“WHEN YOU'VE WON the game, stop playing with the money you really need.”

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
EnjoyIt
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by EnjoyIt » Sat May 30, 2020 12:51 pm

marcopolo wrote:
Fri May 29, 2020 6:33 pm
One Ping wrote:
Fri May 29, 2020 6:15 pm
TheTimeLord wrote:
Fri May 29, 2020 4:38 pm
Who is recommending you completely quit playing the game? And why do some BH seem to paint a picture of people with LMP as skin of the teeth no buffer retirees? Sure you can come up with scenarios that make different types of plans fail but the way I hear LMP and "Won the game" strategies described here bear no resemblance to the implementation I hear people describe. I guess I need go to some meeting that begins "Hi, I am TheTimeLord and I love LMP, Winning The Game and Bond Tents because I am Secure Future Addict".
I agree, TimeLord. I have sort of the opposite view of a LMP from that of being a "skin of the teeth" scenario.

To me a LMP can (should?) be used if one has oversaved, or had success at investing, during the accumulation years and has far more than they might reasonably need for their chosen liabilities. In that case, why not set aside enough to cover reasonably foreseen expenses (I.e., liabilities) and then put together your risk portfolio to allow you to do more ... for family, charity, heirs, or whatever? You can design your risk portfolio for whatever risk level you feel comfortable with for money you don't expect to need. The point is you don't need it and, like any investment portfolio, you can pick a risk level you are comfortable with. 100% stock ... expect, or plan for, a 50% (or potentially larger drop) at the worst time. Don't like that much risk ... go for a 50/50 equity/fixed income split (or whatever) risk portfolio.

If you are concerned you might have to help family or friends, then that's a liability you have chosen to accept and you should consider it as such (part of your liability portfolio) when you are settting up your LMP. If assuming that liability leaves you with nothing for your risk portfolio, then you have your answer ... you haven't really "won the game," have you?

If you have enough such that you LMP in safe assets is only half you portfolio, and you put the other half (risk assets) in 100% equity, how is that really any different than a 50/50 balanced portfolio, with perhaps a rising glide path if you decide to only spend from the FI side. Just seems like mental accounting, fine if you it helps you to think about it that way, but functionally not materially different.

If you have that much excess money, it probably does not matter what approach you choose.
That last sentence tells everything. At some point one has enough wealth where they can keep it under their mattress and never run out of money. To me this keeps coming back to the word "need" what exactly does it mean to each person. I stated before, having security in your needs is extremely beneficial. I understand needs as the basic 3 things: food, shelter, medical care and keeping enough bonds in one's portfolio to make sure that is covered may very well be a very smart approach. More than likely just about any average retirement AA of 40/60 - 60/40 will cover those needs. One may even choose to quantify them so that they sleep well at night. I think there is a reason why so many of us end up with 40/60 - 60/40. It just makes sense.
A time to EVALUATE your jitters. | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418

hoops777
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by hoops777 » Sat May 30, 2020 1:07 pm

Clever_Username wrote:
Wed May 27, 2020 9:10 am
Stop playing, to me, doesn't mean not to invest it.

Let's say you're in your mid-40s (note: I wrote this before the recent post in this thread that has someone in that age group) and have reached 25X projected retirement expenses in savings. Let's say that, for whatever reason, you plan to continue working (this also avoids some arguments that don't affect the question at hand). In such a situation, I think we can all agree you still want to contribute to your 401(k) or equivalent and your IRA.

The question becomes asset allocation. There are three options: keep the same asset allocation, add more conservative assets, have a lower portion in conservative assets. The first states that your risk tolerance is as it was before; the second indicates that you want lower volatility to increase the probability of your portfolio meeting your needs when it becomes your source of finances; the last is probably for building a legacy.

I anticipate being in the second category. I'm in my 30s and my portfolio is already well past 25X my annual non-housing non-medical spending. If I stop contributing today (probably not, as my deduction for my paycheck coming in on Monday has probably already been processed anyway), and over the next handful of years I average 3.5% real return, I'll have well past 25X all expenses by the start of the year I turn 59.5. Some might say this is pretty close to winning the game. I don't know, maybe it is. I do plan to reevaluate my asset allocation in a few months maybe a year and review my notes from March, but at this point I think the likely thing is I keep my plan (I'm already at age in bonds, and some people say that's already on the conservative side).

Again, I don't think the message is don't invest. I think the message is that your risk tolerance changes after you've "won the game."
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K.I.S.S........so easy to say so difficult to do.

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CyclingDuo
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by CyclingDuo » Sat May 30, 2020 1:20 pm

sean.mcgrath wrote:
Sat May 30, 2020 10:17 am
CyclingDuo wrote:
Wed May 27, 2020 11:08 am

You can see somewhat how spending (daily spend) changes based on age...
I find it difficult to get my head around your charts. Assuming two adults in a household (understood not always true, but just to get a picture), this implies that the average Older Gen X household is spending almost $150k per year. The overall median personal income is a bit over $30k, so about $85 per day pre-tax. Is this a difference between average and median? If so, median would be much better to use.

Another site has Older Gen X with an average income a bit over $70k, with median around $50k. So ~$190 vs. ~$135 per day.
Sean - understood.

However, let me just suggest you have a look at the study to determine their metrics. You are not the first person who has failed to go to the Bureau of Labor Statistics to see how they conduct their annual study, so no worries. It is based on a metric which the BLS calls a "unit". So one needs to understand what their definition of a "unit" is.

What is their version of a "unit"?

Some households have one person living in them, many have more than one. In other words, it would be incorrect for you to assume that the data is showing the average is based on a per person basis. It is not.

Here is how the BLS defines their "unit":

Average expenditures per consumer unit(1) for 2018 were $61,224, a 1.9-percent increase from 2017 levels, the U.S. Bureau of Labor Statistics reported today.

(1)Consumer units include families, single persons living alone or sharing
a household with others but who are financially independent, or two or
more persons living together who share major expenses.


Composition of the consumer unit is the classification of interview families according to:

(1) relationship of other family members to the reference person
(2) age of the children of the reference person
(3) combination of relationship to the reference person and age of the children. Stepchildren and adopted children are included with the reference person's own children.

Definitions of CE terms are in the CE glossary at www.bls.gov/cex/csxgloss.htm.

Information on the methodology used to calculate and collect CE data is available at www.bls.gov/cex/ce_methodology.htm.

General articles and research papers using CE data are in the CE research library
at www.bls.gov/cex/research_papers/researc ... atalog.htm.


https://www.bls.gov/news.release/cesan.nr0.htm

PDF Version of the Study: https://www.bls.gov/news.release/pdf/cesan.pdf

So, in your case, a "unit" in the Older Gen Xers is spending $73,095.20 per year.

In our particular case as husband and wife with an empty next in the Young Baby Boomers demographic, our "unit" is in the description as being one of those that qualifies thusly: two or more persons living together who share major expenses. And the chart says our "unit" is spending $64,973.65 per year.

Image

As you mention, there are other websites and studies that do provide information on a per person basis. But for most of us who are either married, or share expenses with a partner/significant other or a roommate - the data holds pretty true from the BLS.

If not, the point being is for each household to determine their average daily spend with regard to expenses of needs, wants, and variables to utilize that information to have the multiple of those expenses either set aside in a LMP, or a portfolio nest egg large enough to support the 25 X multiple using a 4% SWR of the trinity study if retiring at or near a more normal retirement age.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Van
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Van » Sat May 30, 2020 1:29 pm

protagonist wrote:
Wed May 27, 2020 2:33 pm
I hadn't read Bernstein's views on this, but that is exactly what I do. I keep what I need, plus a buffer, in ultrasafe investments that should (theoretically) keep up with inflation, and treat the rest as gambling money that I leave in low-cost index funds. It keeps me from worrying when the market tanks as it did recently, and theoretically thus insures a happy retirement.
Would you care to share with us what your ultrasafe investments are that keep up with inflation?

hoops777
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by hoops777 » Sat May 30, 2020 1:31 pm

geerhardusvos wrote:
Wed May 27, 2020 7:32 pm
7eight9 wrote:
Wed May 27, 2020 6:12 pm
geerhardusvos wrote:
Wed May 27, 2020 6:04 pm
CyclingDuo wrote:
Wed May 27, 2020 5:59 pm
geerhardusvos wrote:
Wed May 27, 2020 3:52 pm
Even Warren Buffett would put his wife in a 50/50 portfolio... with $250M
I believe that AA is incorrect - at least with regard to what Buffett said he would do...

He said 90/10 with the 90% being the S&P 500 and the 10% being in short term government bonds. Then again, we are splitting hairs with a portfolio of $250M at 90/10 as the dividends alone from the index fund would be around $5M per year. I think Astrid could easily manage on that - especially since their home is paid off. :mrgreen:
Sure, and that makes my point all the better. Very wealthy people aren’t taking their money out of the equity market for “safety” - they are more interested in growth and long term preservation
And the way a billionaire (number five on the list currently) invests has what relevance to the average Joe on the street? I would say none.

Lose most of the money - Astrid Menks won't be wondering where her next meal is going to come from.

Forbes Real Time Billionaires --- https://www.forbes.com/real-time-billio ... a46f2b3d78
If you don’t want to invest like a very rich person, that’s fine. But I’m interested in learning how they think about money, business, and growth.

Is my measly ~$1M portfolio substantially different than how Jack Bogle‘s is invested? Overall, no not really.
A very wealthy person can lose half their money and they still are very wealthy. A 65 year old getting ready to retire with average assets,not boglehead forum in the clouds assets, is a different story.
K.I.S.S........so easy to say so difficult to do.

hudson
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Mr. LMP says....

Post by hudson » Sat May 30, 2020 1:58 pm

viewtopic.php?p=5160087#p5160087 on April 4th

I wouldn't say that I've got a liability matching portfolio, but the result is pretty close.

bigskyguy
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by bigskyguy » Sat May 30, 2020 2:09 pm

A lot of great comments and insights on this post. As one who has committed to LMP, let me add a few points that might not have been made and might not be intuitively evident.
The concept of LMP is that day to day living expenses are essentially covered by reliable (guaranteed seems a bit to absolute) investments, and generally includes some combination of fixed income (TIPS, treasuries or the like) plus Social Security that are laddered and matched to annual budgetary needs, with a terminal investment in a deferred annuity for longevity coverage once the fixed income ladder ends. Alternative is Social Security coupled with an immediate annuity. Whatever is left over in your retirement funds can be invested according to one's personal preferences. The key here is lifetime coverage of basic expenses, as defined by you the individual.
The mechanics of this are well worked out. The real challenge is defining one's basic expenses. Done correctly, this takes time and effort, and is very much individually dependent. David Blanchett at Morningstar has done yeoman's work showing that in retirement most of us have a relatively predictable income need, slightly higher in one's 60s and early 70s, sagging into ones 80s, before ticking up at end of life years (the Retirement Spending Smile - google it for particulars). So again, most of us have a predictable pattern once retired. Figure out what you need to retire, and there is a fairly predictable spending pattern that should follow.
Our approach was to look at our life expenses in the 5 years pre-retirement. It was fairly easy, gathering our annual credit card statements, bank account statements, and Quicken ledgers, sifting through to determine what was indeed necessary (our definition for us, your definition for you). That whole process went through three or four iterations, and now occupies an Excel spreadsheet on my computer. Once we settled on what for us was necessary, looking back over the five years pre-retirement, there was quite stable consistency year to year. And don't forget to include tax (federal and state) liabilities. With "our annual expense number" in hand, we structured a ladder of treasuries and TIPS to cover us for 20 years, and have a sum set aside to purchase a terminal annuity in the future (that sum is in a Target Date 2040 fund).
For us, building our LMP has consumed approximately 70% of our retirement dollars. Our remainder is our Risk Portfolio, which is divided amongst I-bonds, gold (coins and EFT), cash, World Stock ETF, and short term Treasuries. We will shortly add a reverse mortgage line of credit, for ballast and ease of access for funds as we age.
The key to Stopping Playing the Game is an honest appraisal of one's needs as a couple, a disciplined review of one's spending habits as one approaches retirement, and the willingness to forgo potential gains in order to assure lifetime security.
No approach is ideal, and I suspect for many sophisticated investors taking this approach seems misguided. It works for us. We are now in year two of our withdrawals. I know just what our base annual income (real dollars) will be through 2039, short of a complete national financial meltdown and treasury default. We feel we have controlled what is in our power to control.
This is doable, albeit not inexpensive. Our preference is risk reduction, and income predictability. Yours may indeed be different. One of my favorite quotes of all time comes from Yogi Berra - "when you come to a fork in the road, take it." We have, and early in our journey, we are satisfied.

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geerhardusvos
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by geerhardusvos » Sat May 30, 2020 2:28 pm

hoops777 wrote:
Sat May 30, 2020 1:31 pm
geerhardusvos wrote:
Wed May 27, 2020 7:32 pm
7eight9 wrote:
Wed May 27, 2020 6:12 pm
geerhardusvos wrote:
Wed May 27, 2020 6:04 pm
CyclingDuo wrote:
Wed May 27, 2020 5:59 pm


I believe that AA is incorrect - at least with regard to what Buffett said he would do...

He said 90/10 with the 90% being the S&P 500 and the 10% being in short term government bonds. Then again, we are splitting hairs with a portfolio of $250M at 90/10 as the dividends alone from the index fund would be around $5M per year. I think Astrid could easily manage on that - especially since their home is paid off. :mrgreen:
Sure, and that makes my point all the better. Very wealthy people aren’t taking their money out of the equity market for “safety” - they are more interested in growth and long term preservation
And the way a billionaire (number five on the list currently) invests has what relevance to the average Joe on the street? I would say none.

Lose most of the money - Astrid Menks won't be wondering where her next meal is going to come from.

Forbes Real Time Billionaires --- https://www.forbes.com/real-time-billio ... a46f2b3d78
If you don’t want to invest like a very rich person, that’s fine. But I’m interested in learning how they think about money, business, and growth.

Is my measly ~$1M portfolio substantially different than how Jack Bogle‘s is invested? Overall, no not really.
A very wealthy person can lose half their money and they still are very wealthy. A 65 year old getting ready to retire with average assets,not boglehead forum in the clouds assets, is a different story.
If they have 25X or more living expenses invested, they’ll be fine with a high equity portfolio, and even 15-20X should be fine for a 65 year old with SS.
VTSAX and chill

sean.mcgrath
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by sean.mcgrath » Sat May 30, 2020 2:39 pm

CyclingDuo wrote:
Sat May 30, 2020 1:20 pm

Sean - understood.

CyclingDuo
Thank you, CD, that is helpful. Yes, I was wondering whether that was the reason; personally I would have titled the graph Household rather than "Average American." And unfortunately the graphs didn't really have sources on them.

Yes, for us as well the "unit" approach is more relevant, so the charts are interesting. I would still prefer to have median income, though. It seems that the top 0.1% household incomes (160,000 households) are about 11% of the income, so they do have a fairly strong influence on the chart.

randomguy
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by randomguy » Sat May 30, 2020 3:13 pm

TheTimeLord wrote:
Sat May 30, 2020 10:25 am
randomguy wrote:
Sat May 30, 2020 9:52 am
TheTimeLord wrote:
Fri May 29, 2020 9:41 pm


The difference is the fixed income allocation (and as a result the equity allocation) is selected using a purposeful calculation instead of just arbitrarily selecting a pair of percentages.
And what do you do when that calculation puts out numbers that make zero sense? Does telling a 65 year old with 25x expenses to fo 0/100 and plan dying by 100 sound like a plan anyone should follow?
I guess I would say 2 things. First as I remember Bernstein's advice it was 20x-25x so if you are someone who needs to be very literal I would say you would be looking at 20/80 for someone with 25x if you believe they have won the game. Second, to me at least, someone at 25x has not won the game so they need to keep playing given that 25x has a 95% success rate for a 30 year retirement even with equity exposure. So in my opinion a 65 year-old with 25x still has a need to take at least some risk so they could not or should not dedicate 100% of their portfolio to safe fixed income. But that is just my opinion, not some hard and fast rule or truth.

I will also point out that 25x is usually recommended for a 30 year retirement and you have specified a 35 year retirement in your example.
And why 20/80 and not 0/100 other that just arbitrarily selecting a pair of percentages? Is it a more purposeful calculation than just looking at a table and deciding you find the past volatility and success rate acceptable? All the evidence that I have seen is that if your AA is outside of the 70/30 to 30/70 range (for most cases. Lets not worry about Warren Buffet with his 10000x of assets), you probably have a suboptimal AA. Giving piles of money special names or usage (spent X first) doesn't seem to change that.

25x is fine historically for 35 years if you use a diversified portfolio. It when you go US Large cap only that you run into trouble. But feel free to use 30 years. It doesn't change anything.

And finally nobody has won the game til they are dead with their financial obligations met. That is the game we are playing. How you play the game might change but you will be playing it to the day you die. And until then you will not know if you picked a winning strategy.

hoops777
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by hoops777 » Sat May 30, 2020 3:17 pm

geerhardusvos wrote:
Sat May 30, 2020 2:28 pm
hoops777 wrote:
Sat May 30, 2020 1:31 pm
geerhardusvos wrote:
Wed May 27, 2020 7:32 pm
7eight9 wrote:
Wed May 27, 2020 6:12 pm
geerhardusvos wrote:
Wed May 27, 2020 6:04 pm


Sure, and that makes my point all the better. Very wealthy people aren’t taking their money out of the equity market for “safety” - they are more interested in growth and long term preservation
And the way a billionaire (number five on the list currently) invests has what relevance to the average Joe on the street? I would say none.

Lose most of the money - Astrid Menks won't be wondering where her next meal is going to come from.

Forbes Real Time Billionaires --- https://www.forbes.com/real-time-billio ... a46f2b3d78
If you don’t want to invest like a very rich person, that’s fine. But I’m interested in learning how they think about money, business, and growth.

Is my measly ~$1M portfolio substantially different than how Jack Bogle‘s is invested? Overall, no not really.
A very wealthy person can lose half their money and they still are very wealthy. A 65 year old getting ready to retire with average assets,not boglehead forum in the clouds assets, is a different story.
If they have 25X or more living expenses invested, they’ll be fine with a high equity portfolio, and even 15-20X should be fine for a 65 year old with SS.
Four words...sequence of return risk.
K.I.S.S........so easy to say so difficult to do.

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CyclingDuo
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by CyclingDuo » Sat May 30, 2020 3:37 pm

sean.mcgrath wrote:
Sat May 30, 2020 2:39 pm
CyclingDuo wrote:
Sat May 30, 2020 1:20 pm

Sean - understood.

CyclingDuo
Thank you, CD, that is helpful. Yes, I was wondering whether that was the reason; personally I would have titled the graph Household rather than "Average American." And unfortunately the graphs didn't really have sources on them.

Yes, for us as well the "unit" approach is more relevant, so the charts are interesting. I would still prefer to have median income, though. It seems that the top 0.1% household incomes (160,000 households) are about 11% of the income, so they do have a fairly strong influence on the chart.
My apologies. I post them every now and then and I guess seem to forget to include the link to BLS data.

In spite of the BLS using average vs. median, the important thing we can all do within our own households is to keep a close tally on all of our expenditures to monitor our cash flow. Pretty easy to do these days with online services or apps.

We have been breaking ours down into daily, monthly, and annually for a few years now to prepare and hone in on retirement planning. At least it has helped in our empty nest years where we practice the starve and stack method of living on one income and stacking (saving) the other is accomplished by knowing the daily expenditures so we can set our rate of savings to save at least the same amount each day as we spend - if not more. It has helped us dial in what we will need in retirement. In our case, our "unit" is not too far off from the number reported by the BLS for the Young Baby Boomer demographic.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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geerhardusvos
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by geerhardusvos » Sat May 30, 2020 5:01 pm

hoops777 wrote:
Sat May 30, 2020 3:17 pm
geerhardusvos wrote:
Sat May 30, 2020 2:28 pm
hoops777 wrote:
Sat May 30, 2020 1:31 pm
geerhardusvos wrote:
Wed May 27, 2020 7:32 pm
7eight9 wrote:
Wed May 27, 2020 6:12 pm


And the way a billionaire (number five on the list currently) invests has what relevance to the average Joe on the street? I would say none.

Lose most of the money - Astrid Menks won't be wondering where her next meal is going to come from.

Forbes Real Time Billionaires --- https://www.forbes.com/real-time-billio ... a46f2b3d78
If you don’t want to invest like a very rich person, that’s fine. But I’m interested in learning how they think about money, business, and growth.

Is my measly ~$1M portfolio substantially different than how Jack Bogle‘s is invested? Overall, no not really.
A very wealthy person can lose half their money and they still are very wealthy. A 65 year old getting ready to retire with average assets,not boglehead forum in the clouds assets, is a different story.
If they have 25X or more living expenses invested, they’ll be fine with a high equity portfolio, and even 15-20X should be fine for a 65 year old with SS.
Four words...sequence of return risk.
Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
VTSAX and chill

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TheTimeLord
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by TheTimeLord » Sat May 30, 2020 5:51 pm

randomguy wrote:
Sat May 30, 2020 3:13 pm
TheTimeLord wrote:
Sat May 30, 2020 10:25 am
randomguy wrote:
Sat May 30, 2020 9:52 am
TheTimeLord wrote:
Fri May 29, 2020 9:41 pm


The difference is the fixed income allocation (and as a result the equity allocation) is selected using a purposeful calculation instead of just arbitrarily selecting a pair of percentages.
And what do you do when that calculation puts out numbers that make zero sense? Does telling a 65 year old with 25x expenses to fo 0/100 and plan dying by 100 sound like a plan anyone should follow?
I guess I would say 2 things. First as I remember Bernstein's advice it was 20x-25x so if you are someone who needs to be very literal I would say you would be looking at 20/80 for someone with 25x if you believe they have won the game. Second, to me at least, someone at 25x has not won the game so they need to keep playing given that 25x has a 95% success rate for a 30 year retirement even with equity exposure. So in my opinion a 65 year-old with 25x still has a need to take at least some risk so they could not or should not dedicate 100% of their portfolio to safe fixed income. But that is just my opinion, not some hard and fast rule or truth.

I will also point out that 25x is usually recommended for a 30 year retirement and you have specified a 35 year retirement in your example.
And why 20/80 and not 0/100 other that just arbitrarily selecting a pair of percentages? Is it a more purposeful calculation than just looking at a table and deciding you find the past volatility and success rate acceptable? All the evidence that I have seen is that if your AA is outside of the 70/30 to 30/70 range (for most cases. Lets not worry about Warren Buffet with his 10000x of assets), you probably have a suboptimal AA. Giving piles of money special names or usage (spent X first) doesn't seem to change that.

25x is fine historically for 35 years if you use a diversified portfolio. It when you go US Large cap only that you run into trouble. But feel free to use 30 years. It doesn't change anything.

And finally nobody has won the game til they are dead with their financial obligations met. That is the game we are playing. How you play the game might change but you will be playing it to the day you die. And until then you will not know if you picked a winning strategy.
Why 20/80, because it would seem to make sense if you have 25x then you should skew to the lower end of Bernstein's advice which would be 20x, not 25x, so that means 20/80 instead of 0/100. Sure, I and everyone almost certainly has a suboptimal AA because we can see the future of the markets or predict when we are going to die. All we can do is make reasonable assumptions and see how it plays out. First time I have ever hear anyone contend 25x is fine for 35 years, it wouldn't be for me but could be for someone else. If you want to be very literal then I guess no one as won the game until they die, on the other hand you could argue everyone eventually wins when they die because the game is about how you go to live. But actually I think what Berstein meant was you have won the game when you have accumulated enough assets that it is reasonable to expect they can support you without have to take on the risk of playing the stock market game.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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TheTimeLord
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by TheTimeLord » Sat May 30, 2020 5:56 pm

geerhardusvos wrote:
Sat May 30, 2020 5:01 pm
hoops777 wrote:
Sat May 30, 2020 3:17 pm
geerhardusvos wrote:
Sat May 30, 2020 2:28 pm
hoops777 wrote:
Sat May 30, 2020 1:31 pm
geerhardusvos wrote:
Wed May 27, 2020 7:32 pm


If you don’t want to invest like a very rich person, that’s fine. But I’m interested in learning how they think about money, business, and growth.

Is my measly ~$1M portfolio substantially different than how Jack Bogle‘s is invested? Overall, no not really.
A very wealthy person can lose half their money and they still are very wealthy. A 65 year old getting ready to retire with average assets,not boglehead forum in the clouds assets, is a different story.
If they have 25X or more living expenses invested, they’ll be fine with a high equity portfolio, and even 15-20X should be fine for a 65 year old with SS.
Four words...sequence of return risk.
Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
Last edited by TheTimeLord on Sat May 30, 2020 5:58 pm, edited 1 time in total.
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by EnjoyIt » Sat May 30, 2020 5:56 pm

TheTimeLord wrote:
Sat May 30, 2020 5:51 pm
randomguy wrote:
Sat May 30, 2020 3:13 pm
TheTimeLord wrote:
Sat May 30, 2020 10:25 am
randomguy wrote:
Sat May 30, 2020 9:52 am
TheTimeLord wrote:
Fri May 29, 2020 9:41 pm


The difference is the fixed income allocation (and as a result the equity allocation) is selected using a purposeful calculation instead of just arbitrarily selecting a pair of percentages.
And what do you do when that calculation puts out numbers that make zero sense? Does telling a 65 year old with 25x expenses to fo 0/100 and plan dying by 100 sound like a plan anyone should follow?
I guess I would say 2 things. First as I remember Bernstein's advice it was 20x-25x so if you are someone who needs to be very literal I would say you would be looking at 20/80 for someone with 25x if you believe they have won the game. Second, to me at least, someone at 25x has not won the game so they need to keep playing given that 25x has a 95% success rate for a 30 year retirement even with equity exposure. So in my opinion a 65 year-old with 25x still has a need to take at least some risk so they could not or should not dedicate 100% of their portfolio to safe fixed income. But that is just my opinion, not some hard and fast rule or truth.

I will also point out that 25x is usually recommended for a 30 year retirement and you have specified a 35 year retirement in your example.
And why 20/80 and not 0/100 other that just arbitrarily selecting a pair of percentages? Is it a more purposeful calculation than just looking at a table and deciding you find the past volatility and success rate acceptable? All the evidence that I have seen is that if your AA is outside of the 70/30 to 30/70 range (for most cases. Lets not worry about Warren Buffet with his 10000x of assets), you probably have a suboptimal AA. Giving piles of money special names or usage (spent X first) doesn't seem to change that.

25x is fine historically for 35 years if you use a diversified portfolio. It when you go US Large cap only that you run into trouble. But feel free to use 30 years. It doesn't change anything.

And finally nobody has won the game til they are dead with their financial obligations met. That is the game we are playing. How you play the game might change but you will be playing it to the day you die. And until then you will not know if you picked a winning strategy.
Why 20/80, because it would seem to make sense if you have 25x then you should skew to the lower end of Bernstein's advice which would be 20x, not 25x, so that means 20/80 instead of 0/100. Sure, I and everyone almost certainly has a suboptimal AA because we can see the future of the markets or predict when we are going to die. All we can do is make reasonable assumptions and see how it plays out. First time I have ever hear anyone contend 25x is fine for 35 years, it wouldn't be for me but could be for someone else. If you want to be very literal then I guess no one as won the game until they die, on the other hand you could argue everyone eventually wins when they die because the game is about how you go to live. But actually I think what Berstein meant was you have won the game when you have accumulated enough assets that it is reasonable to expect they can support you without have to take on the risk of playing the stock market game.
Maybe I am misunderstanding what you are saying, but 20/80 at 25x is riskier than 40/60 or 60/40 based on historical data.
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by TheTimeLord » Sat May 30, 2020 6:04 pm

EnjoyIt wrote:
Sat May 30, 2020 5:56 pm
TheTimeLord wrote:
Sat May 30, 2020 5:51 pm
randomguy wrote:
Sat May 30, 2020 3:13 pm
TheTimeLord wrote:
Sat May 30, 2020 10:25 am
randomguy wrote:
Sat May 30, 2020 9:52 am


And what do you do when that calculation puts out numbers that make zero sense? Does telling a 65 year old with 25x expenses to fo 0/100 and plan dying by 100 sound like a plan anyone should follow?
I guess I would say 2 things. First as I remember Bernstein's advice it was 20x-25x so if you are someone who needs to be very literal I would say you would be looking at 20/80 for someone with 25x if you believe they have won the game. Second, to me at least, someone at 25x has not won the game so they need to keep playing given that 25x has a 95% success rate for a 30 year retirement even with equity exposure. So in my opinion a 65 year-old with 25x still has a need to take at least some risk so they could not or should not dedicate 100% of their portfolio to safe fixed income. But that is just my opinion, not some hard and fast rule or truth.

I will also point out that 25x is usually recommended for a 30 year retirement and you have specified a 35 year retirement in your example.
And why 20/80 and not 0/100 other that just arbitrarily selecting a pair of percentages? Is it a more purposeful calculation than just looking at a table and deciding you find the past volatility and success rate acceptable? All the evidence that I have seen is that if your AA is outside of the 70/30 to 30/70 range (for most cases. Lets not worry about Warren Buffet with his 10000x of assets), you probably have a suboptimal AA. Giving piles of money special names or usage (spent X first) doesn't seem to change that.

25x is fine historically for 35 years if you use a diversified portfolio. It when you go US Large cap only that you run into trouble. But feel free to use 30 years. It doesn't change anything.

And finally nobody has won the game til they are dead with their financial obligations met. That is the game we are playing. How you play the game might change but you will be playing it to the day you die. And until then you will not know if you picked a winning strategy.
Why 20/80, because it would seem to make sense if you have 25x then you should skew to the lower end of Bernstein's advice which would be 20x, not 25x, so that means 20/80 instead of 0/100. Sure, I and everyone almost certainly has a suboptimal AA because we can see the future of the markets or predict when we are going to die. All we can do is make reasonable assumptions and see how it plays out. First time I have ever hear anyone contend 25x is fine for 35 years, it wouldn't be for me but could be for someone else. If you want to be very literal then I guess no one as won the game until they die, on the other hand you could argue everyone eventually wins when they die because the game is about how you go to live. But actually I think what Berstein meant was you have won the game when you have accumulated enough assets that it is reasonable to expect they can support you without have to take on the risk of playing the stock market game.
Maybe I am misunderstanding what you are saying, but 20/80 at 25x is riskier than 40/60 or 60/40 based on historical data.
Nope, I was just responding to how I would see Berstein's guidance applied to the comment in blue, which would be 20/80 not 0/100 as was asserted. Personally, I wouldn't think 20/80 would contain enough risk either for the long term so the person might need to wait until they had 30x giving the 33/67 if they used Bernstein's 20x guideline or just take more risk with 25x and hope the sequence of returns works out.
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by geerhardusvos » Sat May 30, 2020 6:58 pm

TheTimeLord wrote:
Sat May 30, 2020 5:56 pm
geerhardusvos wrote:
Sat May 30, 2020 5:01 pm
hoops777 wrote:
Sat May 30, 2020 3:17 pm
geerhardusvos wrote:
Sat May 30, 2020 2:28 pm
hoops777 wrote:
Sat May 30, 2020 1:31 pm


A very wealthy person can lose half their money and they still are very wealthy. A 65 year old getting ready to retire with average assets,not boglehead forum in the clouds assets, is a different story.
If they have 25X or more living expenses invested, they’ll be fine with a high equity portfolio, and even 15-20X should be fine for a 65 year old with SS.
Four words...sequence of return risk.
Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by absolute zero » Sat May 30, 2020 8:08 pm

marcopolo wrote:
Fri May 29, 2020 7:18 pm
One Ping wrote:
Fri May 29, 2020 6:48 pm
marcopolo wrote:
Fri May 29, 2020 6:33 pm
One Ping wrote:
Fri May 29, 2020 6:15 pm
TheTimeLord wrote:
Fri May 29, 2020 4:38 pm
Who is recommending you completely quit playing the game? And why do some BH seem to paint a picture of people with LMP as skin of the teeth no buffer retirees? Sure you can come up with scenarios that make different types of plans fail but the way I hear LMP and "Won the game" strategies described here bear no resemblance to the implementation I hear people describe. I guess I need go to some meeting that begins "Hi, I am TheTimeLord and I love LMP, Winning The Game and Bond Tents because I am Secure Future Addict".
I agree, TimeLord. I have sort of the opposite view of a LMP from that of being a "skin of the teeth" scenario.

To me a LMP can (should?) be used if one has oversaved, or had success at investing, during the accumulation years and has far more than they might reasonably need for their chosen liabilities. In that case, why not set aside enough to cover reasonably foreseen expenses (I.e., liabilities) and then put together your risk portfolio to allow you to do more ... for family, charity, heirs, or whatever? You can design your risk portfolio for whatever risk level you feel comfortable with for money you don't expect to need. The point is you don't need it and, like any investment portfolio, you can pick a risk level you are comfortable with. 100% stock ... expect, or plan for, a 50% (or potentially larger drop) at the worst time. Don't like that much risk ... go for a 50/50 equity/fixed income split (or whatever) risk portfolio.

If you are concerned you might have to help family or friends, then that's a liability you have chosen to accept and you should consider it as such (part of your liability portfolio) when you are settting up your LMP. If assuming that liability leaves you with nothing for your risk portfolio, then you have your answer ... you haven't really "won the game," have you?
If you have enough such that you LMP in safe assets is only half you portfolio, and you put the other half (risk assets) in 100% equity, how is that really any different than a 50/50 balanced portfolio, with perhaps a rising glide path if you decide to only spend from the FI side. Just seems like mental accounting, fine if you it helps you to think about it that way, but functionally not materially different.
Basically I agree you, but so what? It appears to me you agree with me, too. You have to arrive at an asset allocation somehow, if mental accounting gives you a framework for doing that, what's the downside?
marcopolo wrote:
Fri May 29, 2020 6:33 pm
If you have that much excess money, it probably does not matter what approach you choose.
Exactly. If you don't, you haven't really "won the game."
My only point is that people sometimes seem to present LMP as some magical thing that somehow makes your retirment "safer". But, it is really just mentally shifting the same dollars around, and is not functionally any different.
Completely agree with you marcopolo. I think the LMP concept is mostly just “fancy packaging.” It’s a way to take a super low-risk allocation with a rising equity glide path and view it from a slightly different angle. And, for the most part, it’s only feasible for people with extremely large portfolios. Nothing groundbreaking to me.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by 2pedals » Sat May 30, 2020 9:10 pm

In general I believe that as people get older (yo 70+) they feel more vulnerable to prolonged market drops, loss of income sources from employment and health care issues. Using LMP for at least some liabilities helps reduce some of that stress.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Horton » Sat May 30, 2020 9:11 pm

absolute zero wrote:
Sat May 30, 2020 8:08 pm
Completely agree with you marcopolo. I think the LMP concept is mostly just “fancy packaging.” It’s a way to take a super low-risk allocation with a rising equity glide path and view it from a slightly different angle. And, for the most part, it’s only feasible for people with extremely large portfolios. Nothing groundbreaking to me.
I’ll repeat what I said previously - the LMP is a way to deductively build an asset allocation. Some people find that helpful, some apparently don’t. That about sums it up. Anything more productive we can discuss in this thread?

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by willthrill81 » Sat May 30, 2020 10:01 pm

TheTimeLord wrote:
Fri May 29, 2020 9:41 pm
marcopolo wrote:
Fri May 29, 2020 7:18 pm
One Ping wrote:
Fri May 29, 2020 6:48 pm
marcopolo wrote:
Fri May 29, 2020 6:33 pm
One Ping wrote:
Fri May 29, 2020 6:15 pm

I agree, TimeLord. I have sort of the opposite view of a LMP from that of being a "skin of the teeth" scenario.

To me a LMP can (should?) be used if one has oversaved, or had success at investing, during the accumulation years and has far more than they might reasonably need for their chosen liabilities. In that case, why not set aside enough to cover reasonably foreseen expenses (I.e., liabilities) and then put together your risk portfolio to allow you to do more ... for family, charity, heirs, or whatever? You can design your risk portfolio for whatever risk level you feel comfortable with for money you don't expect to need. The point is you don't need it and, like any investment portfolio, you can pick a risk level you are comfortable with. 100% stock ... expect, or plan for, a 50% (or potentially larger drop) at the worst time. Don't like that much risk ... go for a 50/50 equity/fixed income split (or whatever) risk portfolio.

If you are concerned you might have to help family or friends, then that's a liability you have chosen to accept and you should consider it as such (part of your liability portfolio) when you are settting up your LMP. If assuming that liability leaves you with nothing for your risk portfolio, then you have your answer ... you haven't really "won the game," have you?
If you have enough such that you LMP in safe assets is only half you portfolio, and you put the other half (risk assets) in 100% equity, how is that really any different than a 50/50 balanced portfolio, with perhaps a rising glide path if you decide to only spend from the FI side. Just seems like mental accounting, fine if you it helps you to think about it that way, but functionally not materially different.
Basically I agree you, but so what? It appears to me you agree with me, too. You have to arrive at an asset allocation somehow, if mental accounting gives you a framework for doing that, what's the downside?
marcopolo wrote:
Fri May 29, 2020 6:33 pm
If you have that much excess money, it probably does not matter what approach you choose.
Exactly. If you don't, you haven't really "won the game."
My only point is that people sometimes seem to present LMP as some magical thing that somehow makes your retirment "safer". But, it is really just mentally shifting the same dollars around, and is not functionally any different.
The difference is the fixed income allocation (and as a result the equity allocation) is selected using a purposeful calculation instead of just arbitrarily selecting a pair of percentages.
It goes beyond that. There is a 'hard barrier' between the fixed income used to form the liability matching portion of the portfolio and the remainder, the 'risk' portfolio. So this means that if retirees using the LMP approach had their LMP and risk portfolio each representing 50% of their total investable assets, if their risk portfolio dropped in value significantly, they would not sell from their LMP to buy more in their risk portfolio. Indeed, if the risk portfolio went to zero, the LMP would remain intact. That's the real appeal of this approach; it guarantees that the retiree will at least have the funds in the LMP for the prepared for length of time, no matter what happens to their risk portfolio.

By contrast, if retirees were using a fixed 50/50 allocation to their entire portfolio, if their stocks dropped in value by 50% (all else equal), then retirees would have to sell some of their bonds in order to return to a 50/50 allocation. If stocks kept dropping, the retirees' entire portfolio could go down dramatically, a theoretical phenomenon known as 'rebalancing into oblivion'. For this and some empirical reasons, some here adopt a bit of a hybrid approach referred to as prime harvesting whereby stocks can be sold to buy bonds but not vice versa, thus avoiding the 'rebalancing into oblivion' issue.

Going beyond LMPs, this also demonstrates that if there is no rebalancing between buckets in a 'bucket strategy', then it cannot be accurately stated to be mere mental accounting.
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by protagonist » Sat May 30, 2020 10:15 pm

Van wrote:
Sat May 30, 2020 1:29 pm
protagonist wrote:
Wed May 27, 2020 2:33 pm
I hadn't read Bernstein's views on this, but that is exactly what I do. I keep what I need, plus a buffer, in ultrasafe investments that should (theoretically) keep up with inflation, and treat the rest as gambling money that I leave in low-cost index funds. It keeps me from worrying when the market tanks as it did recently, and theoretically thus insures a happy retirement.
Would you care to share with us what your ultrasafe investments are that keep up with inflation?
"Ultrasafe" is perhaps a misnomer....I should say as safe as I can conceive while keeping up with inflation.
Most of my fixed income money is/has been (for the past decade or so) in high yield CDs with generous EWPs. At least so far, all of them have beat inflation, but there is certainly no guarantee. That said the generous EWPs allow an escape valve if interest rates shoot up or a much better product appears on the market.
I also max out every year on I-bonds, which , IMHO, are the best and safest hedge against inflation available....sadly there are investment limits, but I buy $25K/year (10K in personal account, 10K in revocable trust, 5K in tax refund).
I also own an intermediate term bond fund as part of FFNOX, though that is not nearly as safe as the above so I don't really include it in my "safe bucket". It's something in between.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by FIREchief » Sat May 30, 2020 11:19 pm

Van wrote:
Sat May 30, 2020 1:29 pm
protagonist wrote:
Wed May 27, 2020 2:33 pm
I hadn't read Bernstein's views on this, but that is exactly what I do. I keep what I need, plus a buffer, in ultrasafe investments that should (theoretically) keep up with inflation, and treat the rest as gambling money that I leave in low-cost index funds. It keeps me from worrying when the market tanks as it did recently, and theoretically thus insures a happy retirement.
Would you care to share with us what your ultrasafe investments are that keep up with inflation?
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by sean.mcgrath » Sun May 31, 2020 2:18 am

CyclingDuo wrote:
Sat May 30, 2020 3:37 pm

It has helped us dial in what we will need in retirement.
Yes, this is the point. Years ago I'd read that people typically spend 30% less after they retire, and used that as my planning model. However, as we got closer to that age, I realized it was not what we were hoping for. Like you, it would be very nice to have some "active" years at the start. My new model assumes that spend goes up the first ten years. Good health willing...

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by AlohaJoe » Sun May 31, 2020 3:10 am

Horton wrote:
Sat May 30, 2020 9:11 pm
I’ll repeat what I said previously - the LMP is a way to deductively build an asset allocation.
I don't think it is even that. A couple that is same age has a 10% chance of living (at least) 38 years according to the Society of Actuaries, assuming they retire at age 65. (Almost) nobody builds an LMP ladder for 38 years. And even that would risk a (massive!) 10% chance of failure but with an extraordinarily high cost (a 2.6% withdrawal rate, assuming no "risk portfolio" at all). To get it down to a 1% chance of failure you need a LMP ladder of over 40 years. So instead people generally make up completely arbitrary lengths of their LMP ladder, since we're suddenly talking about needing a portfolio that is 45x expenses.

That is no different than making up arbitrary asset allocations, in my mind. It is just hiding the completely arbitrary choices in a different part of the problem.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Dandy » Sun May 31, 2020 7:19 am

who said that the LMP alone was designed to cover an extra long life? Bernstein's suggestion of 20-25 years for a 65 year old would cover most retirements. And if you have "enough", the assets outside the LMP will come into play to cover unexpected expenses and longer life.

My LMP is geared to age 90 and I have more than double the assets beyond that. And I use the LMP more as insurance than an ATM i.e. my withdrawals usually are a combination of LMP and other assets unless the non LMP equities have bad performance. Remember Bernstein says the assets not needed for the LMP can be invested even 100% in equities.

If you have enough you have to seriously think about what is the goal(s) for your investments going forward. Before retirement it usually is the goal of getting enough assets for a comfortable retirement. If you have enough you probably have exceeded that goal - so what is the new goal? Seeing how much wealth I can accumulate before I die? Maximizing inheritance? Funding my favorite charity? Buying an island? Some attention might be in order to try to preserve the "win" and assure to a large extent that your basic retirement expenses will be covered for X years should really unusually bad times occur.

My goals are to reasonably assure basic retirement expenses for life of which of us lives longer and preserve assets to the extent that I can help our children/grandchildren financially now and when they are heirs. Overall allocation is about 42/58

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by smitcat » Sun May 31, 2020 7:22 am

geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm
geerhardusvos wrote:
Sat May 30, 2020 5:01 pm
hoops777 wrote:
Sat May 30, 2020 3:17 pm
geerhardusvos wrote:
Sat May 30, 2020 2:28 pm


If they have 25X or more living expenses invested, they’ll be fine with a high equity portfolio, and even 15-20X should be fine for a 65 year old with SS.
Four words...sequence of return risk.
Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by tvubpwcisla » Sun May 31, 2020 7:23 am

Is there an particular age that we should look to implement a LMP or is it simply based off raw numbers? Thanks!
Stay invested my friends.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by JustinR » Sun May 31, 2020 8:29 am

How many years of retirement does LMP take into account? How many years of expenses do you need to save before you've "won the game"?

What if you live longer than that?


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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Pinotage » Sun May 31, 2020 9:20 am

Thank you for the links!

Interesting to see the frequency of threads on this topic, and the OPs/top posters in those threads.

Livesoft does not disappoint as the second poster in two of the four threads. In the last link, OP from January 2015, the following post is interesting:
livesoft wrote:
Tue Jan 20, 2015 12:13 pm
Thanks for the link as I had missed it. Wm Bernstein suggests in the article a max allocation to equities for a retiree's portfolio:
Both historical back testing and Monte Carlo analysis suggest that a 65-year-old with only 20 years of RLE in his nest egg should hold no more than 50% of his or her portfolio in equities; if you have 35 years of RLE, then up to 70% is probably safe; and if you have 50 years of RLE, then even an all-stock portfolio is reasonable—if you can stomach it.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Horton » Sun May 31, 2020 9:30 am

AlohaJoe wrote:
Sun May 31, 2020 3:10 am
Horton wrote:
Sat May 30, 2020 9:11 pm
I’ll repeat what I said previously - the LMP is a way to deductively build an asset allocation.
I don't think it is even that. A couple that is same age has a 10% chance of living (at least) 38 years according to the Society of Actuaries, assuming they retire at age 65. (Almost) nobody builds an LMP ladder for 38 years. And even that would risk a (massive!) 10% chance of failure but with an extraordinarily high cost (a 2.6% withdrawal rate, assuming no "risk portfolio" at all). To get it down to a 1% chance of failure you need a LMP ladder of over 40 years. So instead people generally make up completely arbitrary lengths of their LMP ladder, since we're suddenly talking about needing a portfolio that is 45x expenses.

That is no different than making up arbitrary asset allocations, in my mind. It is just hiding the completely arbitrary choices in a different part of the problem.
This is much more simple than you are making it. Products exist to mitigate longevity risk - SPIAs. An LMP could simply be an amount invested in fixed income that would purchase the desired income. In the interim, one could then duration match the assets to the annuity, thereby eliminating most interest rate risk as well. This gives a person the flexibility to settle their liability at any point in time.

A very simple asset allocation could be - SPIA price in fixed income and the rest in equities. Feel free to spice it up and hold more/less fixed income, if desired, but this would be a simple reference point.

My point is that some people may find this approach satisfying and it may help them avoid behavioral errors. For example, amidst the backdrop of current market volatility, a 65 year old retiree holding enough in fixed income now to purchase a SPIA at any point desired may not worry about the gyrations of the market.

As noted above, other people may not see the benefits of this approach. To each his own. There are many roads that lead to Rome.
Last edited by Horton on Sun May 31, 2020 9:42 am, edited 1 time in total.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by geerhardusvos » Sun May 31, 2020 9:39 am

smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm
geerhardusvos wrote:
Sat May 30, 2020 5:01 pm
hoops777 wrote:
Sat May 30, 2020 3:17 pm


Four words...sequence of return risk.
Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 30 year retirement (so longer than almost any 65-year-old would need).
Last edited by geerhardusvos on Sun May 31, 2020 10:35 am, edited 1 time in total.
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randomguy
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by randomguy » Sun May 31, 2020 9:46 am

TheTimeLord wrote:
Sat May 30, 2020 6:04 pm
EnjoyIt wrote:
Sat May 30, 2020 5:56 pm
TheTimeLord wrote:
Sat May 30, 2020 5:51 pm


Why 20/80, because it would seem to make sense if you have 25x then you should skew to the lower end of Bernstein's advice which would be 20x, not 25x, so that means 20/80 instead of 0/100. Sure, I and everyone almost certainly has a suboptimal AA because we can see the future of the markets or predict when we are going to die. All we can do is make reasonable assumptions and see how it plays out. First time I have ever hear anyone contend 25x is fine for 35 years, it wouldn't be for me but could be for someone else. If you want to be very literal then I guess no one as won the game until they die, on the other hand you could argue everyone eventually wins when they die because the game is about how you go to live. But actually I think what Berstein meant was you have won the game when you have accumulated enough assets that it is reasonable to expect they can support you without have to take on the risk of playing the stock market game.
Maybe I am misunderstanding what you are saying, but 20/80 at 25x is riskier than 40/60 or 60/40 based on historical data.
Nope, I was just responding to how I would see Berstein's guidance applied to the comment in blue, which would be 20/80 not 0/100 as was asserted. Personally, I wouldn't think 20/80 would contain enough risk either for the long term so the person might need to wait until they had 30x giving the 33/67 if they used Bernstein's 20x guideline or just take more risk with 25x and hope the sequence of returns works out.
Historically 20/80 has been risker than 40/60. See https://earlyretirementnowdotcom.files. ... table1.png . 40/60 splits 50/50 and 25/75. Note exact percentages depend on what people hold for stocks, time periods looked at, how the money is take out (yearly vs monthly), what type of bonds are being held, and a bunch of other factors. But the general trends hold.

What is magical about 20? Why not hold 18 years or 15 years? What makes 20 anything but an arbitrary number?

smitcat
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by smitcat » Sun May 31, 2020 9:48 am

geerhardusvos wrote:
Sun May 31, 2020 9:39 am
smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm
geerhardusvos wrote:
Sat May 30, 2020 5:01 pm


Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 3 year retirement (so longer than almost any 65-year-old would need).

Whether you call it a "rule" or a "guideline" that worked it has nothing to do with SS.
It is stand alone.

This is what the Timelord was referring to when he said this:
"You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above."

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TheTimeLord
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by TheTimeLord » Sun May 31, 2020 9:50 am

Pinotage wrote:
Sun May 31, 2020 9:20 am
Thank you for the links!

Interesting to see the frequency of threads on this topic, and the OPs/top posters in those threads.

Livesoft does not disappoint as the second poster in two of the four threads. In the last link, OP from January 2015, the following post is interesting:
livesoft wrote:
Tue Jan 20, 2015 12:13 pm
Thanks for the link as I had missed it. Wm Bernstein suggests in the article a max allocation to equities for a retiree's portfolio:
Both historical back testing and Monte Carlo analysis suggest that a 65-year-old with only 20 years of RLE in his nest egg should hold no more than 50% of his or her portfolio in equities; if you have 35 years of RLE, then up to 70% is probably safe; and if you have 50 years of RLE, then even an all-stock portfolio is reasonable—if you can stomach it.
Yes, the size of your portfolio directly effects both your ability (increases) and need to take risk (decreases), I believe that has been pointed out a couple times in this thread. This is why as people's portfolio's grow so do their options including the ability to implement something like a LMP. And sure with 50x you could probably go with an 100/0 portfolio but that begs the question why, how does that help you financially live the life you want? It is hard to tell when you have enough when you don't know what you want.
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TheTimeLord
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by TheTimeLord » Sun May 31, 2020 9:55 am

geerhardusvos wrote:
Sun May 31, 2020 9:39 am
smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm
geerhardusvos wrote:
Sat May 30, 2020 5:01 pm


Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 3 year retirement (so longer than almost any 65-year-old would need).
All people are trying to do is explain to you how X is normally calculated for these discussions since your posts seem to indicate you are using a different calculation.
Last edited by TheTimeLord on Sun May 31, 2020 9:57 am, edited 1 time in total.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

Pinotage
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Pinotage » Sun May 31, 2020 9:56 am

TheTimeLord wrote:
Sun May 31, 2020 9:50 am
It is hard to tell when you have enough when you don't know what you want.
Every once in awhile, you read something that forces you to pause and consider. This triggered exactly such a moment for me.

Excellent post, TimeLord.
Last edited by Pinotage on Sun May 31, 2020 9:59 am, edited 3 times in total.

mathwhiz
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by mathwhiz » Sun May 31, 2020 9:56 am

The Vanguard Wellington Income fund at 60% Bonds and 40% stocks has some extraordinary long term returns as well as low fees for its risk profile. I would feel comfortable having a large portion of my money in it if I have already won the game.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by geerhardusvos » Sun May 31, 2020 9:57 am

smitcat wrote:
Sun May 31, 2020 9:48 am
geerhardusvos wrote:
Sun May 31, 2020 9:39 am
smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm


You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 3 year retirement (so longer than almost any 65-year-old would need).

Whether you call it a "rule" or a "guideline" that worked it has nothing to do with SS.
It is stand alone.

This is what the Timelord was referring to when he said this:
"You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above."
The point that you are not hearing is that most people will never have 20X their living expenses saved. They didn’t plan. They just live off of Social Security. Many people are able to comfortably spend 40 K per year and have less than 10X living expenses saved. They end up being just fine. The size of the portfolio doesn’t matter for them, they have to live on what they have and what they are given through SS.

If someone wants to live perpetually on just their portfolio and they are let’s say age 60, if they have 25X their living expenses, they won’t need any other source of income, and SS is just gravy! For planning purposes a 65-year-old retiree with 15X to 20 X is likely fine given SS
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geerhardusvos
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by geerhardusvos » Sun May 31, 2020 10:01 am

TheTimeLord wrote:
Sun May 31, 2020 9:55 am
geerhardusvos wrote:
Sun May 31, 2020 9:39 am
smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm


You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 3 year retirement (so longer than almost any 65-year-old would need).
All people are trying to do is explain to you how X is normally calculated for these discussions since your posts seem to indicate you are using a different calculation.
I understand that many people have way less than 20 X saved and they live off of Social Security and it covers their living expenses. I also understand that 20x saved is a great guideline for someone who is 65+ and retiring with SS benefits.
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Pinotage
Posts: 376
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Location: Springfield

Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Pinotage » Sun May 31, 2020 10:03 am

geerhardusvos wrote:
Sun May 31, 2020 9:39 am
smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm
geerhardusvos wrote:
Sat May 30, 2020 5:01 pm


Right, and the 4% withdrawal rate already accounts for SORR, especially for a 30 year timeframe. Then you add in Social Security and hey things are looking better than good for the 65 year old retiree with 20x expenses with a high equity portfolio
You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 3 year retirement (so longer than almost any 65-year-old would need).
Geerhard - I think you and Smitcat are agreeing with each other.

Also 99% success for a 3 year retirement is not a particularly high bar :wink:

Dandy
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Dandy » Sun May 31, 2020 10:06 am

What is magical about 20? Why not hold 18 years or 15 years? What makes 20 anything but an arbitrary number?
Not magical and probably somewhat arbitrary but the average life expectancy of a 65 year old is probably in the mid 80's. So, 20 years would address most retirees basic expense needs --and assets outside the LMP, which should be substantial, to cover longer years. It is at least based on actual expenses at a given time vs trying to guess what allocation and sub allocations approximate your educated guess at what your risk tolerance is. (especially after a 10 year stock bull market and a longer one in bonds).

I can certainly understand why many who have enough would choose not to employ and LMP approach and would likely be fine. It's an option.

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TheTimeLord
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by TheTimeLord » Sun May 31, 2020 10:07 am

randomguy wrote:
Sun May 31, 2020 9:46 am
TheTimeLord wrote:
Sat May 30, 2020 6:04 pm
EnjoyIt wrote:
Sat May 30, 2020 5:56 pm
TheTimeLord wrote:
Sat May 30, 2020 5:51 pm


Why 20/80, because it would seem to make sense if you have 25x then you should skew to the lower end of Bernstein's advice which would be 20x, not 25x, so that means 20/80 instead of 0/100. Sure, I and everyone almost certainly has a suboptimal AA because we can see the future of the markets or predict when we are going to die. All we can do is make reasonable assumptions and see how it plays out. First time I have ever hear anyone contend 25x is fine for 35 years, it wouldn't be for me but could be for someone else. If you want to be very literal then I guess no one as won the game until they die, on the other hand you could argue everyone eventually wins when they die because the game is about how you go to live. But actually I think what Berstein meant was you have won the game when you have accumulated enough assets that it is reasonable to expect they can support you without have to take on the risk of playing the stock market game.
Maybe I am misunderstanding what you are saying, but 20/80 at 25x is riskier than 40/60 or 60/40 based on historical data.
Nope, I was just responding to how I would see Berstein's guidance applied to the comment in blue, which would be 20/80 not 0/100 as was asserted. Personally, I wouldn't think 20/80 would contain enough risk either for the long term so the person might need to wait until they had 30x giving the 33/67 if they used Bernstein's 20x guideline or just take more risk with 25x and hope the sequence of returns works out.
Historically 20/80 has been risker than 40/60. See https://earlyretirementnowdotcom.files. ... table1.png . 40/60 splits 50/50 and 25/75. Note exact percentages depend on what people hold for stocks, time periods looked at, how the money is take out (yearly vs monthly), what type of bonds are being held, and a bunch of other factors. But the general trends hold.

What is magical about 20? Why not hold 18 years or 15 years? What makes 20 anything but an arbitrary number?
I have no doubt 20/80 is riskier than 40/60 for a 30 year retirement but you gave a scenario where we were using Bernstein's recommendation and the retiree had 25x so the outcome would be 20/80. This is why I would not expect (or recommend) a person with 25x planning on a 30 year retirement to follow Bernstein's advice because by his definition they haven't actually won the game, and that is key, winning the game is a precondition for following Bernstein's recommendation. As for are 20x to 25x being arbitrary, I am sure they are to some point but probably somewhat mirror what would be a slightly longer than average retirement for people who have accumulated that level of savings.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

reln
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by reln » Sun May 31, 2020 10:11 am

CWRadio wrote:
Wed May 27, 2020 8:28 am
William Bernstein is fond of saying “WHEN YOU'VE WON the game, stop playing with the money you really need.”
For example:
If you need $30,000 a year for 30 years you should have $900,000 in safe money.
My question is where do you put this safe money if it is in a IRA and don't want to play with it? Cash, Cds, bond, Money market funds, SPIA or bond funds, etc.
What about inflation?

Any suggestions? Thanks Paul
tips and/or SPIA/DIA

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TheTimeLord
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by TheTimeLord » Sun May 31, 2020 10:12 am

geerhardusvos wrote:
Sun May 31, 2020 10:01 am
TheTimeLord wrote:
Sun May 31, 2020 9:55 am
geerhardusvos wrote:
Sun May 31, 2020 9:39 am
smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm


No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 3 year retirement (so longer than almost any 65-year-old would need).
All people are trying to do is explain to you how X is normally calculated for these discussions since your posts seem to indicate you are using a different calculation.
I understand that many people have way less than 20 X saved and they live off of Social Security and it covers their living expenses. I also understand that 20x saved is a great guideline for someone who is 65+ and retiring with SS benefits.
No, what we are trying to tell you is if a couple has let's say $40k/year in living expenses and receive $32k/year from SS and have $200,000 saved up they have 25x. Here's the math, $40,000-$32,000=$8,000 and $8,000x25=$200,000. In other words, X which is the needed contribution from their portfolio to meet living expenses is $8,000 not $40,000. This is provided they start SS when they retire.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

reln
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by reln » Sun May 31, 2020 10:20 am

SJIRon wrote:
Wed May 27, 2020 10:38 am
My approach as an age 59 recent retiree.
1) Delay SS until 70
2) TIPS ladder to age 85
3) Deferred Income Annuity starting age 85 (purchased in IRA as QLAC)
4) Small ROTH IRA with 100% stock which will not be touched until age 85
5) Anything left over can be kept in 100% stock (I use VT), because it's for things you don't really need.
Smartest plan I've seen here

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Horton
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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by Horton » Sun May 31, 2020 10:23 am

Here’s a thought - if a couple has lived within their means for their entire adult life up until retirement and has managed to save enough to have an LMP, what’s the likelihood that they will continue to live within their means in retirement?

I’m not proposing that the LMP has magical properties nor that all investors should adopt the approach. I’m merely taking the side that it is a reasonable way to set your asset allocation and think about retirement planning. It doesn’t absolve you from monitoring the plan or risks that may impair it. Again, if you have been diligent and prudent enough to build an LMP, then you will likely be diligent and prudent in monitoring it while in retirement.

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Re: “WHEN YOU'VE WON the game, stop playing with the money you really need.”

Post by geerhardusvos » Sun May 31, 2020 10:37 am

Pinotage wrote:
Sun May 31, 2020 10:03 am
geerhardusvos wrote:
Sun May 31, 2020 9:39 am
smitcat wrote:
Sun May 31, 2020 7:22 am
geerhardusvos wrote:
Sat May 30, 2020 6:58 pm
TheTimeLord wrote:
Sat May 30, 2020 5:56 pm


You do realize SS benefits, pensions and annuities are general already accounted for in calculating the 20x and not over and above.
No idea what you’re saying. My aunt and uncle have around 10X annual expenses saved and retired at age 65. With Social Security they are having a very comfortable retirement.

If they had 20X saved it would likely double for them over 15 years with their $70k/year spending rate.
What he is saying is that when folks refer to the 4% withdrawal rate they are talking about 4% being withdrawn from the portfolio which is figured after any other incomes.
Obviously if you have SS income and/or additional incomes they would reduce the required portfolio draw but they are not utilized to figure the 4% rule rather to reduce the amount which the total portfolio is required to support.
Otherwise the 4% 'rule' would have no meaning at all.
Not you again!

Before the 1000th time, 4% withdrawal rate is not a rule, it’s a guideline that’s worked over a long periods of time. I’m tired of people not understanding that you can have a 75/25 portfolio and even with SORR considered, the 4% withdrawal rate works 99% of the time for a 3 year retirement (so longer than almost any 65-year-old would need).
Geerhard - I think you and Smitcat are agreeing with each other.

Also 99% success for a 3 year retirement is not a particularly high bar :wink:
LOL thank you, updated it to 30 years not 3 :oops:
VTSAX and chill

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