Bogleheads

[speedbump101]

Today's paper had a write up on 'Unveiling the Retirement Myth' and mentioned it was available for free download (until Aug 31st) ... I took advantage of the invitation and found it quite interesting... It's particularily well suited for those approaching the draw down hase of their investment life cycle... Nothing earth shatteringly new, however I feel comfortable recommending it... If you want a quick overview of his strategy read chapter 41 first 'The Zone Strategy'

BTW to download the book in pdf form (non printable) he does require a name and email address.. Also note this is a Canadian author so there may be a slight difference in some of the terminology...

Paper article here: http://www.financialpost.com/o....98736079e8

Download the green 'pre-release' version here http://retirementoptimizer.com/

SB...
_________________
“Knowledge is often mistaken for intelligence. This is like mistaking a cup of milk for a cow."- Bradford K Hull

[stratton]

The article was interesting so I'm grabbing it even if I'm not Canadian. I'm interested in a looksie.

Paul

[neverknow]

Thanks for the link. I read the article. The 2nd to last paragraph said it all for me;

[bob u.]

For those of us in the distribution phase, I'd also recommend Jim Otar's essay, "Lifelong Retirement Income: How to Quantify and Eliminate Luck" (published in Retirement Income Redesigned: Master Plans for Distribution, edited by Harold Evensky & Deena B. Katz).

It's an expensive book so you might want to visit your local library (assuming the library has it). Bob U.

[kenbrumy]

FWIW - I've tried to download the green book twice and it locked up both times.

[Ron]

[bob u.]

Thank you, Ron. That's the one. Bob U.

[HueyLD]

Hi speedbump101,

Just downloaded the book. One page down, 524 pages to go. I took a very, very quick speed reading of the book and it appears to be full of useful information.

Thank you for the timely notification. Best regards.

[speedbump101]

[kenbrumy]

I waited a few hours and it downloaded without a hitch. I don't know how quickly I'll get around to reading it.

[dbr]

On a quick perusal of what would download this is probably an example of the minimum complexity that is necessary to attack this problem at all. If it takes a 600 page book, then so be it.

[RadAudit]

I agree with the preface of the book - a very depressing piece. If there is a way out of the premise for the first several hundred pages - all portfolios disburse all their funds a lot sooner than you think almost regardless of the withdrawal rates - I wish he had put it closer to the front.
_________________
There are many simulations; but, there is only one true test.

[huskerblue]

Okay, so I'm computer challenged. I downloaded the book but now I can't find it on my computer. Advice?

Thanks.

[dbr]

[dbr]

[speedbump101]

[dbr]

[Hexdump]

is that he says to delay purchasing a SPIA as the payments will increase as you age.

Recently, I found that to be not so, and by a significant amount.

For the same amount and same terms, it was $300.00/month less than a year ago.

[dbr]

[1210sda]

Thanks very much for the tip. I have now saved the book to a pdf file. I suppose that once its on my HDD, that Mr Otar can't reach it. In other words, it should still be there after Aug 31 as you idicated in your post.

Thanks again, now I can slowly read over 500 pages (aaarrrrggghhh)

1210

[bob u.]

Hi dbr,

I think Otar does address (verbally and graphically) the "luck" factor in purchasing SPIAs (inflation-indexed is what he recommends) if you look at the section entitled, "Pooled Versus Individual Distribution Portfolios," in the link Ron provided.

In the essay, Otar covers a lot of important ground in a very clear, compact, and compelling manner. Bob U.

[m_j_paquette]

One of the more interesting bits in the book are the Warning Signs, signs at the start and during distribution that the portfolio (and retiree!) are heading for trouble.

It reminds me of one of the other strategies I've seen discussed, that suggests a portfolio, after experiencing a strong downdraft and at risk of failure, should be augmented by converting some of it to a SPIA.

The Warning Signs that Otar has listed provide a hard threshold for taking such action, as does his Green/Gray/Red Zone model.

(I don't want to reproduce his content. That would be Bad. Just download the PDF and take a look. There is lots of crunchy data and discussion there.)

[m_j_paquette]

Did anyone notice the section on rebalancing?

I got a kick out of his spin on the perennial Boglehead discussion. He appears to favor rebalancing in distribution once every four years, at the end of election years!

It works for me. I've always thought that an infrequent rebalance would be better than the monthly or quarterly styles, if only to let momentum in the marketplace do it's thing. My personal Plan has me using broad (+-25% of target) bands, and rebalancing once a year if those bands are exceeded or my cash/money market 'surge tank' is too low for the next year.

I'll have to play around with his ideas and see how they'd work for my own situation.

[livesoft]

speedbump, thanks for the link and everybody reading for the discussion on the book. I imagine J. Otar will also be reading this thread, so thanks to you as well!

Since in the US, social security benefits are essentially a CPI-indexed life-annuity, this means that one can use that to get above the Green Zone into the Gray Zone.

In the end, the message from these 525 pages may boil down to something very simple: The SWR for retirees is about 4%.

From p. 451 on a failure mode:

[cotar@rogers.com]

Wow, I did not think I would get this much response. I am very pleased. Thank you for all your comments.

Yes, the hosting server is congested somewhat due to the overwhelming response. I apologize for that, but there is not much I can do about it. Here are some hints:

-Please download only once and save it on your computer. Then you can read it at anytime at your convenience.

-Please enter your correct name and address and e mail, in case I have to contact you. Once the book is printed, I will purge all this information. I just need it in case of errata.

-For those who are concerned about my business model: I truly appreciate your concern. However, you don't need to worry about me. I am very deep in the green zone, and the existence of these posts indicate that my "business" plan is working well. The only person who gets upset about these free downloads is my wife, but we have been together for 32 years and she is used to me by now (I hope).

- I have gotten an overwhelming download response, so I changed the rules slightly: The green download is free until end of August 31st, or for the first 5,000 (OK maybe a little more than that) successful downloads. After that it will be for a great sum of $3.99.

-It took me on and off 6 years to complete this book, I hope you all enjoy it.

Over and out,
Jim Otar

[livesoft]

[speedbump101]

Jim, as a fellow Canadian I'd like to personally thank-you for this terrific book, and apologize for helping facilitate the overloading of your server

There are so many books out there, almost all of them geared to the accumulation phase, while books like yours; ones directing the leading edge of the boomers towards a successful transition to the "decumulation" phase, are almost non existent. Thank-you for taking the road less travelled.

I also see this is your first post here... Welcome to the best financial forum on the web, and I sincerely hope you drop in occasionally and add some sage advice.

SB...
_________________
“Knowledge is often mistaken for intelligence. This is like mistaking a cup of milk for a cow."- Bradford K Hull

[bob u.]

Jim,

As an American with Torontonian in-laws ( ), I, too, would like to thank you for your good sense and generosity.

Here's to the Green Zone! Many thanks. Bob U.

[leesaage]

Jim,

Welcome to the forum. I'm about 100 pages into the book and find it a good read. As a recovering engineer, I actually like the math.

I downloaded the pdf file and transferred it into a Sony Reader. Some of the tables did not survive the transfer fully intact but the result is still quite readable and more convenient than a computer.

With regard to your discussion of cycles, I will gently and respectfully suggest that we humans have evolved to see and respond to patterns, even when none exist. Completely random activities can produce results that appear to be patterns, but are identifiable as such only in hindsight and therefore are of limited value in making decisions about the future.

Great read, though. Thank you for your insights and for your generosity.

Lee

[livesoft]

[Goodman888]

Jim, you are certainly a generous person and thank you for the opportunity to read and take your advice on retirement planning. I plan to retire within the next year and will read your book and hope to find good advice on what to do with my retirement savings. There is so much information that one can easily get lost in trying to develop a plan. What I am looking for is some good common sense approach that is easy to understand and follow.

[speedbump101]

I just noticed that Jim Otar has linked this thread on his web site...

Welcome linkees to one of the best financial forums on the internet... This forum in conjunction with it's Canadian relative http://www.financialwebring.org/ are the jewels of internet financial forums... Here you will find a 14k plus community of polite, like minded (mostly) and highly knowledgeable, sometimes opinionated members... We also have several well know authors in our ranks... Our common interest is passive investing in the style of Jack Bogle, the founder of Vanguard.

Feel free to sniff around, visit the Wiki and please if you have a question or a comment post away...

SB...
_________________
“Knowledge is often mistaken for intelligence. This is like mistaking a cup of milk for a cow."- Bradford K Hull

[LH]

How to convert and read the pdf book on a kindle

http://www.tech-recipes.com/rx....ur-kindle/


http://www.mobipocket.com/en/D....reator.asp

[DaleMaley]

[Taz]

FYI - I checked this morning and the .pdf download is no longer free, although the paid version is only $3.99. "Missed it by that much."

[yourwealthadvisor.ca]

I am an advisor from Canada and I can't thank Jim enough. I've downloaded the print version of his book and would recommend it to everyone.

Jim's has earned my respect and he certainly deserves huge accolades for his efforts.

Clients and advisors alike need safe and suitable strategies for the distribution phase of life. Thankfully, Jim is leading the way for all of us.

I use Jim's "Zone Approach" in my business with all clients in or approaching the distribution phase.

Congrats to Jim and best regards to all the Bogleheads.

Sincerely,

Graham Cook

Nanaimo, BC, Canada

PS. I used to post here about Zvi Bodie's work and laddering stripped real return bonds in my retirement accounts. I had to reregister to make this post because I forgot my old username.

[dizzy]

I've read a little bit of it so far, and its very interesting to see how annuities can help outsource some of the risk and improve performance, even in the green zone.

However, I think some caution is in order when considering annuities. In Chapter 33 we see

[huskerblue]

I'm into it a ways and it is interesting but so far for a guy who is out to show the variability of all things investing and debunking myths, he sure is intent on showing static withdrawal rates to prove his reality for all his average Joe's.

I have yet to meet an old person who, in the face of a declining portfolio, keeps ramping up his withdrawals cause, well, damn it, that's my plan. They will eat more rice and beans at home and less dinners out long before they get to $100,000 left in the kitty but by god, I'm upping my WD's to $74,650 this year!!!

[dbr]

[Hexdump]

Though the table 20.5 is a puzzle to me.

It deals with the survivability of a portfolio that has a mandated distribution, IE MRD.

To paraphrase:
If the MRD is less than the SWR (sustainable withdrawal rate)

Impact on the portfolio:
Lucky = Significant
Medium = significant
Unlucky = significant

I would have thought that the smaller the MRD, the less the impact, IE if the MRD = 000, then there would be no impact, if the MRD = 1, minimal impact, etc.

For example. in my case the MRD = $19.000, and the SWR is about 2%, say $35,000. According to the table, in all the cases, this will have a significant impact on my portfolio.
Since the $19,000 is part of the $35,000, I don't get it.

Oh well, maybe after I have a beer or two.

hex

[dbr]

[dizzy]

[MWCA]

[speedbump101]

Interesting when backs away from this and tries to look at the big picture here.

-Individuals assess their personal preparedness for risk in retirement by applying a zone overlay. Those in the grey zone must export their risk to a third party insurance company’s annuity.

-Insurance companies on the other hand also ‘zone’ their risk, and have in the past exported this risk to a third party in the form of a swap… Beyond this exactly who and what risk actually exists is left to the ethers in the top floors of Wall St.

Now fast forward to a black swan event, or even a repeat of the markets of 2008, which were arguably not a BS event… The above scenarios are attempts to protect retirees in a prolonged down market.

Fortunately we well ‘diversified’ retiree’s can sleep well knowing our risk outsourcing has provided us with non correlation to stock market events… We can relax knowing we are non-correlated, we are safe… Hummm, haven’t we seen this movie before?

Ok, enough with the fairy tale… We all know now that in a crisis all correlations go to one. In a crisis or perceived crisis, investors blow up, insurance companies blow up, Wall Street firms blow up. Everything blows up with the exception of a couple of safe havens. In recent past the safe haven of choice has been US treasuries, and in the more distant past gold…

I guess there is no real answer here, except that personally the pot of gold at the end of my rainbow doesn’t contain gold at all… It’s filled with health, hope and happiness (ok maybe a little bit of financial happiness too)… We can plan but we can’t guarantee our future. Everyone is looking for the perfect plan; however I’m afraid it doesn’t exist, or it hasn’t been discovered yet. In the end there is only one ‘for certain’ non correlation… death is absolutely, unequivocally uncorrelated with life!

Edit: Does anyone know the half life of recency bias?


Now back to the scotch thread… Scotch and financial planning are definitely correlated!

edit: spelling

SB…
_________________
“Knowledge is often mistaken for intelligence. This is like mistaking a cup of milk for a cow."- Bradford K Hull

[cotar@rogers.com]

[cotar@rogers.com]

On the comment about the risk of the insurance company going under:

Depending how deep you are in the red zone, the probability of running out of money holding an investment portfolio generally -at reasonable withdrawal rates- is 40% and higher. (about 45% at 5% initial withdrawal rate, 80% at 6% even with a balanced portfolio)

The risk of an insurance company going under is significantly less than 50%. Furthermore, there is a guaranteed amount ($2,000/month in Canada) which is continued to be paid even if the insurer goes under. So, if the person needs $3000/month to meet his basic shortfall, I buy it from two different insurers.

[bob90245]

[cotar@rogers.com]

On the comment about adjusting income down:

Yes, you are right. Just because you do the zone analysis at age 65 does not mean you can then take the same income for the rest of your life.

As I mentioned in Chapters 42-44, you need to review your zones periodically and make necessary adjustments for the income allocation and income levels.

It is just that, if you are in the red zone, all your assets should be allotted to annuity at the first place, so there is not much to review. In the gray zone, annually. In the green zone, annually, but you can be more relaxed about it. At each review, you might be able to adjust income -in theory-, but it actually means adjusting your expenses.

Generally, I find that it works better when your withdrawals are below the sustainable withdrawal rate to start with, and increase withdrawals only after observing that you are "lucky". If your starting withdrawals are higher than SWR to start with, and then later you find out you need to cut back, the history shows that it makes little - if any- difference to the outcome (Chapter 39 / Reduction in Bad Markets / Reduction after Withdrawals become Excessive)

[dizzy]

[speedbump101]