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Re: Please explain a 3% SWR to me

It's useful to have a list of fallback options or adjustments that people have identified on this thread and others if the initial assumed SWR seems threatened by extreme events. 1. SPIAs: at any time during the withdrawal period, including from year 1. This is a way to assure that you won't run out...
by Garco
Thu Apr 24, 2014 11:59 am
 
Forum: Investing - Theory, News & General
Topic: Please explain a 3% SWR to me
Replies: 77
Views: 3846

Re: Savings Rate what do you include?

I agree there can be varying legitimate ways to calculate the savings rate. My goal in determining how much to save/invest has always been to try to reproduce an income stream in retirement that matches my income in my last few years of employment. That's also where I think those rules of thumb abou...
by Garco
Tue Apr 22, 2014 11:50 am
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 52
Views: 2944

Re: Savings Rate what do you include?

This discussion has at times confused savings rate for retirement with overall savings rate. I addressed the question just by focusing on the former, which is the central component of that old saw, "Pay yourself first." This is why during most of my career, I felt reasonably secure about m...
by Garco
Tue Apr 22, 2014 9:53 am
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 52
Views: 2944

Re: Savings Rate what do you include?

I count my pre-tax contribution plus my employer's (pretax) matching in my 401k as my basic savings rate: 15%. Have had that same rate for 39 years. It's worth a lot more than saving the same percentage of my net income. Over that many years it amounts to a very substantial sum. In addition to this ...
by Garco
Mon Apr 21, 2014 8:55 pm
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 52
Views: 2944

Re: The reverse world of retirement investing

Well, there are various "withdrawal" and/or spending strategies. "Spend only the dividends (and spend all the dividends)" is one kind of withdrawal strategy. It's not necessarily a crazy one, but it doesn't have the magic properties some of its advocates claim for it. "Take...
by Garco
Sun Apr 20, 2014 11:17 am
 
Forum: Investing - Theory, News & General
Topic: The reverse world of retirement investing
Replies: 34
Views: 4099

Re: The reverse world of retirement investing

I like your approach, Nisi. I am taking a "moderate" approach (when I retire next year). 50-50 stocks/nonstocks (the latter is not all bonds); 4% "traditional" SWR from our tax-advantaged investments, with ~1% from taxable, which is mainly a safety reserve. In other words your a...
by Garco
Sun Apr 20, 2014 10:33 am
 
Forum: Investing - Theory, News & General
Topic: The reverse world of retirement investing
Replies: 34
Views: 4099

Re: The reverse world of retirement investing

I like your approach, Nisi. I am taking a "moderate" approach (when I retire next year). 50-50 stocks/nonstocks (the latter is not all bonds); 4% "traditional" SWR from our tax-advantaged investments, with ~1% from taxable, which is mainly a safety reserve. But asking the kids' o...
by Garco
Sun Apr 20, 2014 10:05 am
 
Forum: Investing - Theory, News & General
Topic: The reverse world of retirement investing
Replies: 34
Views: 4099

Re: M* caution on emerging markets dividend ETFs

(EEMS also includes 6% in India and 5% in Hong Kong, which are not in EEMS unless Hong Kong is considered part of China). Isn't that like saying, "The S&P500 is 94% American companies, unless Virginia is considered part of America"? :happy Now you've got us worried. How's Virginia's e...
by Garco
Sun Apr 20, 2014 9:32 am
 
Forum: Investing - Theory, News & General
Topic: M* caution on emerging markets dividend ETFs
Replies: 15
Views: 1209

Re: Can I get some alpha? (DFA / Wealthfront)

The trick to getting a return that exceeds the benchmark is to choose your benchmark carefully. Whether you should call this differential "alpha" is up to you.
by Garco
Wed Apr 09, 2014 1:46 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2965

Re: What next after you have enough sort of.

So far, nobody who's laying out their retirement plan on this thread has mentioned insurance, specifically disability insurance. You can deplete your wealth pretty fast if you find yourself in need of long-term care. Your relatives, who in some cases you are planning to support through an inheritanc...
by Garco
Tue Apr 08, 2014 12:10 pm
 
Forum: Investing - Theory, News & General
Topic: What next after you have enough sort of.
Replies: 31
Views: 3386

Re: "The 4% rule and a dynamic retirement spending plan"

My "novel" (simple) plan is to use one or another version of a SWR based on all of the tax-deferred retirement funds that I've accumulated through my own work. I don't want the complication of a "dynamic retirement spending plan," and don't think I need it. But in light of the un...
by Garco
Sun Apr 06, 2014 11:36 am
 
Forum: Investing - Theory, News & General
Topic: "The 4% rule and a dynamic retirement spending plan"
Replies: 14
Views: 1627

Re: "The 4% rule and a dynamic retirement spending plan"

The canonical "4% SWR" (taking 4% in year 1 and incrementing the absolute dollar amount of the year 1 withdrawal by the rate of inflation) relies on two assumptions -- starting at age 65, and having 30 year end point. For someone who plans to retire at age 70, it's reasonable to set the en...
by Garco
Sun Apr 06, 2014 12:27 am
 
Forum: Investing - Theory, News & General
Topic: "The 4% rule and a dynamic retirement spending plan"
Replies: 14
Views: 1627

Re: [Poll] Which of These Types of Investments do you Own?

Among types of funds not mentioned, but which I own: Stable value fund, multi-asset fund.
by Garco
Tue Apr 01, 2014 11:11 am
 
Forum: Investing - Theory, News & General
Topic: [Poll] Which of These Types of Investments do you Own?
Replies: 24
Views: 2218

Re: Poll: how did you decide on stock/bond allocation?

I put "other" b/c I've been in the market ("retirement investing") for so long that I've handled this allocation decision differently in different eras. Because I'm approaching retirement soon, I have taken risk off but I am not at "age in bonds." Equities is about 50%,...
by Garco
Mon Mar 31, 2014 8:49 am
 
Forum: Investing - Theory, News & General
Topic: Poll: how did you decide on stock/bond allocation?
Replies: 35
Views: 1863

Re: First Speeding Ticket: What Would You Do?

I've been driving for more than 50 years, and have gotten about a ticket every 8-10 years. All for speeding. 1. Oregon, 2. Indiana. 3. Wisconsin. 4. New York. 5. Michigan. I do a lot of driving. Every one of these was a speed trap, i.e., a place where the speed limit either was not posted or changed...
by Garco
Mon Mar 31, 2014 12:11 am
 
Forum: Personal Finance (Not Investing)
Topic: First Speeding Ticket: What Would You Do?
Replies: 72
Views: 4102

Re: Statement of the Retirement Funding Problem

These days, I don't think anybody should absolutely count on their private or public pensions continuing to provide the same inflation-adjusted income over the entire period in retirement. At least not in America. and you certainly should not expect stocks or bonds to continue to exist, since they ...
by Garco
Fri Mar 28, 2014 1:42 pm
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5707

Re: Statement of the Retirement Funding Problem

I have a DB pension coming but it has no inflation protection and I'm not sure that was particularly common in corporate pensions. My father took his DB pension from Honeywell (then Allied Signal) at age 65. He lived to 95. Honeywell was a DJIA company (still in Fortune 100). The relative value of ...
by Garco
Wed Mar 26, 2014 11:32 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5707

Re: Are Vanguard Index Funds pure ??? Not So

Minor additional note. If you use the "completion index," i.e., VG extended market (VEXMX/VEMSX), it does not consist only of mid and small cap equities. According to M* X-Ray, it has 7% LC. So if you roll your own total market index, combining VFINX and VEXMX, you're blending two indexes ...
by Garco
Wed Mar 26, 2014 11:01 am
 
Forum: Investing - Theory, News & General
Topic: Are Vanguard Index Funds pure ??? Not So
Replies: 67
Views: 4293

Re: Help me settle a debate -- Risk in Retirement

I would divide my portfolio into two distinct parts. One part for my wife and me; the other part for our children. In my/my wife's part, I'd probably choose a portfolio with a moderate bent. In our children's portfolio, I'd choose an aggressive mix of assets, with a very high percentage of low cost...
by Garco
Fri Mar 21, 2014 1:01 pm
 
Forum: Investing - Theory, News & General
Topic: Help me settle a debate -- Risk in Retirement
Replies: 61
Views: 4224

Re: Do you love your job? What do you do?

I am now a Professor Emeritus If there is a better job in the world than being a Professor, its being Professor Emeritus. As to an research university academic career: There is no job in the world that can be as intellectually and personally challenging. But pay is lousy for the time spent in prepa...
by Garco
Mon Mar 17, 2014 8:56 am
 
Forum: Personal Finance (Not Investing)
Topic: Do you love your job? What do you do?
Replies: 134
Views: 10113

Re: How did you decide how much to save?

Our base savings rate has been 15% since 1975 -- in 401k. Beyond that, we saved enough to pay for two kids' private college education. Currently, as I'm edging toward retirement, we're saving about 75% of my salary in 401k and other supplemental tax deferred accounts. A key for us is that we never g...
by Garco
Fri Mar 14, 2014 9:37 am
 
Forum: Investing - Theory, News & General
Topic: How did you decide how much to save?
Replies: 119
Views: 9182

Re: Small Cap Tilting

All this effort to find the "G-spot" of asset allocation is fraught with problems for average investors, especially those like me who have a highly constrained set of choices in their 401k plan. If the funds that they have available aren't truly small or truly value, or if the premium real...
by Garco
Wed Mar 12, 2014 9:26 am
 
Forum: Investing - Theory, News & General
Topic: Small Cap Tilting
Replies: 84
Views: 6224

Re: Happy fifth birthday! [since the 2008-2009 market crash]

18.5% 5-year annualized rate for me (excluding my contributions from salary -- if those are included it's 19.6%). However, I prefer to reckon my gain from mid-October 2007, when my portfolio was at peak, rather than from March 9 when it was at bottom of the trough. I do pretty well from the mid-Octo...
by Garco
Mon Mar 10, 2014 11:40 am
 
Forum: Investing - Theory, News & General
Topic: Happy fifth birthday! [since the 2008-2009 market crash]
Replies: 54
Views: 3354

Re: Poll: Are you going to retire? And if so, when?

Your categories 50-60 and 60-70 overlap. If someone expects to retire at age 60, which category are they in? This is a common error in polls on this discussion board, despite the fact that Bogleheads are quite numerate. 50-59, 60-69, 70 or over would be better. I always assume this means [A, B) and...
by Garco
Mon Mar 10, 2014 12:26 am
 
Forum: Investing - Theory, News & General
Topic: Poll: Are you going to retire? And if so, when?
Replies: 38
Views: 2979

Re: Poll: Are you going to retire? And if so, when?

Darn it. I added an "undecided" option to the poll, and it got rid of the earlier responses. Please revote if you voted before the undecided option was available! Your categories 50-60 and 60-70 overlap. If someone expects to retire at age 60, which category are they in? This is a common ...
by Garco
Sun Mar 09, 2014 4:17 pm
 
Forum: Investing - Theory, News & General
Topic: Poll: Are you going to retire? And if so, when?
Replies: 38
Views: 2979

Re: Poll: Are you going to retire? And if so, when?

I will retire at age 70. I clicked the category 60-70 in the questionnaire. By "retire" I mean I will leave my principal place of employment, and I have no expectation of ever again doing any more work for pay -- either part-time or full-time. I read the "case for never retiring,"...
by Garco
Sun Mar 09, 2014 1:09 pm
 
Forum: Investing - Theory, News & General
Topic: Poll: Are you going to retire? And if so, when?
Replies: 38
Views: 2979

Re: Retirees: About your retirement

I never set retirement as a goal in my life. I set creative, productive, challenging work as a goal in my life. And I set having and raising a family as a goal in my life. Retirement was what would happen when I reached a point in career when I couldn't be as creative or productive as I had been, an...
by Garco
Sat Mar 08, 2014 9:38 am
 
Forum: Investing - Theory, News & General
Topic: Retirees: About your retirement
Replies: 55
Views: 5496

Re: To whom does the advice "max out your 401k" not apply?

Said another way - you were able to do all of it anyway, so the prioritization didn't matter. Yes. College is expensive. People complain about it constantly on the forum. I get it. No need to imply ignorance on my part to bolster your choices. it's a weird proposition not to maximize wealth. Anythi...
by Garco
Thu Mar 06, 2014 10:15 pm
 
Forum: Investing - Theory, News & General
Topic: To whom does the advice "max out your 401k" not apply?
Replies: 45
Views: 4734

Re: To whom does the advice "max out your 401k" not apply?

Lots of good advice, even ordered lists. Why exactly would you do the minimum on retirement savings and then prioritize kids college over the rest of it? Is that the catch all "reality" part? a. My basic goal was to arrive at point 6 with zero debt for me and everyone in my family (kids)....
by Garco
Thu Mar 06, 2014 4:20 pm
 
Forum: Investing - Theory, News & General
Topic: To whom does the advice "max out your 401k" not apply?
Replies: 45
Views: 4734

Re: Replace less than 80% of income in retirement?

To the OP. I'm just chiming in to reinforce the point that saving now is a lot more important than saving later, because of the magic of compound growth. If you can sustain 15-20% saving rate, as your salaries grow, your retirement "need" (80%, 70%) will simply take care of itself, if you'...
by Garco
Thu Mar 06, 2014 11:29 am
 
Forum: Investing - Theory, News & General
Topic: Replace less than 80% of income in retirement?
Replies: 52
Views: 3309

Re: [Nate Silver's] Message for Financial Advisors

Some time ago I also posted this note about Nate Silver, in which Silver offered a Serenity Prayer for Indexers:* "God give me the serenity to accept the things I cannot predict, the courage to predict the things I can, and the wisdom to buy index funds.” From IndexUniverse.com: http://www.etf....
by Garco
Thu Feb 27, 2014 2:11 pm
 
Forum: Investing - Theory, News & General
Topic: [Nate Silver's] Message for Financial Advisors
Replies: 38
Views: 2333

Re: Retirement: Protect Your Critical First Decade

Offshore wrote:Garco,

Would you define the 4 assets of you allocation?
I'm on the brink of retiring. But my portfolio is 50-25-15-10

Thank you.

Equities, real estate (not REIT), bond funds, stable value funds.
by Garco
Thu Feb 27, 2014 1:53 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement: Protect Your Critical First Decade
Replies: 38
Views: 3559

Re: Retirement: Protect Your Critical First Decade

Anyhow, we discussed this topic when it first came out several weeks ago. Seems like a lot of Bogleheads are content to Stay The Course in retirement, often with close to 50/50 AA. Thus neither an Age In Bonds glidepath nor this new increased equity concept... Personally, I am one of the 50/50. It ...
by Garco
Thu Feb 27, 2014 1:03 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement: Protect Your Critical First Decade
Replies: 38
Views: 3559

Re: Do you tilt? If so, how?

1. I have 73% domestic US, 27% international. 2. Of the total, 61% is LC, 39% is MC, SC (extended market). 3. Of the domestic only, 51% is LC, 49% is MC, SC (extended market). Story : I'm a "4 funder" (1 LC international, 2 LC domestic US, 1 MC-SC domestic US). My international percentage ...
by Garco
Tue Feb 25, 2014 8:09 am
 
Forum: Investing - Theory, News & General
Topic: Do you tilt? If so, how?
Replies: 44
Views: 3597

Re: Self protecting a SPIA against inflation

With a TIAA-CREF immediate annuity, you can mix in variable annuity funds (stock, real estate, bonds, etc.) with the basic or Traditional annuity, and this can provide inflation protection to the extent that the value of these other investments keeps up with inflation. This is what I've done, but t...
by Garco
Mon Feb 24, 2014 2:19 pm
 
Forum: Investing - Theory, News & General
Topic: Self protecting a SPIA against inflation
Replies: 47
Views: 2280

Re: Wade Pfau feautured in latest Money magazine

The article about Pfau and others is authored by Donna Rosato and Penelope Wang, and it's in the March 2014 issue (Vol. 43, Issue 2). Check your local library or newsstand. Abstract : "The article discusses retirement planning recommendations from retirement-planning experts as of February 2014...
by Garco
Mon Feb 24, 2014 1:46 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau feautured in latest Money magazine
Replies: 8
Views: 2134

Re: Self protecting a SPIA against inflation

With a TIAA-CREF immediate annuity, you can mix in variable annuity funds (stock, real estate, bonds, etc.) with the basic or Traditional annuity, and this can provide inflation protection to the extent that the value of these other investments keeps up with inflation.
by Garco
Mon Feb 24, 2014 1:36 am
 
Forum: Investing - Theory, News & General
Topic: Self protecting a SPIA against inflation
Replies: 47
Views: 2280

Re: Front loading retirement plan contributions?

My contributions to a 457b are not limited to any specific amount per month or per pay period -- just by the annual allowable total, which is $23K given my age. As a result, I will have contributed $23K to my 457b by May. I'm doing the exact same thing with a supplemental 401k-type retirement accoun...
by Garco
Sun Feb 23, 2014 1:44 pm
 
Forum: Investing - Theory, News & General
Topic: Front loading retirement plan contributions?
Replies: 31
Views: 2491

Re: To whom does the advice "max out your 401k" not apply?

I think the application of common sense to general rules avoids any concerns like this. If you don't make enough to put a decent roof over your head, eat, live a little and max out retirement accounts, then this general rule does not apply to you. Realistically, in such a situation you don't need t...
by Garco
Sat Feb 22, 2014 11:32 am
 
Forum: Investing - Theory, News & General
Topic: To whom does the advice "max out your 401k" not apply?
Replies: 45
Views: 4734

Re: Where do you park cash?

"Cash" is cash for me. Immediately transferable/spendable. Demand deposit. Whatever the term might be. I keep a significant amount in a CMA with Fidelity, and I can quickly transfer cash into or out of this account to either my brokerage account or my bank (credit union) via electronic tra...
by Garco
Sat Feb 22, 2014 11:09 am
 
Forum: Investing - Help with Personal Investments
Topic: Where do you park cash?
Replies: 48
Views: 4993

Re: Estate Planning- Attorney fees $5.5K

We went through this entire process about 4 months ago. We chose an attorney (on advice of friends) from a middle-size full-service law firm that has a strong and long reputation in our community b/c we wanted good advice and continuity in case the particular lawyer retired or expired or departed th...
by Garco
Mon Feb 17, 2014 11:09 pm
 
Forum: Personal Finance (Not Investing)
Topic: Estate Planning- Attorney fees $5.5K
Replies: 34
Views: 3924

Re: To whom does the advice "max out your 401k" not apply?

Lots of good advice, even ordered lists. In my case, employer mandates plus reality meant. 1. Mandated 401k contribution (5%), overmatched by employer. 2. Save for house downpayment, purchased about 5 years into career with 30-yr mortgage. 3. Save for college educations (2 kids, no financial aid). ...
by Garco
Mon Feb 17, 2014 6:23 pm
 
Forum: Investing - Theory, News & General
Topic: To whom does the advice "max out your 401k" not apply?
Replies: 45
Views: 4734

Re: To whom does the advice "max out your 401k" not apply?

Lots of good advice, even ordered lists. In my case, employer mandates plus reality meant. 1. Mandated 401k contribution (5%), overmatched by employer. 2. Save for house downpayment, purchased about 5 years into career with 30-yr mortgage. 3. Save for college educations (2 kids, no financial aid). 4...
by Garco
Mon Feb 17, 2014 4:25 pm
 
Forum: Investing - Theory, News & General
Topic: To whom does the advice "max out your 401k" not apply?
Replies: 45
Views: 4734

Re: Safe Withdrawal Rate

This is interesting. I would have thought the purpose of setting a SWR was to determine how much one needed to save for retirement. [extended but very useful text omitted for sake of brevity here] A person's financial lifetime is an experience of successive approximations. Trying to engineer this f...
by Garco
Mon Feb 17, 2014 11:27 am
 
Forum: Investing - Theory, News & General
Topic: Safe Withdrawal Rate
Replies: 91
Views: 5806

Re: Safe Withdrawal Rate

I should call my approach the ""safe withdrawal rate"", because it is the basic approach that I'll apply to my tax deferred funds, which at this time are about 70% of my investment holdings. Because I will retire later than the age used in most SWR models, and because a substanti...
by Garco
Mon Feb 17, 2014 9:56 am
 
Forum: Investing - Theory, News & General
Topic: Safe Withdrawal Rate
Replies: 91
Views: 5806

Re: What was John Bogle thinking?!

Bogle's change of heart fits that old saw, "Necessity is the mother of invention." It's great that he gives due credit to serendipity, opportunity, and, well, ambition. Those are the kind of factors that I take into account when advising young people about their career choices.
by Garco
Mon Feb 10, 2014 12:30 pm
 
Forum: Investing - Theory, News & General
Topic: What was John Bogle thinking?!
Replies: 11
Views: 2723

Re: "The dangers of long-term care insurance"

Again, am I completely misguided here? LTCI might cover the probability aspect of the long tail (very rare events), but my understanding is that they all have a maximum total payout. You have a policy with a total maximum payout of $400,000 and go into a nursing home for 20 years, that policy not g...
by Garco
Sun Feb 09, 2014 12:01 pm
 
Forum: Personal Finance (Not Investing)
Topic: "The dangers of long-term care insurance"
Replies: 106
Views: 7571

Re: Your mortgage type, if any [POLL]

We had a 30-year conventional 8% mortgage, with 20% down payment, from 1976-2006. I was never tempted to pay it off, even at a time when everybody was refinancing and "taking money out" of their homes for other purposes (remodeling, college funds for kids, boats, cottages, etc.). When we b...
by Garco
Sun Feb 09, 2014 11:29 am
 
Forum: Personal Finance (Not Investing)
Topic: Your mortgage type, if any [POLL]
Replies: 63
Views: 3517

Re: omg, did I miss the buying opportunity in stocks?

The $500 I eagerly (IMPULSIVELY even) threw into my VG Extended Market fund at Monday's closing price is now up to $514.xx in value per my calculations. No expectation of "selling" anytime soon, but "buying low" is one half of the formula for great riches s... But I "bought...
by Garco
Sat Feb 08, 2014 2:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: omg, did I miss the buying opportunity in stocks?
Replies: 54
Views: 6422

Re: omg, did I miss the buying opportunity in stocks?

There is no THE buying opportunity in stocks. 1. There are always numerous buying (and selling) opportunities -- over time, among markets, among market segments, among individual stocks, etc. 2. If you have no business increasing or overloading on stocks, one very good day in the market shouldn't ma...
by Garco
Sat Feb 08, 2014 1:31 pm
 
Forum: Investing - Help with Personal Investments
Topic: omg, did I miss the buying opportunity in stocks?
Replies: 54
Views: 6422
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