Wade Pfau’s new book: How Much Can I Spend in Retirement?

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Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by zwzhang » Sat Oct 14, 2017 7:55 pm


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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Mel Lindauer » Sat Oct 14, 2017 10:17 pm

zwzhang wrote:
Sat Oct 14, 2017 7:55 pm
Anybody here read the book?

https://www.amazon.com/How-Much-Spend-R ... 5c5d3a297f

Thx
Yes, I read it prior to publication and offered an endorsement which appears in the book and on Amazon. Here's my blurb:
Wade Pfau is, in my opinion, today's leading expert in the field of retirement income planning. This series of books provides readers with valuable information gleaned from his important research and is a must read for those who want to be better prepared for their retirement years.
-Mel Lindauer, Forbes.com columnist and co-author, The Bogleheads' Guide to Investing and The Bogleheads' Guide to Retirement Planning.
Best Regards - Mel | | Semper Fi

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Peter Foley » Sat Oct 14, 2017 10:30 pm

While I have not read the book I second Mel's endorsement. Many of his articles are informative and thought provoking at the same time.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by SpaceCowboy » Sat Oct 14, 2017 10:44 pm

Haven't read Pfau's book, but I like much of his work. However in the last 1-2 years, I haven't seen him publish the same quality of in depth work. His articles have tended to be too general and seem to be focused on marketing for McLean Asset Management as opposed to educating DIYers and other financial professionals. Also haven't seen him post here recently.
I'd be curious if there is any solid new information in the book and how it compares specifically to McClung's Living Off Your Money, which I consider to be the best book on the subject. Otar's book is the classic to which other books on retirement spending should be compared.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by book lover » Sun Oct 15, 2017 9:11 am

Reading Mr Pfau's book, very detailed and informative and would highly recommend.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by dbr » Sun Oct 15, 2017 9:59 am

Without having even read it yet, I am going to assume this is a much need addition to an area that perhaps Jim Otar's book was the only real prior entry. I will be surprised if the two books differ by a lot in what they generally tell people.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by 1210sda » Sun Oct 15, 2017 10:34 am

I hope this qualifies as one of Taylor's investment gems.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by MnD » Sun Oct 15, 2017 10:36 am

Is he still pushing 2.5% SWR?

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by furwut » Sun Oct 15, 2017 10:44 am

4% is not a physical constant.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Vegomatic » Sun Oct 15, 2017 12:22 pm

Rethinking Retirement: Sustainable Withdrawal Rates for New Retirees in 2015, W. Pfau + W. Dokken
http://www.fa-mag.com/userfiles/stories ... paper-.pdf

Above is link to 2015 article in FAMag by Wade Pfau and Wade Doken. (Mr. Doken's 'wiki' page is here: https://en.wikipedia.org/wiki/Wade_Dokken).

Perhaps this is similar to material in Dr Pfau's new book.

In reading the above article when it was first published, the matter of expenses is touched briefly. For example, page numbered 5:
  • These simulations will include realistic fees to cover the expenses related
    to working with a financial advisor and to pay underlying mutual fund expenses...
Elsewhere, there is a reference to a 1% advisor fee (see below), and I have a hunch (perhaps to-be-confirmed by those who have read or endorsed the book?) that the mutual fund fee that is assumed is something like the average mutual fund fee, which (guessing here again) is something like:
  • 65 bps per year, Equity Funds
  • 50 bps per year, Bond Funds
  • 75 bps per year, Hybrid Funds
Nerdwallet: https://www.nerdwallet.com/blog/investi ... se-ratios/
Investment Company Institute: https://www.ici.org/pdf/per23-03.pdf

From page numbered 9 in the FAMag article, the authors write:

Fees and Expenses
  • The 4% rule is based on an assumption that investors precisely earn the
    underlying indexed market returns with annual rebalancing. Clients who
    pay investment fees or who otherwise underperform the indices because
    of either poor timing or asset selection decisions cannot rely on 4%
    working for them. Generally, a 1% fee lowers the sustainable spending
    rate by about 0.5%-0.6% (see Pfau, 2012, for more on these estimates).
    This must not be forgotten when estimating sustainable spending rates
    for clients.
So, total fees - for financial advisor and mutual funds - would seem to be something like 150 bps to 175 bps per year.

IMHO, while this fee may be appropriate for the "average investor", I wonder if it is appropriate for the 'Bogleheads' who frequent this board, and who invest directly via low cost Vanguard funds and ETFs. For those of us that do so, believe that (based on family experience) that total costs are something like 11 to 13 bps per year.

This would be roughly 150 bps per year (1.5%) lower than the average expenses that I believe were assumed by Pfau and Dokken in their 2015 article.

Possibly the same assumptions are made in Dr Pfau's latest book...

In any event, if you add 1.5 pct to a 2.0+ pct (possible) withdrawal rate, the result of 3.5+ pct per year is not (to my eye) much different than the old 4.0 pct "rule".

You just need to be mindful of your costs...

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by SpaceCowboy » Mon Oct 16, 2017 12:06 am

So from those who have read Pfau's latest book, how does it compare to Otar's and McClung's work on the subject?
I would expect to include a discussion on Reverse Mortgages, which aren't covered by the others, but I'm not sure what else it covers uniquely.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Artsdoctor » Mon Oct 16, 2017 3:01 pm

I've just finished the book. It's excellent.

This will be one of several. The focus of this particular book is to examine ways to tap retirement portfolios using a total return method. If you're interested in learning more about a "safety-first," liability matching portfolio, you'll need to wait for another book. Likewise, if you're interested in learning more risk pooling by using annuities you'll have to wait.

He examines Bengen's research in great detail, and you'll get a tremendous insight into the factors that went into describing his SWR of 4% in 1994. You'll probably/hopefully walk away feeling a bit more weary of using a standard 4% SWR adjusted dogmatically for inflation in future years. At the very least, you'll feel more comfortable with being flexible when withdrawing from your portfolio.

He'll give you practical alternatives on how the withdraw from your portfolio based on your needs. He doesn't recommend just one way of doing this because there are too many variables, and he does a great job of illustrating how different needs can be. There are several different alternatives to Bengen's methods and Pfau describes each very well.

I'll be using it as a reference and re-reading it periodically. I think it's very well done and would recommend it to anyone who's serious about learning more about withdrawing funds methodically from an investment portfolio.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by ixohoxi » Mon Oct 16, 2017 4:30 pm

rrppve wrote:
Mon Oct 16, 2017 12:06 am
So from those who have read Pfau's latest book, how does it compare to Otar's and McClung's work on the subject?
I would expect to include a discussion on Reverse Mortgages, which aren't covered by the others, but I'm not sure what else it covers uniquely.
Wade Pfau has a whole other book on Reverse Mortgages https://www.amazon.com/dp/B01LZG7FCA so I wouldn't expect exhaustive coverage in this one,
Henceforth, content shall be my aim, and anticipation my joy. -Alfred Billings Street

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by SpaceCowboy » Mon Oct 16, 2017 7:11 pm

Artsdoctor wrote:
Mon Oct 16, 2017 3:01 pm
I've just finished the book. It's excellent...

He'll give you practical alternatives on how the withdraw from your portfolio based on your needs. He doesn't recommend just one way of doing this because there are too many variables, and he does a great job of illustrating how different needs can be. There are several different alternatives to Bengen's methods and Pfau describes each very well.

I'll be using it as a reference and re-reading it periodically. I think it's very well done and would recommend it to anyone who's serious about learning more about withdrawing funds methodically from an investment portfolio.
Any info on how it compares to McClung's work which focused heavily on variable or flexible withdrawal methodologies? Also does he discuss which accounts to tap or asset classes to withdraw from versus retirement rebalance strategies?

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Artsdoctor » Tue Oct 17, 2017 11:18 am

rrppve wrote:
Mon Oct 16, 2017 7:11 pm
Artsdoctor wrote:
Mon Oct 16, 2017 3:01 pm
I've just finished the book. It's excellent...

He'll give you practical alternatives on how the withdraw from your portfolio based on your needs. He doesn't recommend just one way of doing this because there are too many variables, and he does a great job of illustrating how different needs can be. There are several different alternatives to Bengen's methods and Pfau describes each very well.

I'll be using it as a reference and re-reading it periodically. I think it's very well done and would recommend it to anyone who's serious about learning more about withdrawing funds methodically from an investment portfolio.
Any info on how it compares to McClung's work which focused heavily on variable or flexible withdrawal methodologies? Also does he discuss which accounts to tap or asset classes to withdraw from versus retirement rebalance strategies?
I've not read McClung's book so I can't comment on a comparison. Yes, Pfau discusses multiple withdrawal strategies and spends a lot of time on variable withdrawal calculations. He doesn't specifically address which types of accounts to utilize in a specific order because there would be too many variables; in fact, that particular issue is one of the shortcomings of Bengen's work which Pfau points out (Bengen assumed that all withdrawals would come from tax-deferred accounts when using his calculations).

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by jalbert » Tue Oct 17, 2017 12:12 pm

Bengen assumed that all withdrawals would come from tax-deferred accounts when using his calculations).
That made it convenient as it did not require simulating the tax drag of dividend distributions.

But I’m not convinced that Bengen’s choice led to any loss of generality. If you include tax liabilities on withdrawals and distributions as part of spending requurements, and consider distributions as part of withdrawals for the purpose of implementing SWR, how would account type matter for the purpose of simulating withdrawal rates?
Risk is not a guarantor of return.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Artsdoctor » Tue Oct 17, 2017 12:58 pm

^ Strictly speaking, I'd agree with you. I think the most you can say is that the location of the assets may influence amounts but in an unpredictable way. If all of your money were in a taxable account, you'd be paying tax on dividends throughout retirement; however, you'd be paying capital gains tax when liquidating assets versus income tax when withdrawing from your tax-deferred accounts. There are far greater logistic problems inherent in his calculations that you'd have to overcome (for example, Bengen recommends equity allocations in the 50-75% range but really tries to encourage 75% equities, something that most retirees would not be willing to do).
Last edited by Artsdoctor on Tue Oct 17, 2017 4:47 pm, edited 1 time in total.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by jalbert » Tue Oct 17, 2017 2:19 pm

I think the issue is that spending needs are what determine required withdrawal amount, but withdrawal amount and location influences spending needs if withdrawals are taxable, a circularity.
Risk is not a guarantor of return.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by shum » Sun Oct 22, 2017 1:10 pm

I find this book outstanding! One super plus is his ability to produce tables with choices that beautifully summarize research efforts and allow him to point out both strengths and limitations to remind you of what they are and their implications and trade offs.

While I am a safety-first planner 26 years into retirement, even I needed to be reminded that safe withdrawal rates are a many variable concept. I like his table that lays out your horizon, your stock/bond ratios, your probability of success percentages, etc. You know what data is used to prepare all these estimates and you realize there are many different appropriate withdrawal rates as these variables change. This was especially helpful to me as my current fixed income covers twice my floor, and my investments can likely double or more long before they may be needed, and of course, but I had forgotten, that your withdrawal rate at that stage in your life would surely not need to be 4%!

While the book is aimed at the non-safety-First crowd, I give this example to show we all have much to learn or be reminded of from Pfau’s work. He also cites Zwecher’s book, my major reference for my safety-first approach, so regardless of your interests and approaches to funding retirement, you will find lots of useful wisdom in this book.

You will never regret keeping this book on your “shelf” for repeated reading. Don’t expect specific investments identified, expect thoughtful principles that can be fruitfully and repeatablly applied to your retirement plan.
-shum

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by munemaker » Sun Oct 22, 2017 2:41 pm

Like McClung's book, does not appear to be available on Kindle.

I bought the paper copy of McClung's book, and that was a good decision. Some of the charts were very large and would have been difficult or impossible to read on Kindle.

I just hate to buy another paper book...probably will though.

Don't these publishers realize this is the 21st century?

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by shum » Sun Oct 22, 2017 4:03 pm

I have the digital version. Check amazon.com.
-shum

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by TravelGeek » Sun Oct 22, 2017 4:16 pm

munemaker wrote:
Sun Oct 22, 2017 2:41 pm
Like McClung's book, does not appear to be available on Kindle.
From an email I received a couple of days from Wade Pfau:

I'm sending one final message about my new book, How Much Can I Spend in Retirement?, to announce that the Kindle version is now available.

About the Kindle version - Amazon has tougher pricing policies. However, I've enrolled the book in the Kindle Matchbook program, which lets you download a free Kindle version after purchasing the paperback version. Because Amazon is currently running a pricing special of $25.98 on the paperback version, it's actually cheaper for you to order it this way and then download the free Kindle version, rather than just ordering the Kindle book directly. Perhaps you can use that paperback version as a nice holiday gift for someone if you don't need it?”


No endorsement of the book; I haven’t gotten it yet, but I will order the dead tree version because I agree with your assessment of the McClung book:
I bought the paper copy of McClung's book, and that was a good decision. Some of the charts were very large and would have been difficult or impossible to read on Kindle.
Michael McClung does have a 21st century pdf version available via his website, but when I tried the free three chapters, I found them hard to use on my iPad. I am happy with the paperback from Amazon.
Last edited by TravelGeek on Sun Oct 22, 2017 4:54 pm, edited 1 time in total.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by dbr » Sun Oct 22, 2017 4:35 pm

You can read Kindle books with the PC or iMac app on a 21", 27" or larger screen. This somewhat recalls a thread about what device to get where a point possibly overlooked is that big display screens have uses.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by shum » Sun Oct 22, 2017 11:38 pm

Digital version works fine on my 9” iPad. Charts and tables are easy to read and can be expanded for my old eyes.
-shum

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Big Dog » Mon Oct 23, 2017 12:15 am

read the first two chapters, and so far outstanding.

wrt: hardcopy...I guess I'm a luddite as I still prefer the print copy. :wink:

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by UKFred » Mon Oct 23, 2017 2:29 am

Yes, I have read the book and it is an excellent summary of many different withdrawal strategies from a portfolio. It takes Bengen's 4% + inflation as the baseline (while examining why it is inefficient). The early chapters summarise the issues faced in financing a long retirement from a fixed pot of money before talking about the strategies themselves - their strengths and weaknesses.

If you have been following Wade Pfau's blog on Retirement Researcher and Dirk Cotton's on Retirement Cafe, there is no new material, but it's still a way to read it all in one place and refer to it in future.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by SpaceCowboy » Mon Oct 23, 2017 7:15 pm

Sounds like a decent reference work, but I still haven't heard anything in comparison to McClung's recent work, which was both comprehensive and had some innovation.
Maybe I'll take the classic BH approach and wait for it to hit the local library or go on sale at a lower price on the used market.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by munemaker » Mon Oct 23, 2017 9:04 pm

munemaker wrote:
Sun Oct 22, 2017 2:41 pm
Like McClung's book, does not appear to be available on Kindle.

I bought the paper copy of McClung's book, and that was a good decision. Some of the charts were very large and would have been difficult or impossible to read on Kindle.

I just hate to buy another paper book...probably will though.

Don't these publishers realize this is the 21st century?
My bad. Wade Phau's book is, in fact, available for Kindle. The way Amazon presented it on the page, it was not immediately obvious to me and I did not look closely enough.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by azanon » Mon Oct 23, 2017 9:25 pm

MnD wrote:
Sun Oct 15, 2017 10:36 am
Is he still pushing 2.5% SWR?
Was it 2.5%? I thought it was 2% SWR, or preferably buy a SPIA. I see a lot of great reviews, but I've just read too many of his online articles to give it a chance. Just scanning the reviews above, maybe he's had a change of heart?

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Artsdoctor » Tue Oct 24, 2017 6:29 pm

azanon wrote:
Mon Oct 23, 2017 9:25 pm
MnD wrote:
Sun Oct 15, 2017 10:36 am
Is he still pushing 2.5% SWR?
Was it 2.5%? I thought it was 2% SWR, or preferably buy a SPIA. I see a lot of great reviews, but I've just read too many of his online articles to give it a chance. Just scanning the reviews above, maybe he's had a change of heart?
He's really not dogmatic here. He spends a great deal of time dissecting what went into Bengen's projections. He is incredily thorough, guides you through a lot of data, and then ultimately asks you to make your own decisions. There are too many variables to make a blanket statement on what SWR might be right for you, and I appreciated the simple layout of data which I can use to make my own plans.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Tamales » Tue Oct 24, 2017 9:19 pm

TravelGeek wrote:
Sun Oct 22, 2017 4:16 pm
Because Amazon is currently running a pricing special of $25.98 on the paperback version, it's actually cheaper for you to order it this way and then download the free Kindle version, rather than just ordering the Kindle book directly.
Well that didn't last long. Now $36.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by TravelGeek » Tue Oct 24, 2017 10:08 pm

Tamales wrote:
Tue Oct 24, 2017 9:19 pm
TravelGeek wrote:
Sun Oct 22, 2017 4:16 pm
Because Amazon is currently running a pricing special of $25.98 on the paperback version, it's actually cheaper for you to order it this way and then download the free Kindle version, rather than just ordering the Kindle book directly.
Well that didn't last long. Now $36.
I know, I went to buy it right after I posted that and it was already up at the current price.

I am tracking it on camelcamelcamel since I don’t need it right away.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by AlohaJoe » Wed Oct 25, 2017 8:20 pm

rrppve wrote:
Sat Oct 14, 2017 10:44 pm
I'd be curious if there is any solid new information in the book and how it compares specifically to McClung's Living Off Your Money, which I consider to be the best book on the subject. Otar's book is the classic to which other books on retirement spending should be compared.
As someone who is also a fan of McClung's work -- see my probably too numerous posts on viewtopic.php?f=10&t=192105 -- I'm about 50% through Pfau's new book. Overall I am disappointed and underwhelmed. I wouldn't recommend it to anyone who has read McClung's book. I'll still read the rest -- partly because it is fast to read and partly just to see if it gets any better.

To put a more charitable spin on it -- this book is a good summary of the current "state of art" around retirement spending with a heavy, heavy focus on constant inflation-adjusted dollar safe withdrawal rates. I'm in the (no doubt) very small niche of people who has read all of the papers he's talked about so far. Which leads to a lot of skimming and nothing new to learn. But I recognise that most people aren't in that situation. And many of these papers haven't really been all put together and summarised in book form like this before.

The book is a bit uneven in tone & pacing. By the 25% mark Pfau is still (somewhat laboriously) introducing the concept of sequence of returns risk and why you can't withdraw 7% a year if your portfolio returns 7% a year on average. Yet at other parts he'll drop in some multi-regression result. In general, when he's summarising previous work (especially his own previous work) it gets somewhat technical. But when he's writing about new content it is relatively basic.

The first half of the book is an introduction to safe withdrawal rates along with an exploration of the research since Bengen's 1994 paper that affect those rates (both up & down). For instance, research on how retirees are probably spending less as they age, instead of a constant amount (so the SWR might go up). That people rarely have portfolios of just 2 assets (so the SWR might go up). That people often underperform indexes (so the SWR rate might go down). That looking just at US data might give a success bias (so the SWR might go down). That people might use dynamic asset allocations (glide paths, so the SWR might go up).

In some cases he attempts to quantify the impact on an SWR. Most (in)famously of course is the discussion of international SWRs. But he also shows that if you take into actual retirees actual spending patterns then the historical SWR goes from 4% to 4.7%. But in many other cases he is disappointingly handwavy. For instance, he discusses his own rising equity glidepaths but gives no indication of how they would actually work in practice (increase equity by 1% a year or 5% a year?) or what the actual result would be. (Caveat: keep in mind that I'm only 50% through the book so maybe he'll come back to this and provide some actual detail?)

Of course, for people who have read Pfau and have their opinions, you're unlikely to find much to change it. I think he relies over-much on CAPE10 reversion to historical means, for instance. I'm 50% of the way through the book and he is just now opening up the topic of variable spending....

For anyone who is an enthusiast (for lack of a better word :) ) about retirement spending, you're unlikely to find anything new here. But I could see giving this book to someone who is new to the topic and just dipping their toes into the water.

But I'll have to see how the last 50% goes and whether all the somewhat scattered topics congeal into something more concrete.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by victw » Wed Oct 25, 2017 10:13 pm

AlohaJoe wrote:
Wed Oct 25, 2017 8:20 pm
rrppve wrote:
Sat Oct 14, 2017 10:44 pm
I'd be curious if there is any solid new information in the book and how it compares specifically to McClung's Living Off Your Money, which I consider to be the best book on the subject. Otar's book is the classic to which other books on retirement spending should be compared.
As someone who is also a fan of McClung's work -- see my probably too numerous posts on viewtopic.php?f=10&t=192105 -- I'm about 50% through Pfau's new book. Overall I am disappointed and underwhelmed. I wouldn't recommend it to anyone who has read McClung's book. I'll still read the rest -- partly because it is fast to read and partly just to see if it gets any better.

But I'll have to see how the last 50% goes and whether all the somewhat scattered topics congeal into something more concrete.
Thanks AlohaJoe. I've been impressed by McClung's work and I've also read Otar. I've been hoping someone would review that had at least read McClung. I've requested the local library buy Pfau's book. But I won't purchase it.

I'm still blown away by the lack of real practical advise on structuring a retirement portfolio and how to handle withdrawals. Actually alot of the advise here is practical. But it's surprising to me that McClung - someone outside of the industry - comes up with something that seems innovative.

I look forward to hearing about the last half.
Vic

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by TomatoTomahto » Thu Oct 26, 2017 7:58 am

As someone who is less well read than the posters above, I am finding the book interesting.
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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by 1year23 » Thu Oct 26, 2017 10:52 am

I have not read the book but please tell me if I am understanding this correctly. If Pfau is changing the SWR to 2.5% that includes using an advisor. For the sake of easy round numbers, does that mean Bogleheads that do not use an advisor can safely assume SWR to be about 3.5% now?

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by AlohaJoe » Thu Oct 26, 2017 11:08 am

1year23 wrote:
Thu Oct 26, 2017 10:52 am
I have not read the book but please tell me if I am understanding this correctly. If Pfau is changing the SWR to 2.5% that includes using an advisor. For the sake of easy round numbers, does that mean Bogleheads that do not use an advisor can safely assume SWR to be about 3.5% now?
No, that is not correct.

Hoglebed
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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Hoglebed » Thu Oct 26, 2017 5:25 pm

I just picked this up, and I have to say, I am thoroughly enjoying this book so far. It is certainly the most informative and detailed of the last 10+ investing books I've read. Although retirement is many years away for me, I find Pfau's summary and critique of withdrawl research extremely valuable. In my opinion, this book teaches you information that you didn't even know you needed to know.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by AlohaJoe » Fri Oct 27, 2017 6:14 am

victw wrote:
Wed Oct 25, 2017 10:13 pm
I look forward to hearing about the last half.
The last 50% didn't turn me into a fan. The back half of the book is made up of 4 chapters.

Chapter 6 is a rehash of his earlier XYZ paper comparing variable spending strategies. Despite the charts and graphs, I felt Pfau did a weak job of helping the reader navigate them. It is an extremely unopinionated chapter with seemingly every strategy as good as any other, depending on your personal preferences.

Chapter 7 is a rehash of his 3-part series on Advisor Perspectives earlier this year about using bond ladders. Again it is unopinionated and doesn't really guide you much. It included a fairly long and detailed explanation of bonds and yield curves that could easily be skipped. The section is a bit of a letdown because the final result seems to be "bond ladders don't help".

Chapter 8 is the most disappointing chapter. Up to this point, Pfau has really just thrown a ton of options at the reader with no real way to put them together into a real world actionable framework. Which of the many variable withdrawal strategies he covers should I be considering? If I want to build a bond ladder that uses the "critical path" how do I even calculate that critical path? If we accept that spending declines and mortality is stochastic, how does that balance out his beliefs about current low yields?

Unfortunately, the entire chapter is basically "this stuff is all really complicated so my advisory firm has an online questionnaire that takes 30 minutes to fill it and we use that create a personalized plan".
These matters are highly personalized, and personalized advice cannot be provided through a book.

...

If you seek additional guidance, I would encourage you to give the RIO Questionnaire a try.
The final chapter is basically making the case that financial advisors are a good thing, which probably won't be a popular chapter on Bogleheads.

All of the book is a rehash of previously published work. In that sense, it provides a reasonable one stop place for summaries. But the complete lack of any actionable guidance seems like a fatal flaw.

It was also a bit frustrating that he spent 50% of the book taking about constant-dollar withdrawals only to spend the rest of the book saying it is a pointless completely illogical strategy that no one does or should follow in real life. Then why'd you spend so much time on it instead of the more realistic alternatives?!?!

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by sixtyforty » Fri Oct 27, 2017 9:17 am

Thanks for the update AlohaJoe. I think I'm going to get McClungs book.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by SpaceCowboy » Fri Oct 27, 2017 10:58 am

AlohaJoe wrote:
Fri Oct 27, 2017 6:14 am
Chapter 8 is the most disappointing chapter. Up to this point, Pfau has really just thrown a ton of options at the reader with no real way to put them together into a real world actionable framework. Which of the many variable withdrawal strategies he covers should I be considering? If I want to build a bond ladder that uses the "critical path" how do I even calculate that critical path? If we accept that spending declines and mortality is stochastic, how does that balance out his beliefs about current low yields?

Unfortunately, the entire chapter is basically "this stuff is all really complicated so my advisory firm has an online questionnaire that takes 30 minutes to fill it and we use that create a personalized plan".
These matters are highly personalized, and personalized advice cannot be provided through a book.

...

If you seek additional guidance, I would encourage you to give the RIO Questionnaire a try.
The final chapter is basically making the case that financial advisors are a good thing, which probably won't be a popular chapter on Bogleheads.
I think this sums up my disillusionment with Wade Pfau. He did some really good academic work on retirement income. However, he has now essentially become committed to the advisory industry with his association with McLean. His work from the past couple of years is not detailed enough to really provide actionable advice. He's cut back on publishing in depth academic papers and his work has become very broad brush intending to be interesting enough to cause the reader to seek additional advice from his advisory firm. He also essentially resigned from BH, probably due to the FINRA regulations on advertising communications. Unfortunate to lose such a valuable contributor to the retirement literature.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Hoglebed » Fri Oct 27, 2017 11:02 am

In partial defense of Pfau, I think his intention is to keep recommendations broad. He continously says that there is no one-size-fits-all approach, and that the investor must work within their own financial situation. In my opinion he provides plenty of charts and graphs (many with optimized recommendations) with different scenarios/outcomes so that the reader may make an informed decision.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by dbr » Fri Oct 27, 2017 1:37 pm

If people are looking for a book that will simply tell them what to do, then I don't think such a thing exists or ever will.

How helpful Pfau's book is in the practical situation could be discussed.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by AlohaJoe » Fri Oct 27, 2017 7:01 pm

dbr wrote:
Fri Oct 27, 2017 1:37 pm
If people are looking for a book that will simply tell them what to do, then I don't think such a thing exists or ever will.

How helpful Pfau's book is in the practical situation could be discussed.
I don't think Pfau's book provides a way to judge the impacts of tradeoffs and interactions of the various things he discusses. Do you build a five year bond ladder or a six year bond ladder? Why? (Pfau uses an 8 year ladder but doesn't give any explanation why.)

If I use a bond ladder then how does that affect variable withdrawals?

In the final section he talks about how you can't talk about your portfolio in a vacuum. That you absolutely have to see how much Social Security and other pension/annuity income you have.
Blanchett finds that the level of guaranteed income is by far the most important factor in explaining optimal spending rates from investments. Withdrawal rates can be up to four percentage points higher across the range of guaranteed income levels he examines.
That's literally the entirety of it. No chart summarizing the results. No indication of how to apply this. Does this mean a retiree with $20,000 in Social Security should be taking about an 8% safe withdrawal rate?

But wait, because Pfau also (eventually) told us that safe withdrawal rates are pointless and we should be using variable withdrawals. So how exactly does a retiree integrate Blanchett's research with variable withdrawals?

In the chapter on variable withdrawals, Pfau showed the a less conservative retiree could withdrawal 9% of that year's portfolio balance every year. With the "four percent more" does that mean they can withdraw 13%? And if they use a bond ladder with a critical path calculation does it mean they can withdraw 15%?

I didn't feel Pfau really provided the tools the navigate the complexity he covered.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by KSActuary » Sat Oct 28, 2017 3:49 pm

rrppve wrote:
Fri Oct 27, 2017 10:58 am
AlohaJoe wrote:
Fri Oct 27, 2017 6:14 am
Chapter 8 is the most disappointing chapter. Up to this point, Pfau has really just thrown a ton of options at the reader with no real way to put them together into a real world actionable framework. Which of the many variable withdrawal strategies he covers should I be considering? If I want to build a bond ladder that uses the "critical path" how do I even calculate that critical path? If we accept that spending declines and mortality is stochastic, how does that balance out his beliefs about current low yields?

Unfortunately, the entire chapter is basically "this stuff is all really complicated so my advisory firm has an online questionnaire that takes 30 minutes to fill it and we use that create a personalized plan".
These matters are highly personalized, and personalized advice cannot be provided through a book.

...

If you seek additional guidance, I would encourage you to give the RIO Questionnaire a try.
The final chapter is basically making the case that financial advisors are a good thing, which probably won't be a popular chapter on Bogleheads.
I think this sums up my disillusionment with Wade Pfau. He did some really good academic work on retirement income. However, he has now essentially become committed to the advisory industry with his association with McLean. His work from the past couple of years is not detailed enough to really provide actionable advice. He's cut back on publishing in depth academic papers and his work has become very broad brush intending to be interesting enough to cause the reader to seek additional advice from his advisory firm. He also essentially resigned from BH, probably due to the FINRA regulations on advertising communications. Unfortunate to lose such a valuable contributor to the retirement literature.
+1.25%

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by bhsince87 » Sat Oct 28, 2017 7:39 pm

I'm about a third of the way through it. I have not been too big of a Pfau fan (too negative, IMO). But this book is excellent so far, IMO.

Not much new to hard core Boglehead readers, but it's nice to have it all in one place, with a cogent story line.

You can read it for free with a kindle unlimited subscription. And you can get a free 30 day trial of kindle unlimited, if you are super frugal...
Retirement: When you reach a point where you have enough. Or when you've had enough.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by rgroden » Wed Nov 22, 2017 3:11 pm

Have read both the McClung and Pfau books.
McClung does a better job of summarizing each chapter and is an easier read. He discusses a boatload of data and endorses a "prime harvesting" strategy, which calls for a equity/fixed income mix (could be 60/40, 70/30, etc.) and withdrawing first from the fixed income and letting equity run until the equity is 20% higher than initial investment adjusting for inflation; at which time then replenish the fixed portion by selling equity.
The SWR consistently comes in a bit below the 4% rate (Trinity study) for 100% certainty.
I like his analysis, supporting detail and overall format of the book.

Now the Pfau book is way too overdone; it needs a chapter summary and a bit more decisiveness. My takeaway is - the 4% drawdown doesn't work. Not news to me. In the final couple of chapters he markets his Retirement Income Optimization tool ($500). It actually is appealing but by the time you get to this chapter fatigue has set in. If you like to study all the detail you will like this book. He is very intelligent.
But of the two, the McClung book is the better read.

Bob

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by heyyou » Thu Nov 23, 2017 3:54 pm

Thank you Bob/rgroden, a very informative first post.

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by shum » Thu Nov 23, 2017 6:27 pm

I think it was Bogle, but it could have been someone 3,000 years ago that said:

There are lots of good investment/retirement plans but there is no perfect plan.

I think Pfau does an excellent job of illustrating all the variables, how they can interact, and providing information and general principles that can lead one to good plans that can work for the various stages and objectives you may have over the 50-70 years you may be planning and executing your retirement plans.

If I were to sit down with Pfau and describe my plans over my 50 years, I think he would offer observation on my apparent “mistakes,” observe some places where I got lucky, point out some really good decisions, some boneheaded decisions, and observe that what I’m currently doing is probably not what he would do, but it looks like a pretty good fit for you and your objectives. You might try a few adjustments, but you have got a plan that is probably good enough.

It seems some of the readers reacting here would like to be told, here’s your plan, do it, and it will turn out great. Life is just not like that.

I give this book two thumbs up, and look forward to the book for the safety-first folks like me who nevertheless learned a lot from this first book in his plans.
-shum

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Re: Wade Pfau’s new book: How Much Can I Spend in Retirement?

Post by Jackson12 » Tue Dec 05, 2017 9:56 pm

munemaker wrote:
Sun Oct 22, 2017 2:41 pm
Like McClung's book, does not appear to be available on Kindle.

I bought the paper copy of McClung's book, and that was a good decision. Some of the charts were very large and would have been difficult or impossible to read on Kindle.

I just hate to buy another paper book...probably will though.

Don't these publishers realize this is the 21st century?
The book is available in Kindle format.

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