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Re: Guyton-Klinger Withdrawal Decison Rules

As an example: Current age: 55 Last withdrawal age: 99 AA: 75% stocks / 25% bonds => D = .75 X .4 + .25 X .2 = 35% 1st year VPW percentage = 4.9% 1st year F = current portfolio X 3.2% (where 4.9 X (1 - .35) = 3.2) That's a quite conservative initial 3.2% withdrawal rate for a 55 y.o. early retiree.
by longinvest
Fri Apr 24, 2015 12:09 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Siamond, How about an approach to smoothing that doesn't increase portfolio risk? Main idea: Consider VPW as a ceiling. Consequence: No possibility of premature depletion. The objectives: 1- Minimize withdrawal downward variations, 2- Adapt withdrawals to asset allocation and retirement horizon, 3- ...
by longinvest
Fri Apr 24, 2015 11:57 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: What is a Boglehead?

Bogleheads Investment Philosophy
by longinvest
Thu Apr 23, 2015 3:29 pm
 
Forum: Investing - Theory, News & General
Topic: What is a Boglehead?
Replies: 53
Views: 2314

Re: Do you Bogleheads really follow the 3-4% SWR rule?

So, as I understand the SWR rule, you withdraw some nominal amount, 3 or 4% in the first year of retirement and adjust thereafter for inflation, regardless of what happens in the market. But, do you Bogleheads who are doing this actually stick to it, year in and year out? Or, when the stock market ...
by longinvest
Thu Apr 23, 2015 3:12 pm
 
Forum: Investing - Theory, News & General
Topic: Do you Bogleheads really follow the 3-4% SWR rule?
Replies: 46
Views: 3335

Re: Can't get excited about bond funds

When I look at Vanguard's TBM fund Distribution by effective maturity , I see: Under 1 Year: 1.4% 1 - 3 Years: 25.8% 3 - 5 Years : 22.8% 5 - 10 Years: 34.3% 10 - 20 Years: 3.4% 20 - 30 Years: 11.8% Over 30 Years: 0.5% In other words, 50% of TBM will mature in less than 5 years. Another third will ma...
by longinvest
Tue Apr 21, 2015 4:20 pm
 
Forum: Investing - Theory, News & General
Topic: Can't get excited about bond funds
Replies: 19
Views: 1529

Re: What are you up YTD?

jay22 wrote:How do you calculate your YTD returns?

I use the wiki:Calculating personal returns spreadsheet.
by longinvest
Mon Apr 20, 2015 3:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: What are you up YTD?
Replies: 319
Views: 39144

Re: Bernstein: "If you've won the game, stop playing."

I have a lot of respect for Dr. Bernstein, and I know that he was using an analogy. But, his analogy matches a philosophy where money invested for the long term can be gambled in the stock market (using passive index funds, of course; not real gambling in individual stocks). It then becomes importan...
by longinvest
Fri Apr 17, 2015 1:56 pm
 
Forum: Investing - Theory, News & General
Topic: Bernstein: "If you've won the game, stop playing."
Replies: 146
Views: 14752

Re: Bernstein: "If you've won the game, stop playing."

Call me conservative, but for me investing is not a game , so I can't technically stop playing . (I agree with Rusty on this). Risk, in my life, is ever present. I do buy insurance contracts (house, car, disability, ...), but insurance doesn't cover every possibility. I just don't know the future. I...
by longinvest
Fri Apr 17, 2015 12:01 pm
 
Forum: Investing - Theory, News & General
Topic: Bernstein: "If you've won the game, stop playing."
Replies: 146
Views: 14752

Re: Nikkei with reinvested dividends

bpp updates this total-return chart yearly:

viewtopic.php?f=10&t=23036&start=100#p2379273
Image
by longinvest
Tue Apr 14, 2015 6:21 am
 
Forum: Investing - Theory, News & General
Topic: Nikkei with reinvested dividends
Replies: 8
Views: 1074

Re: Do you think Ric Edelman is correct, never pay down mort

One definition of Risk is doing badly in bad times. (William Sharpe)

The bank won't foreclose on a paid-off home mortgage.
by longinvest
Tue Apr 07, 2015 9:08 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16482

Re: Total rate of return in a portfolio

I monitor my portfolio's performance monthly using the wiki:Calculating personal returns spreadsheet. The spreadsheet provides two types of returns: ⋅  Investor return (or internal rate of return, like XIRR). ⋅  Portfolio return (or growth of $10,000 return, comparable to the per...
by longinvest
Mon Apr 06, 2015 2:11 pm
 
Forum: Investing - Theory, News & General
Topic: Total rate of return in a portfolio
Replies: 1
Views: 374

Re: If long-term, why not just go really high risk?

Why don't people consider long-term nominal bonds as high risk ? They have much inflation risk; maybe more so than stocks. Why shouldn't this risk be compensated? As for long-term TIPS, they don't have inflation risk, but they do have much interest rate risk. Again, why shouldn't this be compensated...
by longinvest
Thu Apr 02, 2015 8:46 pm
 
Forum: Investing - Theory, News & General
Topic: If long-term, why not just go really high risk?
Replies: 49
Views: 4979

Re: How does one invest without rebalancing?

dbr reminds me that investing in a total stock or bond market index fund is like, somehow, not rebalancing, but not exactly. The index does cause some minor rebalancing to take place. It could be argued that, to minimize risk, one should match market-weight movements and minimize transactions. As a ...
by longinvest
Thu Apr 02, 2015 8:20 pm
 
Forum: Investing - Theory, News & General
Topic: How does one invest without rebalancing?
Replies: 17
Views: 1660

Re: How does one invest without rebalancing?

Deleted. See my next post.
by longinvest
Thu Apr 02, 2015 7:48 pm
 
Forum: Investing - Theory, News & General
Topic: How does one invest without rebalancing?
Replies: 17
Views: 1660

Re: How does one invest without rebalancing?

Logically, if one does not wish to rebalance, one must always invest or withdraw money according to the current ratio of assets in the portfolio. Here's an example: Initial $10K 3-fund portfolio: $3,333 US Stocks / $3,333 Int Stocks / $3,334 US Bonds 1 month later, the portfolio has drifted to: $3,4...
by longinvest
Thu Apr 02, 2015 7:28 pm
 
Forum: Investing - Theory, News & General
Topic: How does one invest without rebalancing?
Replies: 17
Views: 1660

Re: 15, 20, or 30?

I would choose a home price where I could comfortably pay a 15 year mortgage, and still be able to save 15% of my gross income. If that is a struggle, I would choose a less expensive home or wait. I would also choose a home in a neighborhood where the "cost of living" is reasonable- a nei...
by longinvest
Thu Apr 02, 2015 6:44 pm
 
Forum: Personal Finance (Not Investing)
Topic: 15, 20, or 30?
Replies: 26
Views: 3031

Re: Guyton-Klinger Withdrawal Decison Rules

OK. I'm taking a step back. There were two discussions happening in this thread. One about G-K, one about "smoothing VPW". "Smoothing VPW", to me, means reducing withdrawal volatility while still meeting VPW's objectives. If we're to replace VPW's objectives by different objectiv...
by longinvest
Tue Mar 31, 2015 1:58 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Variable Percentage Withdrawal (VPW)

Dfrank, These are all very good ideas, but the objective of the spreadsheet is mostly to illustrate VPW and let people backtest it. Keeping the spreadsheet as simple as possible allows people to investigate how it works and see that there are no hidden magical formulas. The spreadsheet is really not...
by longinvest
Tue Mar 31, 2015 1:38 pm
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 539
Views: 149756

Re: Guyton-Klinger Withdrawal Decison Rules

Siamond,

I see that we are talking past each other. So, let's agree to disagree.
by longinvest
Mon Mar 30, 2015 1:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Siamond, FIRST: A ROBUST APPROACH TO DEAL WITH LONGEVITY AND BEQUEST MOTIVES The proper approach to tackle longevity risk is an inflation-indexed SPIA that becomes relatively cheap when one reaches 75 years old. Even at 65 years old, one can get an inflation-adjusted payout of 4%, relatively equal t...
by longinvest
Mon Mar 30, 2015 9:15 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Scenario 9h is defined as 25% US stocks, 25% Int'l stocks, 50% bonds. Back to the fixed VPW rate, and no smoothing. And let's compare to the smoothed scenario from Step 3 (9e) with a more aggressive portfolio. I will let you draw your own conclusions (do check the detailed stats in the next post). ...
by longinvest
Sun Mar 29, 2015 2:57 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Siamond, What are your objectives? I still don't see the point of relying on market timing to artificially smooth lengthened portfolio withdrawal paths while reducing withdrawal efficiency (less money withdrawn in total) and increasing portfolio risk. Worse, I'm almost detecting a suggestion that a ...
by longinvest
Sun Mar 29, 2015 2:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Variable Percentage Withdrawal (VPW)

I do not endorse the smoothing methods presented in that thread, as: ⋅  they increase the risk of the portfolio doing badly in bad times, ⋅  some of these methods depend on timing the market (using valuations to estimate future returns), and ⋅  they require that one unn...
by longinvest
Sun Mar 29, 2015 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 539
Views: 149756

Re: More XIRR Questions

I like using this spreadsheet wiki:Calculating personal returns. It calculates both investor (internal) and portfolio (comparable) returns.
by longinvest
Sun Mar 29, 2015 1:36 pm
 
Forum: Investing - Theory, News & General
Topic: More XIRR Questions
Replies: 19
Views: 1558

Re: Why Bonds With 20 Year Horizon?

William Sharpe defines risk as " doing badly in bad times ". A portfolio which includes both stocks and bonds is less risky, using this definition, than a portfolio that only includes either stocks or bonds. And this holds for both short-term and long-term investing. Put simply: it's not a...
by longinvest
Wed Mar 25, 2015 8:27 am
 
Forum: Investing - Theory, News & General
Topic: Why Bonds With 20 Year Horizon?
Replies: 72
Views: 5335

Re: Guyton-Klinger Withdrawal Decison Rules

I'm still trying to understand how a retiree could have, one one hand, a high short-term portfolio volatility tolerance (able to loose half his nest egg in the mid 1975 with no emotions), and on the other hand have a low short-term withdrawal volatility tolerance (cutting withdrawals after a 50% por...
by longinvest
Sun Mar 15, 2015 4:49 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

I don't see much difference between the G-K and VPW+20 years, but maybe that's me. If you really want to smooth VPW's withdrawals, and you have a deep belief in reversion to the mean , why don't you simply allow for a 30% band and make 10% (of difference) adjustment each year (except when the band ...
by longinvest
Sun Mar 15, 2015 4:31 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Here's what smoothed VPW looks like for your suggested $30K S.S., $1.5M 35%US/35%INT/30%BND, age 60 to 119 withdrawals, for start years 1955, 1965, and 1975 Not quite sure that the first JPG file you included is relevant... Nice cartoon, though! :wink: Cool, sounds that you found an effective short...
by longinvest
Sun Mar 15, 2015 4:08 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Here's what smoothed VPW looks like for your suggested $30K S.S., $1.5M 35%US/35%INT/30%BND, age 60 to 119 withdrawals, for start years 1955, 1965, and 1975: http://i58.tinypic.com/9ifs4l.png http://i57.tinypic.com/2nv9g1x.png http://i60.tinypic.com/2rwurg7.png Now, one could easily think that this ...
by longinvest
Sun Mar 15, 2015 1:05 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: How do you structure/hold your Emergency Funds (EF)?

I've adopted Taylor Larimore's approach. As I have a significant amount of bonds in my portfolio, my portfolio is my emergency fund. If I have to sell investments due to an emergency, it will be a rebalancing opportunity. If it happens during a downtrun, I'll end up selling bonds, if it happens duri...
by longinvest
Sun Mar 15, 2015 10:02 am
 
Forum: Personal Finance (Not Investing)
Topic: How do you structure/hold your Emergency Funds (EF)?
Replies: 22
Views: 2604

Re: Guyton-Klinger Withdrawal Decison Rules

Not too sure about your modified VPW proposal, adjusting year over year by 10% isn't necessarily a good idea. 10% of $120k is $12k, hence $1k/month. This is significant. G-K is quite subtle in this respect, you need to get out of the bands created by the guardrails to trigger an adjustment. Which n...
by longinvest
Sun Mar 15, 2015 1:09 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Why don't you implement the Modified VPW and compare it to G-K (and plain VPW)? The advantage of VPW is the automatic course correction (due to the planned depletion) that is missing in G-K. I initially thought that you would simply suggest applying G-K rules to VPW; I am actually surprised that you...
by longinvest
Sun Mar 15, 2015 12:55 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

The problem is that a sequence of returns that would keep (for a long enough time) ModifiedWithdrawal barely below the upper 30% band of a decreasing PlainWithdrawal would harm the portfolio. The self correction of VPW would limit, somehow, the harm, but overall, I am pretty certain that the modifie...
by longinvest
Sun Mar 15, 2015 12:02 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

I don't see much difference between the G-K and VPW+20 years, but maybe that's me. If you really want to smooth VPW's withdrawals, and you have a deep belief in reversion to the mean , why don't you simply allow for a 30% band and make 10% (of difference) adjustment each year (except when the band r...
by longinvest
Sat Mar 14, 2015 11:36 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: If 2% is real, we are . . . . ?

EnjoyIt wrote:This fear mongering needs to stop as very little good can come of it. I for one will ignore the noise.

+1 :thumbsup
by longinvest
Wed Mar 11, 2015 10:19 am
 
Forum: Investing - Theory, News & General
Topic: If 2% is real, we are . . . . ?
Replies: 63
Views: 6484

Re: Rebalancing into a black hole

Crake, I have been considering a particular risk to the strategy of setting an AA and periodically re balancing. I'll use the three fund portfolio to demonstrate this particular risk. Using the three fund portfolio attracted our quick replies, as any of the three funds getting to zero would probably...
by longinvest
Tue Mar 10, 2015 4:29 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing into a black hole
Replies: 12
Views: 1331

Re: Rebalancing into a black hole

If you rebalance only once a year, how many lifetimes will it take your portfolio to reach $0 ? :)

Hint: Just don't rebalance too frequently, and don't invest into things that go to zero. Then, stay the course!
by longinvest
Tue Mar 10, 2015 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing into a black hole
Replies: 12
Views: 1331

Re: BOGLEHEADS 13 VIDEOS

Rich, thanks so much!
by longinvest
Tue Mar 10, 2015 6:30 am
 
Forum: Investing - Theory, News & General
Topic: BOGLEHEADS 13 VIDEOS
Replies: 11
Views: 2884

Re: Bernstein: 2% investment returns over next 20 years

Trader Joe wrote:Tune out the noise.

+1 :thumbsup

Nobody knows nothin!
http://youtu.be/A0gQiz0pCyI
by longinvest
Tue Mar 10, 2015 6:21 am
 
Forum: Investing - Theory, News & General
Topic: Bernstein: 2% investment returns over next 20 years
Replies: 216
Views: 23580

Re: Retirement Withdrawals

ourbrooks, I am glad that you found a plan that works for you.
by longinvest
Sun Mar 08, 2015 9:36 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Withdrawals
Replies: 16
Views: 2080

Re: Retirement Withdrawals

I've looked at VPW and decided it doesn't fit my needs at all, but, perhaps, I'm not interpreting it correctly. Suppose that I started retirement in 2007 with a 60/40 portfolio. That year, I'd withdraw 4.8%. The next year, the stock market dropped 39% so my overall portfolio dropped by 23%. In 2008...
by longinvest
Sun Mar 08, 2015 9:09 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Withdrawals
Replies: 16
Views: 2080

Re: Retirement Withdrawals

I'm planning on delaying Social Security and will have bigger withdrawals in the early years, very small withdrawals during both Social Security and Pension payment periods, and then larger withdrawals when the last person is standing and pension and Social Security payments decrease. So far, the o...
by longinvest
Sun Mar 08, 2015 6:56 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement Withdrawals
Replies: 16
Views: 2080

Re: interest rate increase looming. what you gonna do ?

with interest rate expected to increase this year, what should be the strategy to handle that while our money is sitting in etfs/stocks ? Interest rates change every day; they go up and down. Sometimes they go up more, sometimes they go down more. So, instead of trying to guess the future, I'll go ...
by longinvest
Sat Mar 07, 2015 2:24 pm
 
Forum: Investing - Theory, News & General
Topic: interest rate increase looming. what you gonna do ?
Replies: 65
Views: 6456

Re: Guyton-Klinger Withdrawal Decison Rules

G-K is certainly simple enough for me. I don't think I would find your system any simpler, and possibly I would find it more complex. A constant withdrawal approach is certainly simpler, but it produces such a different set of results that it really isn't comparable. Simplicity is not an important ...
by longinvest
Thu Mar 05, 2015 1:19 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Longinvest-- G-K appears ideal for my purposes, and not very difficult to implement, especially once one has done it for a few years. (Your multi-handed plan seems more complex to me, e.g., constant withdrawal for some money, VPW for other money, CD ladders, etc.) But, different strokes is how it S...
by longinvest
Thu Mar 05, 2015 10:19 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Now, it would be interesting to look at the portfolio balance path and withdrawal path in nominal terms. Inflation is very volatile, yet it is mostly felt on longer time periods (therefore the money illusion that fools so many people). In the short term, most people simply adapt their spending patt...
by longinvest
Thu Mar 05, 2015 9:59 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Thank you all for these excellent posts--they are very helpful. Does the following seem like a fair summary? In regard to my original question, the consensus here is that Guyton-Klinger is a very acceptable set of decision rules that will tend to maximize the safe withdrawal rate, even permitting u...
by longinvest
Thu Mar 05, 2015 9:04 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

It is my personal opinion that the most effective tool, for lowering withdrawal volatility, is the addition of bonds in a portfolio (VPW), instead of using smoothing methods (G-K). Most smoothing methods require markets to recover quickly enough, as they tend to hurt the portfolio in bad times by k...
by longinvest
Thu Mar 05, 2015 8:01 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Let me add that, in a worse than worst-historical scenario, G-K still carries a risk of premature depletion. VPW doesn't carry such risk, but it will lower withdrawals more-or-less proportionally to the loss in value of the portfolio; it can seem brutal, but that's still better than dropping withdr...
by longinvest
Thu Mar 05, 2015 7:23 am
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063

Re: Guyton-Klinger Withdrawal Decison Rules

Thanks, Siamond. Your charts expose very clearly the trade-offs in volatility-of-withdrawals and spending-level of G-K and VPW. Let me add that, in a worse than worst-historical scenario, G-K still carries a risk of premature depletion. VPW doesn't carry such risk, but it will lower withdrawals more...
by longinvest
Wed Mar 04, 2015 9:22 pm
 
Forum: Personal Finance (Not Investing)
Topic: Guyton-Klinger Withdrawal Decison Rules
Replies: 131
Views: 10063
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