definition was quite fluid. It might suggest reliable projections or it might be restricted to a historically based tautology. Whenever someone pinned one of hocus's detractors to any particular definition, there would be a retreat in some meaningless refuge. I also learned that the words Safe Withdrawal Rate were not unique to the Retire Early Safe Withdrawal Rate study. Other sources, including William Bernstein, used the term in the same way that hocus does. I finally concluded that hocus's usage was best. Distractions and disruptions were no more than that.
With time, the special phrase Historical Safe Withdrawal Rate was coined. I think BenSolar deserves the credit. The purpose of the term was to isolate the specialized definition unique to the Retire Early Safe Withdrawal Rate study. It then shrunk in applicability to the historical record alone with no predictive value whatsoever. Of course, such a calculation is essentially meaningless. It is just that the future is worse than the past argument had become meaningless as well. It was no longer a remote possibility but a demonstrated current condition.
hocus is right in saying that a Safe Withdrawal Rate study has no value except in predicting the future. He is right in stating that the Retire Early Safe Withdrawal Rate study has merit. He is also right in pointing out that its applicability has been distorted greatly. It is more than an academic effort. It is far less than a perfect course of action. We should not hide behind a term such as Historical Safe Withdrawal Rate to avoid addressing its predictive value. But we can use the term to identify the specific, unique study upon which it is based.
I favor the more general usage of the term Safe Withdrawal Rate as used in making predictions. It is important that the use of the term be described accurately. It is best when it is described entirely in objective terms, even when these terms describe subjective factors. To the extent that subjective factors are identified explicitly and handled appropriately, they can be included in the definition.
Have fun.
John R.
There is a minor semantics argument about the definition of the term Safe Withdrawal Rate on the How do we handle dividends? thread. It has produced some really good comments such as FMO's list of six limitations related to implementing the Retire Early Safe Withdrawal Rate study. However, I wish to move away from arguments based on semantics alone.
At one time and elsewhere, I suggested that hocus move away from his use of the words Safe Withdrawal Rate since the definition was used in arguments against him. Over time, I noticed that the definition was quite fluid. It might suggest reliable projections or it might be restricted to a historically based tautology. Whenever someone pinned one of hocus's detractors to any particular definition, there would be a retreat in some meaningless refuge. I also learned that the words Safe Withdrawal Rate were not unique to the Retire Early Safe Withdrawal Rate study. Other sources, including William Bernstein, used the term in the same way that hocus does. I finally concluded that hocus's usage was best. Distractions and disruptions were no more than that.
With time, the special phrase Historical Safe Withdrawal Rate was coined. I think BenSolar deserves the credit. The purpose of the term was to isolate the specialized definition unique to the Retire Early Safe Withdrawal Rate study. It then shrunk in applicability to the historical record alone with no predictive value whatsoever. Of course, such a calculation is essentially meaningless. It is just that the future is worse than the past argument had become meaningless as well. It was no longer a remote possibility but a demonstrated current condition.
hocus is right in saying that a Safe Withdrawal Rate study has no value except in predicting the future. He is right in stating that the Retire Early Safe Withdrawal Rate study has merit. He is also right in pointing out that its applicability has been distorted greatly. It is more than an academic effort. It is far less than a perfect course of action. We should not hide behind a term such as Historical Safe Withdrawal Rate to avoid addressing its predictive value. But we can use the term to identify the specific, unique study upon which it is based.
I favor the more general usage of the term Safe Withdrawal Rate as used in making predictions. It is important that the use of the term be described accurately. It is best when it is described entirely in objective terms, even when these terms describe subjective factors. To the extent that subjective factors are identified explicitly and handled appropriately, they can be included in the definition.
Have fun.
John R.