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Re: Comparing Results from VPW, RMD, & 4% Rule Withdrawals

I can certainly understand why it's not possible to have perfectly level real income during retirement, but I don't see why it would be undesirable. I always thought the ultimate retirement income situation would be a sufficient level of Social Security benefits, an inflation indexed private pensio...
by bobcat2
Fri Dec 12, 2014 9:47 pm
 
Forum: Investing - Theory, News & General
Topic: Comparing Results from VPW, RMD, & 4% Rule Withdrawals
Replies: 40
Views: 2185

Re: Comparing Results from VPW, RMD, & 4% Rule Withdrawals

In retirement you want to minimize, as much as you reasonably can, year to year unplanned fluctuations in income. Obviously, people aren't going to have perfectly level real income during retirement. That is neither possible nor desirable. You also want to avoid large planned fluctuations in income ...
by bobcat2
Fri Dec 12, 2014 2:31 pm
 
Forum: Investing - Theory, News & General
Topic: Comparing Results from VPW, RMD, & 4% Rule Withdrawals
Replies: 40
Views: 2185

Re: Comparing Results from VPW, RMD, & 4% Rule Withdrawals

A fluctuating income in retirement is just fine so long as it exceeds your needs by 50% or more. A portion of my own income is from a variable annuity adjusted monthly, hence never the same paycheck twice... What do you mean by your needs? Do you have an income goal or not, or are you simply talkin...
by bobcat2
Fri Dec 12, 2014 1:47 pm
 
Forum: Investing - Theory, News & General
Topic: Comparing Results from VPW, RMD, & 4% Rule Withdrawals
Replies: 40
Views: 2185

Re: Comparing Results from VPW, RMD, & 4% Rule Withdrawals

The market will fluctuate and you should plan on having your income fluctuate also. Your income fluctuated all through your entire life. Retirement is no different. To ignore this reality, is to invite fear and bad planning into your retirement plan. You want to minimize the amount of fluctuation i...
by bobcat2
Fri Dec 12, 2014 1:38 pm
 
Forum: Investing - Theory, News & General
Topic: Comparing Results from VPW, RMD, & 4% Rule Withdrawals
Replies: 40
Views: 2185

Re: Comparing Results from VPW, RMD, & 4% Rule Withdrawals

Let's review a simplified version of the retirement planning process. It is simplified because I am not going into the details of each step but merely acknowledge the steps you should consider leading up to retirement. Every few years prior to retirement you should also re-evaluate these steps. Ste...
by bobcat2
Fri Dec 12, 2014 1:00 pm
 
Forum: Investing - Theory, News & General
Topic: Comparing Results from VPW, RMD, & 4% Rule Withdrawals
Replies: 40
Views: 2185

Re: projected income metric for portfolios

Vanguard seems to be dragging their feet a bit on this. :wink: Vanguard has filed official comments with the U.S. Department of Labor (DOL) on a DOL pre-rule release that would require plan sponsors to present illustrations on participant account statements of how account balances might translate in...
by bobcat2
Mon Dec 08, 2014 11:14 pm
 
Forum: Investing - Theory, News & General
Topic: projected income metric for portfolios [WSJ article]
Replies: 11
Views: 940

Re: projected income metric for portfolios

If I am not mistaken, Robert Merton and Zvi Bodie may have mentioned this idea once or twice. :wink: :D

BobK


P.S. It's probably also worth mentioning that Merton and his mentor Paul Samuelson were advisors to TIAA-CREF back in the day.
by bobcat2
Mon Dec 08, 2014 8:53 pm
 
Forum: Investing - Theory, News & General
Topic: projected income metric for portfolios [WSJ article]
Replies: 11
Views: 940

Re: Retirement Planning: The View from Vanguard

OR: So, Merton and the actuaries will tell you the goal is inflation-adjusted real income. But if you talk to the typical financial planner who is running calculations, the numbers that you need to save for retirement are dramatically lower than when you assume steadily rising expenditures. Dale Th...
by bobcat2
Sun Dec 07, 2014 6:14 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Planning: The View from Vanguard
Replies: 8
Views: 1646

Re: Retirement Planning: The View from Vanguard

bobcat2 wrote. On whether the goal of 401k type plans should be wealth value or retirement income stream I not only couldn't follow Utkus's response, I am not certain, if he was quoted correctly , that Utkus understands what he said. :) So, Merton and the actuaries will tell you the goal is inflatio...
by bobcat2
Sun Dec 07, 2014 3:41 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Planning: The View from Vanguard
Replies: 8
Views: 1646

Re: Retirement Planning: The View from Vanguard

I thought Utkus was asked very good questions and sometimes he gave solid answers and sometimes he whiffed. On the whiffed side I include his weak response regarding 401k leakage, which appears to be a bigger problem than fund high expense ratios for households becoming adequately financed for retir...
by bobcat2
Sun Dec 07, 2014 1:45 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Planning: The View from Vanguard
Replies: 8
Views: 1646

Retirement Planning: The View from Vanguard

The dramatic shift by retirement savers to passive investing means financial advisors will spend less time in the future picking stocks, and that leads to questions about new ways to add value. Nowhere are those questions more pressing than at Vanguard, the king of passive mutual fund investing. Th...
by bobcat2
Sun Dec 07, 2014 1:06 am
 
Forum: Investing - Theory, News & General
Topic: Retirement Planning: The View from Vanguard
Replies: 8
Views: 1646

Re: Safe Withdrawal Rates - Is the 4% rule still good?

The 0.1% difference between the safe withdrawal method and the annuity method of estimating a savings goal isn't really a meaningful difference. The 4% safe withdrawal rate is for a 30 year period. The 3.9% annuity payout is for as long as one member of the couple lives. The annuity payout only app...
by bobcat2
Thu Nov 27, 2014 8:09 pm
 
Forum: Investing - Theory, News & General
Topic: Safe Withdrawal Rates - Is the 4% rule still good?
Replies: 84
Views: 7961

Re: Safe Withdrawal Rates - Is the 4% rule still good?

Rules like 4% of initial amount are IMO reasonably useful for setting goals for retirement assets/spending when pretty far away from retirement. There is a simple more accurate way to estimate the amount of wealth needed at retirement to meet your retirement income goal. Price a real life annuity f...
by bobcat2
Thu Nov 27, 2014 3:33 pm
 
Forum: Investing - Theory, News & General
Topic: Safe Withdrawal Rates - Is the 4% rule still good?
Replies: 84
Views: 7961

Re: Safe Withdrawal Rates - Is the 4% rule still good?

Since the 4% rule has never been good, it's hard to make much sense of the premise of this thread. The 4% rule and all its SWR variants fail two basic principles of what constitutes a sound withdrawal rate strategy. Any rule for spending out of a retirement account should adhere to the following tw...
by bobcat2
Thu Nov 27, 2014 11:27 am
 
Forum: Investing - Theory, News & General
Topic: Safe Withdrawal Rates - Is the 4% rule still good?
Replies: 84
Views: 7961

Re: What is the present value of future payments?

One stream is inflation adjusted (real payments) one is a nominal payment. Both go on for 30 years. I assumed each these payments are risk free so the appropriate discount rate is inflation. ...Is this correct? No. The appropriate discount rate is not the inflation rate. The appropriate 30 year ris...
by bobcat2
Wed Nov 26, 2014 2:12 pm
 
Forum: Investing - Theory, News & General
Topic: What is the present value of future payments?
Replies: 8
Views: 743

Re: Will stocks beat bonds over next 30 years?

There is probably about a 10% chance that LT bonds will outperform stocks over the next 30 years. We can argue til the cows come home whether it's really closer to 8% or 12% - that's not important. What is important is that it is almost surely the case that if bonds outperform stocks over the next 3...
by bobcat2
Sat Nov 22, 2014 12:09 am
 
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 5857

Re: Master thread for Washington DC Area Bogleheads

Time, directions, parking, etc. for Sunday's meeting (11/16/2014). Our next meeting is tomorrow (Sunday, November 16, 3:00-5:30) in the second floor meeting room at the Arlington, VA Central Library, 1015 N. Quincy Street, Arlington, VA 22201; this is the same place as our two previous meetings in J...
by bobcat2
Sat Nov 15, 2014 9:59 am
 
Forum: Local Chapters and Bogleheads Community
Topic: Master thread for Washington DC Area Bogleheads
Replies: 21
Views: 2793

Re: Master thread for Washington DC Area Bogleheads

This Sunday there will be two presentations, which will likely be very different from one another in both in subject matter and tone. David will be making a presentation that is particularly pertinent and timely during the present sign up season on High Deductible Health Plans and Health Savings Acc...
by bobcat2
Tue Nov 11, 2014 9:05 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: Master thread for Washington DC Area Bogleheads
Replies: 21
Views: 2793

Re: what is risk?

Paul, You are unbelievable. You write the following. I don't have any objection to your academic definitions, but I do question the usefulness to the average investor. Some alternative thinking... http://glynholton.com/wp-content/uploads/2006/10/risk.pdf If we go to the above article on your suppose...
by bobcat2
Sun Sep 28, 2014 4:51 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4743

Re: what is risk?

Merriam-Webster dictionary definition of risk (noun) - -the possibility that something bad or unpleasant (such as an injury or a loss) will happen - someone or something that may cause something bad or unpleasant to happen - a person or thing that someone judges to be a good or bad choice for insura...
by bobcat2
Sun Sep 28, 2014 11:28 am
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4743

Re: what is risk?

Risk is uncertainty that matters to peoples welfare. If you and I flip a coin a 100 times at a penny a flip, there is uncertainty in the outcome but there is no risk. The financial uncertainty is trivial. If, OTOH, we flip the same coin a 100 times at $5,000 a flip, that uncertain outcome is risky. ...
by bobcat2
Sun Sep 28, 2014 11:04 am
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4743

Re: what is risk?

Which is riskier: 1) Certain to miss your goal by a large margin. 2) May miss your goal by a large margin, may exceed your goal by a large margin. Under Bob's definition, 2 is riskier - it has more "Uncertainty of outcomes". I find it hard to believe anyone would prefer 1. If so, does tha...
by bobcat2
Sun Sep 28, 2014 10:19 am
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4743

Re: what is risk?

Sharpe has said risk is the probability of doing badly in bad times. Which comes closer to your idea of risk: your portfolio doing badly in bad times (not having money when you need it) or not being certain what your portfolio will be worth at some point in the future? There is a difference between...
by bobcat2
Sat Sep 27, 2014 9:21 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4743

Re: what is risk?

The meaning of the word "risk" in financial economics is probably influenced by Frank Knight's 1921 book, Risk, Uncertainty, and Profit. NO NO NO !!! Frank Knight distinguished uncertainty from risk. Knight died over 40 years ago. You are referring to a book that Knight wrote about a 100 ...
by bobcat2
Sat Sep 27, 2014 8:34 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4743

Re: what is risk?

I fail to understand why so many posters at Bogleheads have so much trouble understanding the common definition of risk in finance and economics. This isn't hard guys. :oops: Here risk is defined in several leading economics and finance textbooks. Risk is uncertainty that "matters" because...
by bobcat2
Sat Sep 27, 2014 8:24 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4743

Re: Using Your House for Income in Retirement

How are reverse mortgage payments accounted for in Social Security/ACA income determination? That could have an impact on the sell and rent vs reverse mortgage decision. The money you get from a reverse mortgage is a loan, so it’s tax-free. It does not affect costs pegged to your “income,” such as ...
by bobcat2
Tue Sep 23, 2014 11:50 am
 
Forum: Personal Finance (Not Investing)
Topic: Using Your House for Income in Retirement
Replies: 19
Views: 1676

Re: Using Your House for Income in Retirement

Could reverse mortgages help many elderly Americans? Let's look at some data. US Median home equity and financial assets, two-person households (thousands $) Home Equity Financial Assets Age 65-74 150 125 75-84 160 115 85+ 150 100 BobK
by bobcat2
Tue Sep 23, 2014 11:25 am
 
Forum: Personal Finance (Not Investing)
Topic: Using Your House for Income in Retirement
Replies: 19
Views: 1676

Using Your House for Income in Retirement

Using Your House for Income in Retirement - Consumer guide from the Center for Retirement Research at Boston College available for free in pdf form. authors - Steven Sass, Alicia H. Munnell, and Andrew Eschtruth key points Home equity is the largest store of wealth for retirees and, with reduced su...
by bobcat2
Tue Sep 23, 2014 9:13 am
 
Forum: Personal Finance (Not Investing)
Topic: Using Your House for Income in Retirement
Replies: 19
Views: 1676

Re: money's worth ratio (MWR) of life annuities

Understated risk in one time life annuity purchase - the risk of volatility in payments from life annuities because of fluctuations in interest rates Workers who want to ensure they will not outlive their assets will seek to convert their retirement savings into an annuity around the time they reti...
by bobcat2
Mon Sep 22, 2014 3:42 pm
 
Forum: Investing - Theory, News & General
Topic: Are SPIA's fairly priced? - A quick and dirty analysis
Replies: 75
Views: 3739

Alexandria public library meeting rooms

The Alexandria public library has meeting rooms available to patrons and their organizations for meetings of an educational, cultural or civic nature. However, to reserve the meeting rooms you must be " a library cardholder in good standing (no fines or fees on your account) who lives in, or ow...
by bobcat2
Mon Sep 22, 2014 2:28 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: Master thread for Washington DC Area Bogleheads
Replies: 21
Views: 2793

Re: Master thread for Washington DC Area Bogleheads

At yesterday's meeting I mentioned that if you wait to take Social Security until age 70, but take Medicare at 65, your lifetime Medicare premiums are higher. I couldn't recall why the premiums will be higher. Here Larry Kotlikoff explains why. When inflation is low, like it is now, there is a disad...
by bobcat2
Mon Sep 22, 2014 12:14 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: Master thread for Washington DC Area Bogleheads
Replies: 21
Views: 2793

money's worth ratio (MWR) of life annuities

Money’s worth ratio (MWR) of life annuities - The expected present discounted value (EPDV) of cash flows from a life annuity divided by the initial premium cost. There have been many studies of MWR, mainly by financial economists. Here are links to a few of them. New Evidence on the Money's Worth of...
by bobcat2
Mon Sep 22, 2014 10:59 am
 
Forum: Investing - Theory, News & General
Topic: Are SPIA's fairly priced? - A quick and dirty analysis
Replies: 75
Views: 3739

Re: The Annuity Puzzlement

I believe the term "fixed annuity" without further qualifiers should be interpreted as "life annuity". But what do I know? I've only passed two actuarial exams. :mrgreen: The term "fixed annuity" often refers to a fixed deferred or immediate annuity, an annuity product...
by bobcat2
Fri Sep 19, 2014 9:07 am
 
Forum: Investing - Theory, News & General
Topic: The Annuity Puzzlement
Replies: 95
Views: 7252

Meeting this Sunday - September 21, 3:00-5:30

As grabiner previously noted. Our next meeting is this Sunday, September 21, 3:00-5:30, in the second floor meeting room at the Arlington, VA Central Library, 1015 N. Quincy Street, Arlington, VA 22201; this is the same place as our previous meeting in July. The library is between the Virginia Squar...
by bobcat2
Thu Sep 18, 2014 2:06 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: Master thread for Washington DC Area Bogleheads
Replies: 21
Views: 2793

The Great Recession casts a long shadow

The Great Recession Casts a Long Shadow on Family Finances - from St Louis Fed's Center for Household Financial Stability. The income and wealth of the typical American family declined between 2010 and 2013, according to the Federal Reserve’s latest Survey of Consumer Finances. These declines reduc...
by bobcat2
Tue Sep 16, 2014 7:08 am
 
Forum: Investing - Theory, News & General
Topic: 2013 Federal Reserve Survey of Consumer Finances released
Replies: 9
Views: 1804

2013 Survey shows young households losing ground

Young families are better educated than ever before, but they are earning lower real incomes. The Federal Reserve Board’s newly released 2013 Survey of Consumer Finances indicates that the median family headed by someone under 35 years of age earned $35,509 in 2013 dollars. Adjusted for inflation, ...
by bobcat2
Mon Sep 15, 2014 10:03 am
 
Forum: Investing - Theory, News & General
Topic: 2013 Federal Reserve Survey of Consumer Finances released
Replies: 9
Views: 1804

2013 Federal Reserve Survey of Consumer Finances released

Every three years, the Federal Reserve’s Survey of Consumer Finances (SCF) interviews thousands of American families (6,026 for the newly published 2013 edition) about their income, savings, investments and debts. It is some of the richest information available about Americans’ financial lives, par...
by bobcat2
Mon Sep 08, 2014 10:14 am
 
Forum: Investing - Theory, News & General
Topic: 2013 Federal Reserve Survey of Consumer Finances released
Replies: 9
Views: 1804

Re: What risk-return really means

The nut of what Marks is saying is by definition risky investments are investments where the outcomes are highly uncertain. That risky investments cannot be counted on to provide reliable higher long-term returns, because if they could, they would not be risky. :wink: But what riskier investments do...
by bobcat2
Fri Sep 05, 2014 10:47 am
 
Forum: Investing - Theory, News & General
Topic: What risk-return really means
Replies: 41
Views: 2449

Re: Warning level

Rob5TCP wrote:I have had two warnings in 5 years and my warning level says 1
I am guessing that is the lowest level.
Beyond that, I never even noticed that before

I have never noticed this before either. :)

BobK
by bobcat2
Fri Sep 05, 2014 8:31 am
 
Forum: Forum Issues and Administration
Topic: Warning level
Replies: 39
Views: 3136

Re: Warning level

VictoriaF wrote:
bobcat2 wrote:When you joined
When you last visited
Your total posts
Your most active forum
Your warning level


In my profile the only lines are:
- Joined
- Last visited
- Total posts

The other two are not listed.

Victoria


Actually mine has six lines, not five. I left out - most active topic.

BobK
by bobcat2
Fri Sep 05, 2014 8:26 am
 
Forum: Forum Issues and Administration
Topic: Warning level
Replies: 39
Views: 3136

Re: Warning level

I have no idea what you are talking about. If you sign in to Bogleheads and click on User Control Panel you go to the Overview tab - Front Page. On the Front Page there is a Your Activity section block prominently displayed. Within the block it shows the following: When you joined When you last vis...
by bobcat2
Fri Sep 05, 2014 8:15 am
 
Forum: Forum Issues and Administration
Topic: Warning level
Replies: 39
Views: 3136

Warning level

In looking at my profile I see there is a warning level, but I don't know what the number means. How many warning levels are there and what does each level mean?

Thanks in advance,
BobK
by bobcat2
Fri Sep 05, 2014 7:42 am
 
Forum: Forum Issues and Administration
Topic: Warning level
Replies: 39
Views: 3136

Re: What risk-return really means

Call_Me_Op wrote:Any good discussion on risk should include a good definition. We know that standard deviation of returns is not a good definition of risk.
Standard deviation is not a definition of risk. Standard deviation is a measure of risk.

See my signature for the definition of financial risk.

BobK
by bobcat2
Fri Sep 05, 2014 7:17 am
 
Forum: Investing - Theory, News & General
Topic: What risk-return really means
Replies: 41
Views: 2449

Re: What risk-return really means

It is not "reasonable to make the assumption that returns follow a normally distributed pattern." It is only reasonable if there is a good reason to believe that returns are the sum of a reasonably large number of independent random variables, each of which follows some reasonable, well-b...
by bobcat2
Fri Sep 05, 2014 7:11 am
 
Forum: Investing - Theory, News & General
Topic: What risk-return really means
Replies: 41
Views: 2449

Re: Inflation Protected Annuity versus TIPs ladder

BobK, As far as I know, all deferred, inflation adjusted annuities are not inflation adjusted from the time you buy them to the time they start to pay off. Are there some that I missed? Or are you suggesting a non inflation adjusted annuity? You are right; they are not inflation adjusted until they...
by bobcat2
Fri Sep 05, 2014 1:33 am
 
Forum: Investing - Theory, News & General
Topic: Inflation Protected Annuity versus TIPs ladder
Replies: 9
Views: 976

Re: Inflation Protected Annuity versus TIPs ladder

TIPS ladder or Annuitized Income? Advantages of annuitized income. Annuitized income addresses longevity risk. TIPS ladder does not. Annuitized income is a contingent claim and therefore you get additional income from the mortality credit. Annuitized income can be inflation adjusted. When it is inf...
by bobcat2
Fri Sep 05, 2014 12:31 am
 
Forum: Investing - Theory, News & General
Topic: Inflation Protected Annuity versus TIPs ladder
Replies: 9
Views: 976

Re: What risk-return really means

The following is a post I made two years that is still true today. :) Note that this is a distribution of daily returns. With relatively low correlation between daily returns, the returns over longer periods are closer to a normal distribution. This is a general principle in statistics. The Central...
by bobcat2
Thu Sep 04, 2014 10:24 pm
 
Forum: Investing - Theory, News & General
Topic: What risk-return really means
Replies: 41
Views: 2449

Re: 100% Stock Thread Collection

Hi cjking et al, The idea that investing a small portion of your portfolio in LEAPS options is vastly more risky and expensive than investing in stock funds is simply wrong in my opinion. We disagree. Investing in futures is cheap. Investing in LEAPS is somewhat more expensive but fairly safe. I can...
by bobcat2
Wed Sep 03, 2014 3:10 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Stock Thread Collection
Replies: 93
Views: 5845

Re: 100% Stock Thread Collection

Phineas J. Whoopee writes. We seem to have descended into a contentious argument over whether 100% stock holders should be 105% holders instead, claiming if they're not they're behaving inconsistently at best. I am certainly not arguing that. I'm asking why there are so many threads about 100%, and ...
by bobcat2
Wed Sep 03, 2014 12:44 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Stock Thread Collection
Replies: 93
Views: 5845

Re: 100% Stock Thread Collection

bobcat2, Have you not read any of the above? Are you just loading up your gun for your next point without reflecting on the counter argument? There is a clear difference in the risk:return profile between a jump from 80-85% equities and 100-105%. 5% does not equal 5% in both instances. They are not...
by bobcat2
Wed Sep 03, 2014 12:01 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Stock Thread Collection
Replies: 93
Views: 5845
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