Bogleheads

[jh]

...

[BillRogers]

If we revisit the Trinity study of safe withdrawal rates we see that from 1926 through 1995 (includes depression years) the following combination of portfolio allocation, withdrawal rates, and adjustments provided 100% success rates for the portfolio to provide the desired income:

Note stocks are defined as the S&P 500 (or VFINX), and bonds were defined as long-term, high-grade corporate bonds (i.e., Long-Term Investment Grade Bond Fund) in the study.

Withdrawal as a % of Initial Portfolio Value (similar to a pension without a COLA)

100% Stocks
15 years (3-4% withdrawal rate)
20, 25 & 30 years (3% withdrawal rate)

75% stocks/25% bonds
15 years (3-6% withdrawal rate)
20 years (3-5% withdrawal rate)
25 & 30 years (3-4% withdrawal rates)

50% stocks/50% bonds
15 years (3-7% withdrawal rate)
20 years (3-6% withdrawal rate)
25 & 30 years (3-5% withdrawal rates)

25% stocks/75% bonds
15 years (3-8% withdrawal rate)
20 years (3-7% withdrawal rate)
25 & 30 years (3-6% withdrawal rates)

100% Bonds
15 years (3-7% withdrawal rate)
20 years (3-5% withdrawal rate)
25 & 30 years (3-4% withdrawal rate)

Inflation-Adjusted Withdrawal as a % of Initial Portfolio Value (similar to Social Security)

100% Stocks
15 years (3-5% withdrawal rate)
20 & 25 years (3-4% withdrawal rate)
30 years (3% withdrawal rate)

75% stocks/25% bonds
15 years (3-5% withdrawal rate)
20 & 25 years (3-4% withdrawal rate)
30 years (3% withdrawal rates)

50% stocks/50% bonds
15 years (3-5% withdrawal rate)
20 & 25 years (3-4% withdrawal rate)
30 years (3% withdrawal rates)

25% stocks/75% bonds
15 years (3-5% withdrawal rate)
20 years (3-4% withdrawal rate)
25 & 30 years (3% withdrawal rates)

100% Bonds
15 years (3-5% withdrawal rate)
20 & 25 years (3% withdrawal rate)
30 years (none at 100% success rate)

Best wishes,
Bill

[RustyShackleford]

You folks have just about convinced me that I made a big
mistake getting into these. I'm tempted to convert to VTSAX
(bearing in mind I need to adjust the rest of my portfolio to
keep a similar stock/bond and domestic/foreign mix).

Is there any stale pricing issue on this conversion ? In other
words, does today's closing price of VPGDX jibe with TODAY's
closing price of the constituent funds (without a day's lag or
some other effect) ? So as long as I pick a day when the
other funds (foreign stocks and various bonds) "seem" to be
up, I'll not be losing anything on the switch ?

[jh]

...

[CyberBob]

[RustyShackleford]

Yes, I'm about convinced. I suppose if it's really true that
each day's closing price on VPGDX is in sync with the closing
price on the constituent funds, it doesn't really matter when I
make the switch to VTSMX. Subject to, of course, whether or
not I believe the other constituent funds (bonds and foreign
stocks) are under-/over-valued.

And if I believe in EMH like a good Boglehead, and I make the
adjustments to the remainder of my portfolio the same day (to
account for the loss of the bonds and foreign stocks that were
in VPGDX), then even that does not matter.

[RustyShackleford]

Ok, it's done ... VPGDX -> VTSAX. I am now divested of the
Mother Ship's worst idea ever.

I realize I need to adjust the rest of my portfolio for the loss of
the bond and foreign equity holdings. I think maybe 40% was
too high on foreign share of equity anyhow, so not too worried
about that. Meanwhile I needed to get my bond holdings more
into tax-sheltered accounts anyhow.

[riskreward]

I own the Managed payout distri. fund. . Here's my take on some of the comments
1. I don't believe that Vanguard has misrepresented these funds in any way. They aren't touting them as a safe investment. Yes, you do need to be able to read and have a minimal level of comprehension to understand that they hold equities and therefore your principal and therefore payout will fluctuate both up and down. It's not rocket science.
2.I've heard Ameriks note that since soc. security is a significant part of many people's retirement and that since SS is a an inflation adjusted annuity then some equity exposure makes sense. It seems they are trying to look at the big picture (including SS) and design something that will make $ last. (Many complain about high equity in TR also but I think VG realistically includes SS considerations in retirement product designs).
3. The fact that the payout adjusts is a good thing. If you have a long period of market declines, the payout will be less. This forces one to reduce their spending/part time job, etc.. This to me seems like a prudent thing.
One could possibly get themselves in more trouble by blithely continuing to take out an ever increasing inflation adj. 4% out of target retirement funds. After all, they also would have declined in a down market (the 2010 TR is about 50% stocks and the MP distri is about 60%). Seems the adjusting payout acts as a governor to help lessen running out of $.

[riskreward]

I own the Managed payout distri. fund. . Here's my take on some of the comments
1. I don't believe that Vanguard has misrepresented these funds in any way. They aren't touting them as a safe investment. Yes, you do need to be able to read and have a minimal level of comprehension to understand that they hold equities and therefore your principal and therefore payout will fluctuate both up and down. It's not rocket science.
2.I've heard Ameriks note that since soc. security is a significant part of many people's retirement and that since SS is a an inflation adjusted annuity then some equity exposure makes sense. It seems they are trying to look at the big picture (including SS) and design something that will make $ last. (Many complain about high equity in TR also but I think VG realistically includes SS considerations in retirement product designs).
3. The fact that the payout adjusts is a good thing. If you have a long period of market declines, the payout will be less. This forces one to reduce their spending/part time job, etc.. This to me seems like a prudent thing.
One could possibly get themselves in more trouble by blithely continuing to take out an ever increasing inflation adj. 4% out of target retirement funds. After all, they also would have declined in a down market (the 2010 TR is about 50% stocks and the MP distri is about 60%). Seems the adjusting payout acts as a governor to help lessen running out of $.

[riskreward]

I own the Managed payout distri. fund. . Here's my take on some of the comments
1. I don't believe that Vanguard has misrepresented these funds in any way. They aren't touting them as a safe investment. Yes, you do need to be able to read and have a minimal level of comprehension to understand that they hold equities and therefore your principal and therefore payout will fluctuate both up and down. It's not rocket science.
2.I've heard Ameriks note that since soc. security is a significant part of many people's retirement and that since SS is a an inflation adjusted annuity then some equity exposure makes sense. It seems they are trying to look at the big picture (including SS) and design something that will make $ last. (Many complain about high equity in TR also but I think VG realistically includes SS considerations in retirement product designs).
3. The fact that the payout adjusts is a good thing. If you have a long period of market declines, the payout will be less. This forces one to reduce their spending/part time job, etc.. This to me seems like a prudent thing.
One could possibly get themselves in more trouble by blithely continuing to take out an ever increasing inflation adj. 4% out of target retirement funds. After all, they also would have declined in a down market (the 2010 TR is about 50% stocks and the MP distri is about 60%). Seems the adjusting payout acts as a governor to help lessen running out of $.

[brick-house]

riskreward wrote:

[nisiprius]