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In post 7 of his board he was saying 4% was a "rule of thumb"

If he intends the SWR as a "rule of thumb" then his claim that it will take someone going with an allocation other than 74 percent stocks longer to achieve a safe retirement is false. The two statements are completely inconsistent.

There is no possible way that a mere rule of thumb could tell you which allocation would get you to a safe retirement the quickest. You could only figure that out by doing a valid analysis of the data that bears on the question.

There is no possible way that a mere rule of thumb could tell you which allocation would get you to a safe retirement the quickest. You could only figure that out by doing a valid analysis of the data that bears on the question.

The OED2 defines "rule of thumb" thusly: "A method or procedure derived entirely from practice or experience, without any basis in scientific knowledge.

Based on the 1870-2002 period 74% is the optimal stock allocation. This derived entirely from experience. IE it is a rule of thumb

ataloss wrote:Based on the 1870-2002 period 74% is the optimal stock allocation. This derived entirely from experience. IE it is a rule of thumb

You forgot to add 'optimal' only if you use a particular narrow definition. An effectively equivalent (or superior in some ways) definition provides an optimal stock allocation of 50%.

http://rehphome.tripod.com/re60.html

Ben

Based on the 1870-2002 period 74% is the optimal stock allocation. This derived entirely from experience. IE it is a rule of thumb

The semantical issue of whether it is a "rule of thumb" or not doesn't matter. What matters is, does the analysis performed validly reveal the allocation that gets you to the quickest possible early retirement or not?

If it does not, intercst should stop putting forward the false and dangerous claim that it does. He should stop doing this today, before more people are done harm by the claim.

It's not Monopoly money we are talking about here. Having one's retirement go bust is a serious life setback, ataloss.

You forgot to add 'optimal' only if you use a particular narrow definition. An effectively equivalent (or superior in some ways) definition provides an optimal stock allocation of 50%.

True, I guess I am responding to what hocus says intercst's claim is. I think any specific claim of optimal allocation depends on the circumstances and definition. I am personally more comfortable with just looking at the Trinity data which seems to me to show that 50-75% is the optimal range

I am personally more comfortable with just looking at the Trinity data which seems to me to show that 50-75% is the optimal range.

since it ignores investor psychology, a plethora of then existent drags on the methodology, sundry new phenomena and assorted "cyber fictions," I accord traditional SW studies with the barest minimum of credibility.

to each their own...

I guess I would go with the 50-75% range if constrained to use only us equities/one class of fixed income Fortunately there are other allocation choices

Thanks for the encouragement. It got me thinking about how to present the issues without extraneous material.

Bpp said

I think your approach sounds quite interesting. Would you mind posting some details on the mathematics?

Wanderer said

a) how do you define "utility", other than as a place that generates power or tremendous financial losses, and b) did you see a post from dagrims(?) re: spending more earlier than later.

Ben said

I am with bpp. Could you start a new thread with some details on your approach? Please?

Happy to do so. I started a thread called The Utility of Money and Personal Life Expectancy at http://www.nofeeboards.com/boards/viewtopic.php?t=956 I welcome your questions and comments on it. hocus and others emphasize that valuations matter in assessing the life expectancy of a retirement portfolio. I raise two additional points. 1. Personal life expectancy must play some role in retirement planning, too. If I find myself with reduced income in advanced old age, having outlived most of my contemporaries, I will at least have the consolation of knowing that I enjoyed more income earlier. 2. The value of money to someone depends on how much of it that person has already. A $10,000 change in after-tax income is more significant to a $50,000-a-year person than to a $1,000,000-a-year person.

I was tempted in my posts in the new thread to have a dialogue with an invisible friend, a la gummy, but I didn't do it. There are a few little spread-sheets in that thread. I don't know how to make them available to you, but my verbal description and the sample results there should make it possible for you to recreate them. Otherwise, maybe I could email them to you. Do any of you use Solver, the optimization software inside Excel? Would you try it, on my recommendation?

I don't recall the dagrims post. Does anyone have a URL for it?

therealchips

I don't recall the dagrims post. Does anyone have a URL for it?

Dagrims started the original Alternative Withdrawal Strategy thread on this board. We have had so much activity here that it is already on the next page.
http://nofeeboards.com/boards/viewtopic.php?t=863

I have not heard any feedback from Dagrims. I know that we gave him a lot to look at. He may be suffering from information overload.

In any event I thought that Dagrims had an excellent question and that it deserves the attention that we have given it (even though we have spread these discussions over several threads).

Have fun.

John R.