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Re: Retirement planning for those already retired

Wow!

LG please remove me from this forum permanently so that I am never tempted to post here again. Thanks.
by BruceA
Thu May 09, 2013 9:26 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

[Response to snarky comment removed by admin LadyGeek] Oh, I understand spreadsheets quite well....And again it seems you have come up with nothing new. I have a lot of spreadsheets myself, but they are no replacement for Historical Market returns pitted against your withdrawal plans. [Additional r...
by BruceA
Thu May 09, 2013 7:26 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

Please simply compare my methodology with Firecalc, summarizing how each works and the outputs of each, and commenting upon their relative usefulness. If you do understand my model such a reply should take you less time than it did to assemble your last post, and then I and others would be able to ...
by BruceA
Thu May 09, 2013 3:04 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

Your post (quote) is contradictory and, no offense, but your OP seems to me to claim that you have developed something truly phenomenal - and "certain" to work for other retirees. Thanks Landy, your post illustrates the continual confusion over what my model does and does not do. I suppos...
by BruceA
Thu May 09, 2013 1:05 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

The question I actually asked was: Would anyone be willing to comment upon the matter of the relative usefulness of the outputs from my model and the various other models currently being used? So far, no takers. Actually this question has been Beat to Death in Many other threads that you started. L...
by BruceA
Thu May 09, 2013 10:36 am
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

To address Bruce's question on financial models, I see zero utility for myself for any such tool at this point in time. Something like that MIGHT have been useful 20 yrs ago to predict the future, but way too much market uncertainty to make even that of much use... Interesting comment Wizard becaus...
by BruceA
Wed May 08, 2013 5:15 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

I was hoping that this thread might develop a discussion of some of the general concepts of my model. The issue that I was most interested in discussing involves the outputs generated by my model as compared to the other alternative models that many use. In my last post above I described that issue ...
by BruceA
Wed May 08, 2013 9:25 am
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

KarlJ I am very familiar with Fidelity's RIP and MCS. The RIP is very good and very sophisticated; possibly the best off the shelf planning tool available. My approach is not nearly as sophisticated, but I can say that my model gives me personally much more realistic and meaningful results than does...
by BruceA
Tue May 07, 2013 2:42 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

Overthehill Clearly, as you indicate, there is no such thing as an optimal worst case scenario. When dealing with a worst case scenario, I think it best to test a range. Japan's actual drop in equity value was a "permanent" 80%. We did have a larger than 50% drop in 2008, but that was not ...
by BruceA
Tue May 07, 2013 12:24 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

3. Compute various worst case scenarios so that I can determine what I need to do to plan for them.. My worst case scenario is based on being reasonably certain that we would have enough to take us to the grave even if our total portfolio dropped by 50% and stayed there more or less for the duratio...
by BruceA
Tue May 07, 2013 9:38 am
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement planning for those already retired

When I retired I focused on what I needed for retirement planning and that is described above. A couple of replies focused on the "budget", but as I said, I simply compute what I need for estimating annual expenditures, and not a detailed budget. I update it each month and that only takes ...
by BruceA
Mon May 06, 2013 2:54 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Retirement planning for those already retired

I am retired and I use a retirement planning approach that works very well for me, and I'm certain it will work for other retirees as well. How much am I spending each year? How much will I be able to spend each year until I die? And what will happen under various worst case scenarios? That is what ...
by BruceA
Mon May 06, 2013 12:27 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement planning for those already retired
Replies: 44
Views: 4427

Re: Retirement models and Black Swans

Maybe these complex models should all be scrapped and financial advisors could then earn their fee by thoroughly analyzing all the data that is relevant and material to each individual client, e.g., a detailed analysis of expected returns plus consideration of relevant negative scenarios. Probably ...
by BruceA
Sun Feb 24, 2013 2:43 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Retirement models and Black Swans

I think you are pointing out the weaknesses of some the popular retirement calculators. Just like the way Trinity study showed that the "old-school" calculators which assumed constant 8% every year were way too optimistic, maybe the withdrawal calculators that assume normal distribution o...
by BruceA
Sat Feb 23, 2013 7:18 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Retirement models and Black Swans

Who is suggesting "throw up your hands"? Inserting various types of Black Swan events when modeling retirement planning makes good sense to me. 25% drop in one day? Milevsky type drop? Why not. One might consider many other market decline levels and other types of Black Swans to try. For e...
by BruceA
Sat Feb 23, 2013 5:38 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Retirement models and Black Swans

Chan-va Do you agree that investment returns do not follow a normal curve and that there are fat left tails (consider Mandelbrot rather than Taleb if you prefer)? Do you agree that history cannot predict future negative outliers? If so, do you agree that the percentage probability of success derived...
by BruceA
Sat Feb 23, 2013 1:35 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Retirement models and Black Swans

Positive Black Swans do occur, but these are generally ignored as gravy or good fortune. People are more concerned with "will I have enough" than "will I have too much". I believe Taleb concluded that they are less likely than negative Black Swans.
by BruceA
Sat Feb 23, 2013 1:13 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Retirement models and Black Swans

As I see it, a model is not useless if it provides relevant and material information that helps in decision making. For example, an MCS can beneficially illustrate the effect of return sequencing, which is more realistic and conservative than using constant returns. The problem I have with MCS is no...
by BruceA
Sat Feb 23, 2013 12:30 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Retirement models and Black Swans

It seems that many on this forum use retirement planning models. The most commonly used appear to be: 1) SWR models and variations; and 2) models such as Firecalc, Fidelity retirement planner, and others that use Monte Carlo Simulations. These models do not take into account Black Swans. To what ex...
by BruceA
Sat Feb 23, 2013 11:53 am
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Retirement models and Black Swans

First, Monte Carlo simulations can be programmed for "Black Swans" or fat tails Second, having said that 2008 type event would be included in a MCS that used historical data for stocks, even assuming normal distribution Third, fwiw, Taleb is obviously a smart guy who thinks the right way ...
by BruceA
Sat Feb 23, 2013 11:11 am
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Retirement models and Black Swans

Nassim Nicholas Taleb wrote: Models and constructions, these intellectual maps of reality, are not always wrong; they are wrong only in some specific applications. The difficulty is that a) you do not know beforehand (only after the fact) where the map will be wrong, and b) the mistakes can lead to...
by BruceA
Sat Feb 23, 2013 10:34 am
 
Forum: Investing - Theory, News & General
Topic: Retirement models and Black Swans
Replies: 41
Views: 1993

Re: Taleb and Kahneman: Antifragility vs. common-man attitud

It's very easy for some to dislike Taleb, but do those people really disagree with the importance of considering fat tails (black swans)? But Monte Carlo models depend on the input parameters, and these parameters are derived from some historical data. Many of the MCS models do use historical inputs...
by BruceA
Fri Feb 22, 2013 3:18 pm
 
Forum: Investing - Theory, News & General
Topic: Taleb and Kahneman: Antifragility vs. common-man attitudes
Replies: 147
Views: 8856

Re: Taleb and Kahneman: Antifragility vs. common-man attitud

SWR=2 is generally a result of refining the model by not relying on historical returns. I am certain Taleb is familiar with modeling using Monte Carlo simulations, and quite possibly aware of SWR models. I suppose the questions for this forum are whether those who use these models are fully aware of...
by BruceA
Fri Feb 22, 2013 1:54 pm
 
Forum: Investing - Theory, News & General
Topic: Taleb and Kahneman: Antifragility vs. common-man attitudes
Replies: 147
Views: 8856

Re: Taleb and Kahneman: Antifragility vs. common-man attitud

WWTS

Has anyone considered what Taleb would say about the most common retirement strategies -- Safe Withdrawal Rates, and the various models that incorporate Monte Carlo Situations?
by BruceA
Fri Feb 22, 2013 12:54 pm
 
Forum: Investing - Theory, News & General
Topic: Taleb and Kahneman: Antifragility vs. common-man attitudes
Replies: 147
Views: 8856

Re: Achieving a Higher Safe Withdrawal Rate

Rodc Are you open to the possibility that Paul is correct? Is Paul open to the possibility that you are correct? Are you suggesting that you both are correct even though your positions are totally inconsistent? Did you miss my earlier posts that explained in detail how and to what extent I agreed wi...
by BruceA
Sat Jan 19, 2013 12:43 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

ydnal

Nice straw man. Next time at least try to understand the issues before commenting.
by BruceA
Sat Jan 19, 2013 11:41 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Was it really necessary to follow with such an oversimplified and patronizing comment?
by BruceA
Sat Jan 19, 2013 11:05 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

This has been quite a ride. I have written over 50 posts on this one subject and with practically no results. I got to thinking about it and, although it did turn out to be a waste of time, looking back it proved to be an interesting case study -- so no regrets. I brought up my method for monitoring...
by BruceA
Fri Jan 18, 2013 1:56 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Paul I was a bit curt in my last reply, so let me try and explain one more time. trying to get what withdrawal rate your strategy allowed was very difficult The important thing to grasp here is that there is no withdrawal rate; instead there is a computed AAS. The AAS is the amount available to spen...
by BruceA
Thu Jan 17, 2013 11:50 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Rod, to you the world is mathematical certainty, or nothing. Paul, to you the world of retirement planning can only be evaluated and measured as a SWR. I too would like to apologize for wasting everyone's time.
by BruceA
Wed Jan 16, 2013 6:03 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Rod, really? I'm at a loss as to how to respond to your last post.
by BruceA
Wed Jan 16, 2013 12:49 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Rod Of course you realize that your example is overly simplistic. In the real world one would have SS, part of his portfolio in a traditional or Roth IRA, perhaps a pension, maybe deferred comp, RMD in 5 years, etc. So the real world after tax analysis using this model becomes much more meaningful t...
by BruceA
Wed Jan 16, 2013 11:56 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Rod I'm sorry you have misunderstood how my model works. Computation of AAS using worse case scenarios is an integral part of the overall methodology, not a stress test. The stated purpose of SWR is to plan withdrawals such that you will not deplete your investments during your lifetime. My model pl...
by BruceA
Tue Jan 15, 2013 6:56 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Rod I agree with what you have said many times which is: SWR and other methodologies that purport safe planning using historical patterns are unreliable in the long run. I agree. I agree. I agree that, if my methodology were limited to that which you quote in your last post, it would be equally unre...
by BruceA
Tue Jan 15, 2013 10:50 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Rodc wrote:But the fundamental issues remain. You have simply huge uncertainties in your fundamental input variables.
Rod


And these are managed with the worse case AAS scenarios. You have not yet indicated why you don't agree with this central and important point.
by BruceA
Mon Jan 14, 2013 6:42 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

The benefit of reading and understanding the SWR studies is that it gets you in the neighborhood. So, understand the concept of a SWR, then use your brain after that. My approach involves computing an annual available spend based upon your own unique set of facts (not some generalized historical se...
by BruceA
Mon Jan 14, 2013 6:19 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

There are many methods. You have one. A careful analysis might say yours is best or it may not. All these methods used together may be more helpful that using the best alone. So of course and ensemble makes sense. If you want a maximum safe withdrawal rate and you use your conservative method you g...
by BruceA
Mon Jan 14, 2013 5:59 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

BruceA, as Rodc says, "you'll just have to wait and see and adjust along the way," This is true and here's what you say: using best current estimates , compute future annual after-tax returns from each pot of income (pensions, SS, taxable investments, IRA, RMD, etc.); b) using best estima...
by BruceA
Mon Jan 14, 2013 3:12 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Of course it is necessary to gain a fundamental understanding of the accuracy and limitations of any method. Come up with several possible alternative methods and then do your best to gain a fundamental understanding of each, as you suggest. From these alternatives, choose that method which you (or...
by BruceA
Mon Jan 14, 2013 2:56 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Of course it is necessary to gain a fundamental understanding of the accuracy and limitations of any method. Come up with several possible alternative methods and then do your best to gain a fundamental understanding of each, as you suggest. From these alternatives, choose that method which you (or ...
by BruceA
Mon Jan 14, 2013 2:10 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

I believe that our goal should be to find a best method available. I would love to hear alternative suggestions, but not those based upon "scientific validity". Rod, any thoughts? I am not Rod, though your post was directed at him. I think "scientific validity" is a red herring....
by BruceA
Mon Jan 14, 2013 1:26 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Thanks Rod We do seem to be in agreement on one point. It seems that you (and Bernstein and Taleb) believe that there is no scientifically valid method for determining how much can be safely withdrawn in order to avoid running out of funds. Please note that I am focusing on the simpler case of a ret...
by BruceA
Mon Jan 14, 2013 11:32 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Rodc Excellent points; I agree with all you say about uncertainty and the reality of SWR. However, it is possible to do more than, "you'll just have to wait and see and adjust along the way". It is apparent that you are proficient at financial analysis. Will you comment on the approach tha...
by BruceA
Fri Jan 11, 2013 11:03 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

For what it's worth, here is my summary of all this. SWR (4% and variations) is an excellent rule of thumb. It is generally conservative and very easy to implement. Much better than winging it for those looking for something simple and conservative. Having said that, there are several problems with ...
by BruceA
Thu Jan 10, 2013 10:53 am
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

Maybe it is worthwhile discussing what is good and bad about SWR. SWR is very helpful as a working rule of thumb, sort of like Jack Bogle's age in bonds. Some people might assume that with a 1million portfolio that they can safely spend 70 or 80k each year and 4% SWR helps to put the brakes on. It i...
by BruceA
Tue Jan 08, 2013 6:32 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

If you're going to make flexible adjustments, what's the evidence that any set of numerical rules is going to work any better than Taylor Larimore's system: "We simply withdrew what we needed and kept an eye on our portfolio balance. Most years our balance went up and we spent the money on vac...
by BruceA
Tue Jan 08, 2013 12:18 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: Achieving a Higher Safe Withdrawal Rate

All of this precision seems misguided:

viewtopic.php?f=10&t=64941
by BruceA
Mon Jan 07, 2013 2:22 pm
 
Forum: Investing - Theory, News & General
Topic: Achieving a Higher Safe Withdrawal Rate
Replies: 109
Views: 7949

Re: "Plan B" is an ambiguous idea

Regarding what is Plan B, I agree with the Swedroe article.

I'm curious though why this discussion is only about market declines and not inflation. For those with fixed pensions or annuities, inflation can be as devastating as a market decline.
by BruceA
Mon Dec 31, 2012 12:10 pm
 
Forum: Investing - Theory, News & General
Topic: "Plan B" is an ambiguous idea
Replies: 28
Views: 3111

Re: Retirement Planning with Annual Available Spend

Umfundi, there was a good bit of explanation of the details in earlier posts, including the threads linked by LadyGeek. I don't think there is any point in adding more detail regarding the mechanics. What is needed is a full discussion of the concept, and there does not appear to be interest in furt...
by BruceA
Thu Dec 20, 2012 11:34 am
 
Forum: Investing - Theory, News & General
Topic: Retirement Planning with Annual Available Spend
Replies: 15
Views: 1927

Re: Retirement Planning with Annual Available Spend

Paul, as I stated in my last reply to you: I have not stated a range of withdrawals because I have none. I use conservative life expectancy (age 100) and conservative estimates of after-tax portfolio growth (not historical, and please note that the B,B,&S earnings estimates are long term, not an...
by BruceA
Tue Dec 18, 2012 6:06 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Planning with Annual Available Spend
Replies: 15
Views: 1927
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