tag:blogger.com,1999:blog-2875915890415125655.post7007169681258210456..comments2023-05-18T10:37:34.608+01:00Comments on <a href="http://www.retirementinvestingtoday.com">Retirement Investing Today</a>: Safe Withdrawal Rate (SWR) ThoughtsRetirementInvestingTodayhttp://www.blogger.com/profile/03088383743670046657noreply@blogger.comBlogger29125tag:blogger.com,1999:blog-2875915890415125655.post-76614367852420247602015-04-16T11:17:22.403+01:002015-04-16T11:17:22.403+01:00meant to say I used 4% NOMINAL return, just 2.5% r...meant to say I used 4% NOMINAL return, just 2.5% real return in my modelAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-36367261003115071112015-04-15T21:09:57.013+01:002015-04-15T21:09:57.013+01:00I find the 4% rule pretty conservative, it's b...I find the 4% rule pretty conservative, it's based upon a worst case scenario.<br /><br />I made a simple spreadsheet model myself, for a conservative low growth-deflationary scenario (as this seems to be the most likely future) with 4% real average return for a 50/50 portfolio.<br />Starting with 4% withdrawals, adjusted for inflation, I was surprised to see how much money was left over Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-18286123769438643742015-04-12T23:46:47.517+01:002015-04-12T23:46:47.517+01:00Just a thought ...
If the Internal Rate Of Return...Just a thought ...<br /><br />If the Internal Rate Of Return / Value Gap method is so completely predictable & reliable, then what is the point of a 50/50, 60/40 or any other mix of poorer performing bonds with the equity portion of your portfolio. Now that we have a theory to make the market volatility evaporate (at least in terms of calculating a safe withdrawal rate) then what is to stop Ricnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-78060356971642995712015-04-10T17:45:03.622+01:002015-04-10T17:45:03.622+01:00Pay them the money and they might tell you for USA...Pay them the money and they might tell you for USA. The video is an advertisement. Jim Fnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-70858412802427527502015-04-09T09:31:27.149+01:002015-04-09T09:31:27.149+01:00I watched that whole video, and it is fascinating....I watched that whole video, and it is fascinating. Having said that how do we define where we are right now in relation to the green line?Cowboynoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-20049634741192270862015-04-09T09:28:29.668+01:002015-04-09T09:28:29.668+01:00Hi RIT
Thanks for sharing that video. Very intere...Hi RIT<br /><br />Thanks for sharing that video. Very interesting. Spelled out like that, it intuitively seems a much better method than just picking a % without taking valuation into account.<br />Like you I'm not sure what I'd do with this information but I'm a way off having to worry about that at the moment :-)Chrisnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-14366616076109421472015-04-08T21:03:25.654+01:002015-04-08T21:03:25.654+01:00Hi RIT,
I didn't explain very well. I would ...Hi RIT,<br /><br />I didn't explain very well. I would still work, but not in my current office job. It would be out of interest rather than specifically for the money. Who knows, I quite fancy learning carpentry or being a motorbike mechanic...and if it's not enjoyable I can just move on.<br /><br />I did read some of the Pfau study, and I may have another read. I did read somethingAnonymoushttps://www.blogger.com/profile/18300941962780673623noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-31181149068569252252015-04-06T20:32:33.343+01:002015-04-06T20:32:33.343+01:00Don't do it on my behalf dearieme. I'm pr...Don't do it on my behalf dearieme. I'm pretty happy with my current very simple to understand plan thanks. :-)RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-11004935504555334352015-04-06T20:27:45.465+01:002015-04-06T20:27:45.465+01:00Thanks for sharing Mr Z. I've decided that 4%...Thanks for sharing Mr Z. I've decided that 4% is too rich for me but I'm trying to give myself the option of full early retirement (the option of never having to work again if I don't want to).<br /><br />It sounds like you're in a very different situation to me with work and cut-back options but is that really FI? I think we have to each answer that question for ourselves but RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-73061112077344337422015-04-06T20:25:45.790+01:002015-04-06T20:25:45.790+01:00Oh, all right, let's reinvent tontines then.Oh, all right, let's reinvent tontines then.deariemenoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-70330811118629308152015-04-06T20:12:29.908+01:002015-04-06T20:12:29.908+01:00Fair enough, it would have been an interesting tho...Fair enough, it would have been an interesting thought experiment though. For example:<br />- what 'income' would have been available;<br />- how much the 'fees' associated with this type of thing would have been given the transfer of some risk plus operating costs plus profit expectations;<br />- how much counter party risk would have been brought into the mix;<br />to name but RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-39180103507345449412015-04-06T19:43:02.687+01:002015-04-06T19:43:02.687+01:00Hi RIT,
The SWR is an interesting subject and one...Hi RIT,<br /><br />The SWR is an interesting subject and one that will get more attention following the new updates here in the UK (I hope!).<br /><br />At the moment I have been looking at a 4% rate with the assumption the split would be 75% equity / 25% bonds and cash. I'd want enough in cash and bonds to be able to sustain me through a depressed market (say 5 years).<br /><br />I'm Anonymoushttps://www.blogger.com/profile/18300941962780673623noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-17582620140259504312015-04-06T19:03:13.646+01:002015-04-06T19:03:13.646+01:00Unfortunately, I cannot tell you. At least I would...Unfortunately, I cannot tell you. At least I would need access to Market Data, which I dont have and even if I had had, I would not have been able to reveal in public forum without violation of certain terms. <br />What you are asking is to model a bespoke instrument for you, which you would like to purchase with certain parameters. The specialist would calibrate the model and calculate its riskAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-45353910196957692902015-04-06T15:58:04.814+01:002015-04-06T15:58:04.814+01:00Thanks for sharing your thoughts. I'm conscio...Thanks for sharing your thoughts. I'm conscious that cash will likely earn a negative return after inflation and tax so don't want to hold to much as it will damage return but I'll certainly be holding some for the reason you suggest. Initially this will be a lot as it will be the home purchase but whether it will be more or less than 5 years worth post home purchase will certainly RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-62936474585062864772015-04-06T15:52:09.740+01:002015-04-06T15:52:09.740+01:00Hi K
I suspect you have far more knowledge than me...Hi K<br />I suspect you have far more knowledge than me on swap rates. I'll be 44 by the time I'm financially independent and let's assume I live to 90 so only 46 more years on this great planet. Let's also assume that inflation averages 3% over that period. What's my 'income' in real % terms per annum?<br /><br />I'm guessing well less than 2.5%.<br />Cheers<brRetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-66621658328724647332015-04-06T15:44:57.153+01:002015-04-06T15:44:57.153+01:00Hi John, I suspect you may well be right. I'm...Hi John, I suspect you may well be right. I'm also very interested in how this experiment is going to pan out. Cheers, RIT.RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-69193822710291453242015-04-06T15:21:59.143+01:002015-04-06T15:21:59.143+01:00Someone from large financial organization can tell...Someone from large financial organization can tell you as they would now terms of various inter-institutional contracts. Or you can pull some info from brokers. <br />If we fix your life expectancy to 100, then one can use long term swap rates ( no sure how liquid 56 year swaps are) to derive it.<br />Here are SONIA OIS swap rates for up to 5 years.<br /><br />http://www.bankofengland.co.uk/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-38797285771512107552015-04-06T15:09:48.361+01:002015-04-06T15:09:48.361+01:00It seems to me the video is mostly about how to su...It seems to me the video is mostly about how to survive a bear market.<br />What I would do is this: start with the 4% rule, but try to avoid having to sell shares with a loss during a bear market by having a bucket of cash that makes up for the difference between interest and dividends you receive and shares you would need to sell to get to your remaining yearly income need for a period of let&#Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-49347249825654540132015-04-06T10:33:10.060+01:002015-04-06T10:33:10.060+01:00As you say, start off with the 2.5% and see how it...As you say, start off with the 2.5% and see how it goes. Even when you have moved on from working flat out for the Man, I suspect you may well move into more pleasurable ways to pass the days, some of which may generate income so it won't be as if there is no other income streams - even if it may be useful to think like that at present.<br /><br />Be interested to see how it all pans out.Getting to Net Zerohttps://www.blogger.com/profile/05649975918886866788noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-9238393816408795852015-04-06T09:04:58.042+01:002015-04-06T09:04:58.042+01:00I wonder what the rate would be for a 44 year old,...I wonder what the rate would be for a 44 year old, joint life, inflation protected, good health annuity...RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-38887928150854665592015-04-06T09:01:47.393+01:002015-04-06T09:01:47.393+01:00Full details on the 4% Rule are detailed in the 2n...Full details on the 4% Rule are detailed in the 2nd hyperlink of the post. Yes it was US based. The study included 5 different allocations ranging from 100% equity to 100% bonds but the rule of thumb was as you say based on 50:50.<br /><br />Wade Pfau has run a study based on many countries including the UK. You can access it via the 3rd hyperlink. For 50% UK Equities and 50% UK Bonds he RetirementInvestingTodayhttps://www.blogger.com/profile/03088383743670046657noreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-54808467431557212202015-04-06T03:09:21.514+01:002015-04-06T03:09:21.514+01:00Ok, here is how it is actually done.
- selecting ...Ok, here is how it is actually done.<br /><br />- selecting models for equity index<br />- selecting models for interest rates<br />- selecting model for one's survival (age at the event of death)<br />- selecting model for default probability of your bonds <br /><br />Then using various option prices to find parameters of the model, CDS prices for survival probabilities, some statistics for Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-72293462565132898322015-04-06T02:43:33.528+01:002015-04-06T02:43:33.528+01:00You underestimate how developed financial instrume...You underestimate how developed financial instruments are.<br />This is a simple instrument ( well, almost) which exists now.<br />It could be structured as puttable bond, with put option exercised by the estate when the holder of the bond dies.<br />I don't know if annuity with this feature is really offered, but nothing prevents such an offer if there is a demand, and if approached, Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-33387882208036507362015-04-06T00:42:27.185+01:002015-04-06T00:42:27.185+01:00It's a pity nobody has ever invented a financi...It's a pity nobody has ever invented a financial device by which you exchange a lump of capital for a lifetime income.deariemenoreply@blogger.comtag:blogger.com,1999:blog-2875915890415125655.post-549149499442197822015-04-05T21:31:13.134+01:002015-04-05T21:31:13.134+01:00As I understand it, the 4% SWR was based on a US m...As I understand it, the 4% SWR was based on a US model of 50:50 equities/bonds. I know that over different periods, returns on these assets have varied across different global regions.<br /><br />It would be interesting to apply the outcome using e.g. UK model.<br /><br />It seems to me a lot depends upon the weight of equities selected at the time the income is required which in turn, I suppose,Getting to Net Zerohttps://www.blogger.com/profile/05649975918886866788noreply@blogger.com