Search found 461 matches

by Allan Roth
Sun Jan 28, 2024 5:23 pm
Forum: US Chapters
Topic: 🎁 🎉Happy 100th Birthday to Taylor Larimore 🎊🎂
Replies: 429
Views: 43303

Re: 🎁 🎉Happy 100th Birthday to Taylor Larimore 🎊🎂

Happy Birthday Taylor. Thank you for a century of helping people - from defending our freedom to helping millions of people reach financial freedom. A life well lived!
by Allan Roth
Mon Nov 27, 2023 6:00 pm
Forum: Investing - Theory, News & General
Topic: TIPS reinvestment risk
Replies: 25
Views: 3343

Re: TIPS reinvestment risk

This is great, Dr. McQuarrie. Thanks so much! To be clear, this isn't relevant to a TIPS ladder since the coupons would not be reinvested but is instead withdrawn as part of the cash flow to live on. All things being equal, buying one TIPS security with the smallest coupon minimizes the reinvestment risk. But you are right that even a TIPS with a 0.125% coupon has more risk over time as the principal value increases since the cash distribution is based on that principal value. Assuming we have positive inflation, which is quite likely, the risk increases over time though the possible lower rate is over a shorter period of time.

Thanks again for doing this.
by Allan Roth
Sun Oct 29, 2023 3:48 pm
Forum: Investing - Theory, News & General
Topic: Beat Inflation Handily, and Risk-Free - Allan Roth
Replies: 73
Views: 14344

Re: Beat Inflation Handily, and Risk-Free - Allan Roth

[ Roth says this also in the linked article: It also makes the assumption that the TIPS interest could be reinvested. This assumption is true for the inflation component (added to the principal), but, for example, this particular bond has a 1% coupon that is paid out in cash. That would have to be reinvested and could pay more or less than the current real yield. Some TIPS have coupon yields as low as 0.125% which minimizes the reinvestment risk. I'm not sure that's correct. There's a thread on the topic of bond YTM in which it can be discovered that YTM does not assume reinvested coupon payments. That seems to be true, so I'm trying to reconcile this with the assertion that the strategy assumes reinvestment. Perhaps someone (e.g., Allan R...
by Allan Roth
Fri Oct 27, 2023 6:34 pm
Forum: Investing - Theory, News & General
Topic: Beat Inflation Handily, and Risk-Free - Allan Roth
Replies: 73
Views: 14344

Re: Beat Inflation Handily, and Risk-Free - Allan Roth

Another way to look at it is this. If I put $100,000 into a 25-year TIP at 2.581% (real) annual return, I'd end up with $189,046 in today's dollars in 25 years, which is about as risk-free 89% return as I can get. If I'd be happy with a base return of just getting my $100,000 in today's dollars back in 25 years, then I can put $52,884 into the TIP and the rest in stocks. As long as stocks have a real annualized return no lower than 2.581% then I'll do at least as well in 25 years. If stocks do better (which they have in the past) I'll do better. If they do worse, I won't do as well. Even if my stock investment is completely wiped out, I'd still recoup my original $100K in today's dollars from the $52,884 I invested in TIPs. Of course, if m...
by Allan Roth
Fri Oct 27, 2023 12:45 pm
Forum: Investing - Theory, News & General
Topic: Beat Inflation Handily, and Risk-Free - Allan Roth
Replies: 73
Views: 14344

Re: Beat Inflation Handily, and Risk-Free - Allan Roth

Here is how I think about this. There are some (ugly) insurance products offering part of the return of stocks along with the guarantee you will get your money back as long as you waited long enough for the insurance company to recoup the costs and commissions paid to the agent. These were once called "equity indexed annuities" but they got such bad press, they changed the name to "fixed Indexed annuities" or FIAs. These have all sorts of tricks (like stripping out the dividends) and even getting your money back is in nominal terms which could be devastated by inflation. So think of this strategy as building a better FIA that has the guarantee in real inflation-adjusted terms. It also avoids those pesky high fees from th...
by Allan Roth
Fri Oct 27, 2023 12:31 pm
Forum: Investing - Theory, News & General
Topic: Beat Inflation Handily, and Risk-Free - Allan Roth
Replies: 73
Views: 14344

Re: Beat Inflation Handily, and Risk-Free - Allan Roth

I understand the TIPS make up the lost stock principal, but what if there was inflation at the same time as the equities became worthless? What he is showing is that if you start with $100K, you end up with $100K (inflation-adjusted) even if stocks go to zero. You cannot lose spending power so long as the government doesn't default on its debt. And of course, barring a global apocalypse, the entire world stock market can't really go to zero. How does the 47% in equities adjust for inflation? That portion might exceed inflation, or it might not. Only the 53% in TIPS is indexed for inflation. Note the positive yield on the TIPS simply makes up the lost principal investment on the equities in the hypothetical total wipeout. It doesn’t also co...
by Allan Roth
Thu Oct 26, 2023 5:26 pm
Forum: Investing - Theory, News & General
Topic: Beat Inflation Handily, and Risk-Free - Allan Roth
Replies: 73
Views: 14344

Re: Beat Inflation Handily, and Risk-Free - Allan Roth

just to be clear - this is a very different strategy than a TIPS ladder. With a single TIPS and a stock index fund fund, investors can earn 6% above inflation if stocks earn their historical rate but still be assured they will beat inflation (pre-tax), even if stocks lost 99.9% of their value.
by Allan Roth
Fri Oct 13, 2023 10:02 am
Forum: Investing - Theory, News & General
Topic: An ETF Proposal for the 4% Rule - Allan Roth
Replies: 21
Views: 4304

Re: An ETF Proposal for the 4% Rule - Allan Roth

nisiprius wrote: Tue Oct 10, 2023 6:01 pm I think Allan Roth may have reinvented the [url=https://www.sec.gov/Archives/edgar/data ... /d497k.htm]PIMCO
How did those funds produce a stable inflation adjusted cash flow virtually every year between coupon payments and maturity. I'm 99.9% sure they didn't.
by Allan Roth
Mon Oct 09, 2023 5:26 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio - Moderate risk HIGHER return than high risk?
Replies: 8
Views: 1573

Re: Three fund portfolio - Moderate risk HIGHER return than high risk?

Welcome to the forum. :happy I think you probably missed or misunderstood the message Allan was trying to get across. There are certainly time periods where 60/40 has out-performed 90/10. Or there may have been something else he was trying to show you, maybe something about rebalancing? But nobody here is going to tell you to switch to 60/40 based on a point that Allan Roth was trying to make awhile back. We don't know what he was trying to get across to you and we know little to nothing about your financial situation. Your asset allocation (stock to bond ratio) should be based on your need to take risk, your willingness to take risk, and your ability to take risk (which is mostly how long you have for your portfolio to recover after a dow...
by Allan Roth
Tue Aug 29, 2023 2:07 pm
Forum: Investing - Theory, News & General
Topic: "The Place of Social Security in Your Retirement Portfolio"
Replies: 49
Views: 8478

Re: "The Place of Social Security in Your Retirement Portfolio"

That article is not going to be popular with the "never even think about pensions or SS as financial assets or something that influences your asset allocation" crowd. :mrgreen: Why do you say that? I am one of those guys. I disagree with the assertions for both SS and pensions. Pension lump sums CAN be categorized as some part of one's AA because when taking the lump sum into a tIRA, one would typically buy something which is categorized in the allocation spectrum. I took my small pension as a lump sum about a year ago and used it to buy either stocks or bonds. I don't remember what my AA was compared to the target at the time. In my opinion, you shifted your asset allocation from all fixed income (pension) to part stocks and par...
by Allan Roth
Tue Aug 29, 2023 9:46 am
Forum: Investing - Theory, News & General
Topic: "The Place of Social Security in Your Retirement Portfolio"
Replies: 49
Views: 8478

Re: "The Place of Social Security in Your Retirement Portfolio"

If I were advising the hypothetical "Sue", I might suggest she (a) continue to work until age 70 to increase her SS benefit by 28% (assuming she is able to do so) to ~$27372; (b) invest ~$252K now in a 27 year TIPS ladder starting when she turns 70, thereby producing $12K inflation adjusted income per year, a withdrawal rate of ~5%; (c) set aside $40K for an emergency fund, and (d) using the balance of her funds, ~$120K, invest in a low cost stock index fund. She will then have >$39K per year in inflation adjusted income in retirement plus $5340 in pension income (or likely more if she waits to take it until 70), an emergency fund buffer, and stock fund that can be used for lumpy expenses/wants and/or long term care at the end of...
by Allan Roth
Mon Aug 28, 2023 4:30 pm
Forum: Investing - Theory, News & General
Topic: "The Place of Social Security in Your Retirement Portfolio"
Replies: 49
Views: 8478

Re: "The Place of Social Security in Your Retirement Portfolio"

The amount of the lump-sum option is likely a good approximation of today’s value of the pension payments. That was not what I experienced when offered a lump-sum alternative. My understanding is that these lump sum offers usually under-value the pensions. I consider the pension part of the portfolio but Social Security income as the amount we know it’s ok to spend. That’s because Social Security is inflation-protected while the pension is taking on a lifetime of inflation risk. The pension is like a super long-term bond, whereas Social Security is an inflation-adjusted paycheck for life. Why does whether there is inflation risk alter whether these two annuities (SS and pension) are considered part of your portfolio or not? You've got to a...
by Allan Roth
Fri Aug 18, 2023 9:13 am
Forum: Investing - Theory, News & General
Topic: Annuity article by Wade Pfau
Replies: 288
Views: 33928

Re: Annuity article by Wade Pfau

GaryA505 wrote: Wed Aug 16, 2023 11:11 am
Like I said, I think they made a step in the right direction. I actually sent them an email about their "omission" and a suggested correction. I'll post back if/when they reply, and the result.
Please let us know if they do. You may also want to suggest they post that the insurance company has the right to change caps, participation, and the like. As I put it, the annuitant is providing insurance to the insurance company. And don't forget that FIAs are the rebranded name the insurance industry came up with after "equity indexed annuities" got such bad press.

I'm always willing to look at new products and strategies but, in my analysis, the current FIAs are a less bad product than the EIAs of a couple decades ago.
by Allan Roth
Wed Aug 16, 2023 10:39 am
Forum: Investing - Theory, News & General
Topic: Annuity article by Wade Pfau
Replies: 288
Views: 33928

Re: Annuity article by Wade Pfau

GaryA505 wrote: Wed Aug 16, 2023 10:31 am I see that Blueprint Income is now listing Fixed Indexed Annuities on their website, and they offer a lot more explanations and information than I've seen anywhere else, and my "BS detector" didn't go off. More transparency is a step in the right direction.
https://www.blueprintincome.com/fixed-index-annuities
I'm sorry but my "BS detector" sounded an alarm. For example, they state "The interest credited to FIAs is linked to the performance of an external index, such as the S&P 500®" That is technically true but I've found the vast majority of people don't understand that dividends are stripped out. While I may disagree with Wade's paper, he clearly noted it did not include dividends.
by Allan Roth
Tue Aug 15, 2023 11:15 am
Forum: Investing - Theory, News & General
Topic: Annuity article by Wade Pfau
Replies: 288
Views: 33928

Re: Annuity article by Wade Pfau

Nearly a decade ago, a global insurance company sent four senior executives all the way to Colorado Springs to see me and educate me on fixed indexed annuities. I asked them six questions:

1. What is the cap of the index return?
2. Does the insurance company have the right to lower the cap in the future and, if so, by how much?
3. Within the rate cap, will I get the total return of the index or only the price appreciation?
4. Will I pay less in taxes?
5. Isn't some of the income just return of my own principal?
6. How much will I have to pay if I withdraw money from the account?

The meeting did not go very well.

https://www.cbsnews.com/news/six-questi ... d-annuity/
by Allan Roth
Mon Aug 14, 2023 4:26 pm
Forum: Investing - Theory, News & General
Topic: Annuity article by Wade Pfau
Replies: 288
Views: 33928

Re: Annuity article by Wade Pfau

Stinky wrote: Mon Aug 14, 2023 3:21 pm
Pfau still hasn’t addressed the elephant in the room, which is the assumption of a 12% cap rate on the FIA. That seems wildly over-optimistic.

Bringing that assumption back to earth would further back FIAs away from the efficient frontier.
Thanks Stinky. Now that I see you are a retired life insurance financial exec, this makes me wish I had noted this in my piece but I didn't have any data to support such an assertion. I did aske Wade what product this was based on and he responded several.
by Allan Roth
Mon Aug 14, 2023 2:51 pm
Forum: Investing - Theory, News & General
Topic: Annuity article by Wade Pfau
Replies: 288
Views: 33928

Re: Annuity article by Wade Pfau

My piece disagreeing with Wade on FIAs in the efficient frontier was published today. It's all in the assumptions.

https://www.advisorperspectives.com/art ... allan-roth
by Allan Roth
Fri Jul 21, 2023 3:55 pm
Forum: Investing - Theory, News & General
Topic: Annuity article by Wade Pfau
Replies: 288
Views: 33928

Re: Annuity article by Wade Pfau

I'm planning on writing about this for Advisor Perspectives and interviewed Wade. While I disagree with the assumptions and conclusions in his paper, I continue to be impressed with Wade's openness to discuss his work in a very academic and professional manner.
by Allan Roth
Mon May 01, 2023 4:40 pm
Forum: Investing - Theory, News & General
Topic: "The Case for Tax Adjusting a Portfolio"
Replies: 16
Views: 1723

Re: "The Case for Tax Adjusting a Portfolio"

jebmke wrote: Mon May 01, 2023 10:22 am The challenge of course is what rate to use? Even doing a Roth conversion, the decision often involves an assumption about rates that may not be very good.
The main reason to do some Roth conversions is that we don't know future rates. So having three different tax wrappers (taxable, tax-deferred, and Roth) gives us some diversification for what Congress does. Logic tells me that tax rates have to go up but logic and politics have little in common.
by Allan Roth
Mon Mar 27, 2023 10:54 am
Forum: Investing - Theory, News & General
Topic: New tool for building a TIPS ladder
Replies: 426
Views: 81312

Re: New tool for building a TIPS ladder

I just want to say that members like #Cruncher and Kaesler do so much for so many people without any intent for personal gain. The fact that you give away the brilliant tools that I can only imagine how long it takes you to build shows how much you want to give back to others. Thank you so much!
by Allan Roth
Tue Mar 21, 2023 1:47 pm
Forum: Investing - Theory, News & General
Topic: Vanguard PAS and International Stock Allocation
Replies: 50
Views: 5184

Re: Vanguard PAS and International Stock Allocation

Colorado Guy wrote: Sun Mar 19, 2023 8:44 am
Blue456 wrote: Sat Mar 18, 2023 3:31 pm Interesting. My pass advisor was very strict, “we may not be a good fit” if you don’t agree with their recommendations.
Ha! That is exactly what my PAS advisor said when I wanted to change my international exposure!
Roughly how long ago was that? Thanks. Allan
by Allan Roth
Tue Mar 21, 2023 1:45 pm
Forum: Investing - Theory, News & General
Topic: Vanguard PAS and International Stock Allocation
Replies: 50
Views: 5184

Re: Vanguard PAS and International Stock Allocation

Florida Orange wrote: Sun Mar 19, 2023 1:15 pm I am no longer enrolled in the Vanguard Personal Advisor Service but I was a few years ago. For my stocks, my advisor recommended 60% U.S., 40% International. I discussed with her the possibility of making significant changes to those percentages as well as other aspects of the plan and she was fine with it. I got the impression she would let me do anything I wanted within reason. When I asked, just out of curiosity, about some fairly extreme asset allocations, she told me it was a bad idea, but she didn't say I couldn't do it.

In the end, after much discussion, I accepted her plan in toto and I've stuck with it ever since.
Roughly how long ago did you open the PAS account and get that 60/40 advice? Thanks.
by Allan Roth
Tue Mar 21, 2023 1:44 pm
Forum: Investing - Theory, News & General
Topic: Vanguard PAS and International Stock Allocation
Replies: 50
Views: 5184

Re: Vanguard PAS and International Stock Allocation

FreddieFIRE wrote: Sun Mar 19, 2023 12:35 pm Not an answer to Allen's OP, but perhaps an interesting data point. Fidelity's planning tool currently forces 30% of equities into foreign stocks.
Which planning tool is that? Thanks!
by Allan Roth
Sat Mar 18, 2023 3:14 pm
Forum: Investing - Theory, News & General
Topic: Vanguard PAS and International Stock Allocation
Replies: 50
Views: 5184

Re: Vanguard PAS and International Stock Allocation

arcticpineapplecorp. wrote: Sat Mar 18, 2023 3:04 pm
Allan Roth wrote: Sat Mar 18, 2023 2:51 pm
arcticpineapplecorp. wrote: Sat Mar 18, 2023 2:33 pm i don't, but may I ask what the range of percentages of international you've been seeing? Is it closer to 30% or 20% international? I wouldn't imagine Vanguard would want people overweighting to international (i.e., >40%) but could be if following Merriman's long held advice of 50/50 US/Int.
Significantly lower than 40% international.
could it be because Jack Bogle advocated for anywhere from 0%-20%?
After all of these years, Vanguard is finally taking Jack's advice on some PAS accounts but not others such as target date funds?
by Allan Roth
Sat Mar 18, 2023 2:51 pm
Forum: Investing - Theory, News & General
Topic: Vanguard PAS and International Stock Allocation
Replies: 50
Views: 5184

Re: Vanguard PAS and International Stock Allocation

arcticpineapplecorp. wrote: Sat Mar 18, 2023 2:33 pm i don't, but may I ask what the range of percentages of international you've been seeing? Is it closer to 30% or 20% international? I wouldn't imagine Vanguard would want people overweighting to international (i.e., >40%) but could be if following Merriman's long held advice of 50/50 US/Int.
Significantly lower than 40% international.
by Allan Roth
Sat Mar 18, 2023 2:50 pm
Forum: Investing - Theory, News & General
Topic: Vanguard PAS and International Stock Allocation
Replies: 50
Views: 5184

Re: Vanguard PAS and International Stock Allocation

Blue456 wrote: Sat Mar 18, 2023 2:33 pm Vanguard PAS doesn’t discuss any foreign or international allocations nor do they discuss any duration of their bonds. They simply put you in 60% US and 40% international. When asked whether one can deviate from this they will generally agree going down to 30% but no less.
That is not consistent with the two cases I mentioned earlier where neither the client requested nor assets outside of Vanguard PAS argued for a different allocation.
by Allan Roth
Sat Mar 18, 2023 2:23 pm
Forum: Investing - Theory, News & General
Topic: Vanguard PAS and International Stock Allocation
Replies: 50
Views: 5184

Vanguard PAS and International Stock Allocation

I've lately seen two Vanguard Personal Advisory Services portfolios that have a very large variation from Vanguard's position of the stock allocation of 60% US and 40% international. Neither of these two account owners requested to vary from this position nor did they have significant assets outside of Vanguard PAS that warranted such a large variation.

I may write about this and am soliciting any feedback from Bogleheads members who might have a PAS account opened in the last couple of years and asking for your breakdown of US vs. Int'l stock recommended by a Vanguard PAS advisor. Please let me know if you do and whether or not you requested a certain allocation between US vs. Int'l.

Thanks very much!

Allan
by Allan Roth
Tue Mar 14, 2023 12:00 pm
Forum: Personal Finance (Not Investing)
Topic: How to spend more money - request for help regarding an article
Replies: 116
Views: 13569

Re: How to spend more money - request for help regarding an article

Thanks for all of the great input - you all are the smartest and most helpful people in the world of finance. After all, what good is great investing if we can't enjoy the fruits of our labor. Here is the piece. I conclude with "Financial Planner - heal thyself!"

https://www.advisorperspectives.com/art ... more-money
by Allan Roth
Thu Mar 02, 2023 1:36 pm
Forum: Investing - Theory, News & General
Topic: "Wrong! My Mistakes Over a 20-Year Advisory Career"
Replies: 57
Views: 9408

Re: "Wrong! My Mistakes Over a 20-Year Advisory Career" by Allan Roth,

er999 wrote: Wed Mar 01, 2023 11:25 am I wonder if a similar article 20 years from now will say the same thing about factor and international investing?
I've been writing against factor investing for at least decade. I'm for "dumb beta."
by Allan Roth
Thu Jan 26, 2023 6:52 pm
Forum: Personal Finance (Not Investing)
Topic: How to spend more money - request for help regarding an article
Replies: 116
Views: 13569

Re: How to spend more money - request for help regarding an article

Freeadvice wrote: Thu Jan 26, 2023 4:17 pm Haha. You came to the wrong place. 🤣
I came to the Bogleheads because we tend to be so frugal. That was one of the many traits I loved about Jack Bogle as well. I'm certainly not arguing to spend for the sake of spending but if we work hard and deny ourselves something that would bring us greater happiness, then that's not a good thing. I understand this from a theoretical standpoint - it's the actual practice I fall short on.

Thanks everyone for the great comments so far!
by Allan Roth
Thu Jan 26, 2023 4:08 pm
Forum: Personal Finance (Not Investing)
Topic: How to spend more money - request for help regarding an article
Replies: 116
Views: 13569

How to spend more money - request for help regarding an article

I'm doing some research for an article on how to s=spend more money and wanted to solicit some views from the Bogleheads forum.

We spend so much time and effort on developing "safe spend rates" from one's nest egg and live frugally but there is another problem that I personally have and suspect many on the forum do as well. For whatever reason, many of us were programed to live below our means and build up a nest egg. After decades of building up a nest egg, the thought of spending it down is scary and our fugal behavior continues even though we know we can't take this money with us when we pass.

Any thoughts on the subject, especially on how to get someone to spend more money, would be very much appreciated. Thank you!
by Allan Roth
Sat Nov 26, 2022 3:16 pm
Forum: Investing - Theory, News & General
Topic: What are you most thankful for in your investing career?
Replies: 78
Views: 7632

Re: What are you most thankful for in your investing career?

retiredjg wrote: Fri Nov 25, 2022 10:49 am I'm thankful for 2 things.

1. My parents taught me not to sell during a market downturn when I was young. I didn't have investments for many years, but remembered the lesson. I just didn't look at my statements during most years to avoid being worried. That carried me through to retirement.

2. After retirement, I stumbled onto an Allan Roth AARP article that mentioned Bogleheads...liked what I saw, left Ameriprise, and the rest is pretty predictable. :happy
That's a really nice thing to say. Thanks!
by Allan Roth
Thu Nov 17, 2022 2:27 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

If I had wanted to build at the 4% rule, I could have put roughly $93K in the TIPS ladder and the other $7K in a total stock index fund. The latter would provide some cushion living longer than 30 years. In reality, I wouldn't recommend putting 93% of one's portfolio in any one strategy. [/quote] Not that you are recommending this strategy, but if I understand this, it would be 7% stock. Many would consider that a very low number. I note that a few years ago, you mentioned your portfolio was 45 stock/55 fixed income and cash. I wonder if you have changed that. If someone is just trying to have their money last, and not investing for heirs, do you think a very low percentage of stock is sufficient if the fixed income/cash part of the portfo...
by Allan Roth
Thu Nov 17, 2022 2:09 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

I looked at this several months ago for the current choices of fixed COLA adjustments available with SPIAs today and it was still around 14 years or so. The surprising thing to me (and, yeah, this is from my memory) was that the breakeven period seemed to be largely independent on the amount of COLA chosen. And with a higher COLA resulting in lower initial payouts, yet another thing to think about when considering one's range of remaining life expectancy. The fixed COLA is set to be actuarially neutral, which means the "breakeven point" (I hate that phrase) will always be near the life expectancy value used by the insurance company for its annuitant pool. I think Vineviz deserves the medal of honor for financial bravery. I'm too ...
by Allan Roth
Thu Nov 17, 2022 1:58 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

I'd hope people in this thread are about facts, and the fact is that in the worst historical period for inflation a retiree would have been better off with a nominal annuity than with nominal bonds. I also recall that Larry Swedroe said you could just take withdrawals from a TIPS fund and get much the same effect as you would get from a TIPS ladder. Did Larry Swedroe recommend which TIPs fund or funds he recommended for this? And has anyone done a study on what would have to happen economically in terms of inflation/rates in comparing future returns of a TIPS ladder versus the same withdrawal amount as the ladder but instead using TIPS funds? Thanks. [ quote fixed by admin LadyGeek] Larry posted his e-mail with his last post here. You can ...
by Allan Roth
Thu Nov 17, 2022 1:49 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

I thought the 4% rule was the ability to withdraw 4% of a portfolio in the first year and increase the withdrawal by the rate of inflation each year thereafter. If that is true, then wouldn’t the coupon on TIPS need to hit 4% in order to support The 4% Rule in perpetuity? Or does this use of 2% TIPS reduce the portfolio by 2% per year (4%-2%), so a 4% SWR (inflation adjusted) would be possible for all of an 30 year retirement but not forever? He's not going for perpetuity. He's spending it over 30 years with $0 left at the end. He's starting with $100,000, which is 25x his first year's expenses. So if TIPS were yielding 0%, his portfolio would buy him 25 years of real expenses. The extra yield is what allows him to last through those last ...
by Allan Roth
Sat Nov 05, 2022 11:42 am
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

Is there a typo or math error in the calculations shown in the article at https://www.advisorperspectives.com/articles/2022/10/24/the-4-rule-just-became-a-whole-lot-easier ? In the table it shows https://i.postimg.cc/hvhXz38D/bond-ladder.jpg In the first line for 2023, 2 bonds with a cost of $2,367 aren't going to be worth much more in 2023 which is only a few months away. So the coupon payments on all the purchased bonds must make up the difference of about $2,000 but given that most of the coupon rates are well under 1% I don't see how a $100K initial investment can give that much in interest payments. Yep - I see your point now. In actuality, I was able to run it at a $4,310 "desired annual real amount" which had me buy 2 bond...
by Allan Roth
Wed Nov 02, 2022 6:37 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

FreddieFIRE wrote: Wed Nov 02, 2022 6:28 pm
I've bought TIPS in the secondary market at Fidelity for years and never had the types of problems you described. As I mentioned earlier, the book is dynamic and you need to not stop and study the order for more than a few seconds. Even if you wait too long, it's very simple to just repeat the process.
With all due respect, if you can't actually read the article or the tread, I'd strongly recommend you not assume I stopped and studied and waited more than a few seconds. The response in the tread I provided you a direct link to makes more sense if you'd care to read now that I've pointed it out. Good luck to you but I won't have time to answer questions already addressed.
by Allan Roth
Wed Nov 02, 2022 6:21 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

FreddieFIRE wrote: Wed Nov 02, 2022 6:06 pm
I reviewed all of your posts in the thread and didn't find it. Perhaps you could point me in the right direction?
In the article itself - "I built the bond ladder on the Fidelity platform. I had to find bond lots where the seller was willing to sell lots as small as one bond and often found that the order didn’t execute even though I met the seller’s ask price and quantity. Some orders had to be placed multiple times and it took two calls to the bond desk."

In the posts in the same thread: viewtopic.php?p=6933035#p6933035

BTW, when I later did a much larger purchase, i found Vanguard superior to Fidelity in execution and pricing. That surprised me.
by Allan Roth
Wed Nov 02, 2022 6:08 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

vineviz wrote: Wed Nov 02, 2022 4:54 pm Accepting more interest rate risk by staying short-term in duration does not reduce the inflation risk of the nominal instrument.

If anything, it compounds it.
Well I've learned something. You say a long term nominal bond paying the same rate or less than an intermediate or short-term bond has less inflation risk. I didn't know that but happy to see the math to support. I also thought markets were pretty smart punishing long-term nominal bonds far more due to higher inflation expectations but always happy to learn from those smarter than the market. Thank you!
by Allan Roth
Wed Nov 02, 2022 5:57 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

FreddieFIRE wrote: Wed Nov 02, 2022 5:36 pm
Where did you encounter difficulties? When buying in the secondary market, Fidelity's system now even checks the depth of book for you and prefills the correct bid for the quantity entered. The only time I've encountered a minor issue is if I study the order too long and the book shifts. It takes less than a minute to buy and the results appear immediately. Buying at auction is even simpler.
I used Fidelity's depth of book but recommend one last time to read the thread and the article itself where your question is answered.
by Allan Roth
Wed Nov 02, 2022 4:34 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

Okay, but now are we back to the "double standard" question? Presumably by "bonds" you mean "nominal bonds", since you're distinguishing them from your TIPS. So why should the inflation risk of "CDs and bonds" be acceptable to an investor but the the inflation risk of income annuities be unacceptable? It seems to me there is either a role for nominal fixed income in a portfolio or there isn't. No double standard. Yes, I hold nominal bonds like BND and short-term Treasury bonds. Nothing long-term. CDs are either short-term or have small early withdrawal penalties. Two chapters in my very old book are "don't put all of your eggs in any one basket" and "better than bonds" which expla...
by Allan Roth
Wed Nov 02, 2022 3:36 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

FreddieFIRE wrote: Wed Nov 02, 2022 1:55 pm
If you guys are finding it difficult to buy TIPS in the secondary market at Fidelity, then you're doing it wrong.
I've already addressed the same comment earlier in this tread. I'm happy to learn from you the right way if you'd care to share?
by Allan Roth
Wed Nov 02, 2022 3:31 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

We are disagreeing, amiably I hope. I think one should have both TIPS protection and life annuity protection. You think retirees should have only TIPS protection. These are reasonable points of disagreement on which reasonable people can disagree. Best wishes, BobK I agree with you on the amicably thing but the above is not my position at all. TIPS are only a relatively small part of my portfolio and the TIPS ladder wouldn't have been very good when real rates were negative. I have stocks, CDs, bonds, and real estate. But I'm not including SPIAs or DAs (as you call life annuities), because of the inflation risk. Had I owned a DA, for example, I'd argue more than 50% of the economic value would have been wiped away this year. But most impor...
by Allan Roth
Wed Nov 02, 2022 1:35 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

TIPS ladders are expensive. Roth's 30 year TIPS ladder paying out $4,300 real per year cost $99,650. A graded life annuity for a 65 year old male that also pays out $4,300 in the first year with a 3% increase every year costs $70,997. The quote is from Penn Mutual. Graded at 4% increase every year costs $78,700. For those worried about extreme inflation a graded annuity that increases 5% per year costs $87,691. IMO for safe retirement income one should have income from all the following sources: SS, TIPS ladder or combo funds until mid 80s, Ibonds, and graded life annuity. If sometime in the future CPI adjusted life annuities become available, I would switch annuity purchase to the COLA adjusted annuity. BobK Was that a single life or did ...
by Allan Roth
Wed Nov 02, 2022 1:11 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

vineviz wrote: Wed Nov 02, 2022 12:58 pm
I appreciate you clarifying that. You weren't someone I had in mind who was using a double-standard, even though I'd probably quibble with the characterization of SPIAs as being "high cost".
Thanks. I agree that a SPIA is low cost compared to other insurance products but that's not the standard I use. I compare to a Vanguard bond fund or, in this case, a TIPS ladder with zero costs other than the original one-time small bid-ask spreads to construct.
by Allan Roth
Wed Nov 02, 2022 12:54 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

Holding SPIAs to a different standard than other nominal fixed income choices when it comes to inflation risk is as suspicious as it is tiresome. If you read the thread in a prior post I noted I'm holding the SPIA and DA to the exact same standard of nominal fixed income choices. I wrote: "Remember SPIAs and Deferred Annuities are not inflation protected. The Vanguard Extended Duration Treasury ETF (EDV) is down 42.95% YTD through 10/31. That's because inflation expectations are higher. The duration of a SPIA can be that long and a deferred annuity even longer meaning it has lost more spending power than the 42.95% loss of the Extended Duration Treasury ETF. Just because you can't see a daily market value of the annuity doesn't mean y...
by Allan Roth
Wed Nov 02, 2022 12:47 pm
Forum: Investing - Theory, News & General
Topic: The 4% Rule Just Became a Whole Lot Easier - Allan Roth
Replies: 409
Views: 76639

Re: The 4% Rule Just Became a Whole Lot Easier - Allan Roth

Is there a typo or math error in the calculations shown in the article at https://www.advisorperspectives.com/articles/2022/10/24/the-4-rule-just-became-a-whole-lot-easier ? In the table it shows https://i.postimg.cc/hvhXz38D/bond-ladder.jpg In the first line for 2023, 2 bonds with a cost of $2,367 aren't going to be worth much more in 2023 which is only a few months away. So the coupon payments on all the purchased bonds must make up the difference of about $2,000 but given that most of the coupon rates are well under 1% I don't see how a $100K initial investment can give that much in interest payments. TIPS pay interest every six months so accrued interest is part of the purchase price. The cash flow for 2023 is for the entire year rathe...