[Book: Living off Your Money, by M. McClung (Prime Harvesting)]

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letsgobobby
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by letsgobobby » Wed Oct 26, 2016 3:10 pm

AlohaJoe wrote:After siamond posted the Barclay's data in another thread, I re-ran my previous analysis using UK data instead of US data, just out of curiosity. The UK data is from 1900-2015.

Prime Harvesting's relative performance appears to be better with UK data than US data.

With US data the difference between the median Prime Harvesting withdrawal and the median Annual Rebalancing withdrawal was about $1,000. With UK data the difference is £3,600. Other stats seem to show similar improvements.

Image

(Also, what the heck happened in 1975 in the UK?!? Their equities returned 100% that year according to Barclays! Holy moly!)

end of the 73-74 bear market, 75 was a good year for equities in many locations

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JDCarpenter
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by JDCarpenter » Wed Oct 26, 2016 4:01 pm

Small Law Survivor wrote:I ordered this book from Amazon on Sept. 20th, supposedly on two day shipping.

It didn't arrive, and eventually Amazon's page for the order said I'd receive it around Oct. 20th.

When Oct. 20th came, Amazon updated the order page to say it would arrive in mid-November.

Not a big deal for me, personally, but just letting you know, Mr. McClung, that your book is subject to shipment on a slow boat from China, at least when it's ordered from AMZN.


FWIW, I ordered from AMZN LLC on 9/15 and got it on the second business day after--the 19th. (I'm in Nashville, with numerous nearby fulfillment centers, if that makes any difference.) Unfortunately, haven't opened it yet. :annoyed
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rrppve
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by rrppve » Tue Nov 08, 2016 12:40 pm

FWIW It looks like the price has dropped into the $30s and there is a paperback version available on Amazon. I was unable to access the website to see if the pdf version price has changed.

986racer
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by 986racer » Thu Feb 16, 2017 12:36 am

I know I'm reviving an old thread here, but I just received my copy of this book and it is immensely intellectually stimulating and this thread had a lot of great thoughts on the topic that are also making me ponder on this a bit more.

jjface wrote:Forget the other example. Let me try to simplify.

$1m equities in year 1 with $660k bonds. crash happens so equities now worth $500k. You rebalance to maybe $720k equities 480k bonds. Guy is laid off. Starts prime harvesting. Starting equity balance is $720k. Market recovers to $920k. Prime harvesting says sell stocks. Does that make sense when a year before retirement he had $1m in equities? Seems to go against the never sell stocks low goal to me. Prime harvesting misinterpreted a recovery for excessive stock growth.

Maybe it doesn't make that much of a difference though - i don't know.


I've been thinking about this and originally I agreed that a "memory effect" seems wrong but I think it is almost required if you don't have a VPW type strategy. Let's use the following example...

Person 1 decides to retire in 2008 and has $1MM in assets with a 65/35 (equities/bonds) split. This person decided to retire because he decided he needed 40K in income and the 1MM would generate that using the 4% SWR. By the end of the year, after the crash, he is now down to 410K in equities and 310K in bonds (57/43 split). That 40K per year is now a 5.6% WR.

Person 2 comes along with the same portfolio amount and the same age and wants to retire at the same time. Are we really recommending that the person should have a 5.6% SWR? I suspect that person 2 would likely shoot also for a 4% SWR and would therefore be only able to withdraw 28.8K per year from the portfolio.

Since these two people will end up withdrawing different amounts, it makes sense that their triggers for when to sell stock and buy more bonds will be at different points. On the other hand, if we want to force person 2 to withdraw at 5.6%, then perhaps the best strategy is to put him on the same schedule as person 1.

I suspect that the requirement to have a constant (adjusted for inflation) WR is what forces a need for the best strategy to also have a memory effect.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Thu Feb 16, 2017 1:39 am

986racer wrote:I've been thinking about this and originally I agreed that a "memory effect" seems wrong but I think it is almost required if you don't have a VPW type strategy. Let's use the following example...


I think you're mixing up two things: the initial withdrawal rate and the (inflation-adjusted) dollar value of the equity part of the portfolio.

The initial withdrawal rates does get changed to take into account valuations. Someone retiring in 2007 is told to withdraw 4.4% to start with and someone in 2008 will start with 5.2% (due to valuations crashing during 2007).

If you withdraw 4.4% of a $1,000,000 portfolio that gives you $44,000 a year. If you withdraw 5.2% of an $850,000 portfolio (i.e. what you have after the crash) then you also get $44,000. (In reality, your portfolio probably would have been a bit lower than $850,000 but McClung admits he isn't trying to perfectly correct for valuations.)

Person 2 comes along with the same portfolio amount and the same age and wants to retire at the same time. Are we really recommending that the person should have a 5.6% SWR?


Yes, that's what (some) people recommend. It is what McClung recommends. It is what many recommend who say one should take valuations into account when setting initial withdrawal rates.

(Though your use of "SWR" is misplaced: SWRs assume constant inflation-adjusted withdrawals. McClung doesn't recommend that. He recommends variable withdrawals.)

However...

The disconnect is that the (inflation-adjusted) dollar value of the equity part of your portfolio (which is used for Prime Harvesting) doesn't take valuations into account. That's the memory effect.

(Of course, one could also argue that taking valuations into account like this is wrong and another kind of memory affect. But, for argument's sake, let's assume that using valuations perfectly corrects for the memory affect.)

In essence people are saying we ought to track things in Really Real Dollars when dealing with equities. Real Dollars are inflation-adjusted. Really Real Dollars are adjusted for inflation and valuations.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by 986racer » Thu Feb 16, 2017 10:19 pm

AlohaJoe wrote:
986racer wrote:I've been thinking about this and originally I agreed that a "memory effect" seems wrong but I think it is almost required if you don't have a VPW type strategy. Let's use the following example...


I think you're mixing up two things: the initial withdrawal rate and the (inflation-adjusted) dollar value of the equity part of the portfolio.

The initial withdrawal rates does get changed to take into account valuations. Someone retiring in 2007 is told to withdraw 4.4% to start with and someone in 2008 will start with 5.2% (due to valuations crashing during 2007).

If you withdraw 4.4% of a $1,000,000 portfolio that gives you $44,000 a year. If you withdraw 5.2% of an $850,000 portfolio (i.e. what you have after the crash) then you also get $44,000. (In reality, your portfolio probably would have been a bit lower than $850,000 but McClung admits he isn't trying to perfectly correct for valuations.)

Person 2 comes along with the same portfolio amount and the same age and wants to retire at the same time. Are we really recommending that the person should have a 5.6% SWR?


Yes, that's what (some) people recommend. It is what McClung recommends. It is what many recommend who say one should take valuations into account when setting initial withdrawal rates.

(Though your use of "SWR" is misplaced: SWRs assume constant inflation-adjusted withdrawals. McClung doesn't recommend that. He recommends variable withdrawals.)



I'm not mixing it up. I think you just jumped ahead in the book. The first three chapters deal with finding the best AA strategy given the constraint of finding the best MSWR. My way of thinking of MSWR is that I'd pick what I consider to be the safest MSWR that I can live with. I.e., if I want MSWR-100% (meaning it works under 100% of scenarios), then I'm picking something around 4% (for a 30 year horizon). This percentage does not adjust given valuations (that's covered in later chapters).

If we use the above stipulations, then McClung shows that prime harvesting is the best strategy. My point is that the initial hypothesis already demands a "memory effect" and that is the choosing of the initial withdrawal amount. I suspect that the reason prime harvesting works better than a constant AA because if you are going to require a memory effect of a constant withdrawal, then the best AA strategy will also have a memory effect.

Chapter 4 of the book begins with the comment to the effect of, "now that I found the best AA strategy, let's find the best withdrawal strategy using the best AA strategy. Oh, and the withdrawal strategies are independent of the AA strategies." Now, it may be true that the withdrawal strategies are independent, but it would be nice for him to include a few charts to show it. It does leave me wondering if he did the analysis in a different order, would he arrive at a different conclusion. For instance, if he decided to find the best withdrawal strategy using a constant AA strategy and then applied that best withdrawal strategy to multiple AA strategies, would he still have ended up at the same place?

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Fri Feb 17, 2017 12:26 am

If we use the above stipulations, then McClung shows that prime harvesting is the best strategy. My point is that the initial hypothesis already demands a "memory effect" and that is the choosing of the initial withdrawal amount. I suspect that the reason prime harvesting works better than a constant AA because if you are going to require a memory effect of a constant withdrawal, then the best AA strategy will also have a memory effect.


Okay, I think I understand: you are arguing that because McClung used MSWR as his metric of success -- and MSWR has a memory effect -- that the winning strategy -- which happened to be Prime Harvesting -- will also have a memory effect.

I'm not sure I see the causal connection why one must follow from the other; after all, the Parker and Bonds-First strategies were top performers under MSWR and don't have a memory effect. If a memory effect were required for top performance they wouldn't have come in as the best performers for the US datasets.

Image

In any case, it seems like you are suggesting "why not try testing Prime Harvesting using variable withdrawals instead of relying MSWR-logic", which I think many agree with. Some of the results are posted in this thread but if you perform any analyses of your own it would awesome to see them added to the mix!

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Fri Feb 17, 2017 2:02 am

A while back I posted a comparison of Prime Harvesting & Annual Rebalancing when using VPW for withdrawals using UK historical data:

viewtopic.php?f=10&t=192105&start=300#p3034845

I've cobbled together Japanese historical data from 1957-2016 so here's the same using that Japanese data:

Image

And the histogram of all annual withdrawals

Image

While the minimum is identical, most other measures show an improvement. The 5th percentile income is 12% higher and the median income is 17% higher.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Wed May 31, 2017 10:17 pm

(Resurrecting a long dormant thread....)

One of the objections that longinvest, siamond, and others had against Prime Harvesting was the "memory effect". That is, the way Prime Harvesting works is dependent on the exact value of your portfolio on the day you retire. If you retire a few days earlier or later then the strategy can behave very differently.

While I don't think it is totally necessary to not have memory effects, I still think it is a fair point and introduces a bit of wonkiness. Something I'd been thinking about for a long while was whether one could use actuarial calculations (like PMT, PV, etc) in order to drive the "harvesting" instead of just looking at inflation-adjusted stock prices.

This is far from definitive but I figured I'd share what I have anyway, in case anyone else in this thread was interested.

Because this is how the universe works...at virtually the same time I did this, Wade Pfau published something very similar. :D

The basic idea is: we need to decide when we "harvest". That is, when to sell some stocks and buy bonds with the proceeds. McClung says "whenever your stocks are 25% above their inflation-adjusted starting value".

Let's try another way of looking at things: we know how much we're withdrawing today. We know (approximately) how long we will live. We can use a Present Value calculation to decide how big our portfolio "should" be in order to sustain that withdrawal.

We have two things we need to decide:
1. What "rate" should we use in the PV calculation? If the number is too low then we will never harvest. If the rate is too high then we'll harvest too much, end up mostly in bonds, and be reliant on unrealistic growth from stocks to support our life style. I'll use 5.4%, which is the global average of equities from 1900-present according to the Credit Suisse Global Returns Yearbook.

2. How much should you harvest? Sell 20% of stocks? 25%? Whatever amount is above the PV calculation threshold? For no good reason (other than it is what McClung also chose) I'll go with 25% of stocks.

Here it is against US data from 1871-present (it is labelled "ActuarialHarvesting" in all of the charts below)
Image

And against UK data from 1900-present
Image

And against Japanese data from 1957-present
Image

So at first blush, this looks like a reasonable re-definition of Prime Harvesting to get rid of the memory effect.

For those interested in more detail I wrote two blogs:
https://medium.com/@justusjp/actuarial- ... 17d3a044ce
https://medium.com/@justusjp/actuarial- ... b48c115640

And here is Pfau's series of articles on a similar topic
Part 1: https://www.advisorperspectives.com/art ... ent-income
Part 2: https://www.advisorperspectives.com/art ... ond-ladder
Part 3: https://www.advisorperspectives.com/art ... r-strategy

Also, bobcat2 has written a few posts here on bogleheads about the "funded ratio" which contains some vaguely related ideas.

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Leif
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by Leif » Wed May 31, 2017 10:58 pm

I was less interested in equity memory corrections because I think the change is de minimis. This seems to be over thought. Also, I'll probably use significantly less then the MSWR.

I do like the never buy stocks part. I don't believe I'll have a problem with the fluctuating AA. As I recall McClung did not have a problem with using a lower trigger. I'll probably use 10%. That may not be optimal for a long bull market, but I think that will serve to help keep my portfolio more in the 50/50 balance I plan to start with.

By the way, great work on continuing the research. I also hope to hear more from McClung. Too bad he left (driven off?) from the Bogleheads.
Last edited by Leif on Thu Jun 01, 2017 12:00 pm, edited 1 time in total.
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by skjoldur » Thu Jun 01, 2017 1:02 am

AlohaJoe wrote: One of the objections that longinvest, siamond, and others had against Prime Harvesting was the "memory effect".
In a self referential wormhole of retirement research conversations, I learned from the Early Retirement Now blog, in a response to a comment that links to this thread and which points out the memory effect issue, that the correct term for this sort of memory effect is to say that it violates the Principle of Optimality.

You can find the discussion in the comment section here:
https://earlyretirementnow.com/2017/04/ ... arvesting/

Thanks for the post and links about Actuarial Harvesting.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by LeeMKE » Sat Jun 10, 2017 1:25 pm

I bought the hardcopy of Living Off Your Money and marked it up a good deal.

Unlike most finance books I buy, this one will stay on our shelf. I'd recommend it for people planning the shift from accumulation to withdrawals. It is well organized and includes compelling research that all these pages of posts have still failed to disprove. The technical proofs are a bit dense, so the author has organized each chapter. You get the gist by reading each chapter's introduction and summary recommendations.
The mightiest Oak is just a nut who stayed the course.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by mhalley » Sun Jun 11, 2017 2:00 am

I am awaiting my copy (being a boglehead I ordered a cheap used copy) but read the free chapters. Several have mentioned having problems accepting a high stock allocation, and I don't think I have seen mentioned that putting a floor of 30% bonds was a possibility. On page 87, he states:

"Despite the data, retirees can still choose to maintain a bond floor, selling stocks as needed to maintain a min- imum bonds percentage. Figure 46 shows this case: a 30% bond floor is enforced using Prime Harvesting with a 60% initial stock percentage. There is a moderate but consistent loss in income based on the SBBI data. While this is a viable option for retirees who are uncomfortable with a low bond percentage, it’s important to understand that across four datasets (SBBI, Shiller, UK, Japan) this consistently lowered performance during difficult retirement periods. On the other hand, when combined with a variable-withdrawal strategy, the loss in income is divided across many years without a major impact—this is briefy revisited in Chapter 10. Bounding the lower bond level isn’t recommended based on the data, but an otherwise strong retirement plan can handle it."
(Sorry I don't know how to post the graph)

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by mhalley » Sun Jun 11, 2017 2:07 am

A couple of off topic questions answered:
1. To increase pdf font size, convert it to word.
http://www.techradar.com/news/the-best- ... -converter
2. To get a pdf to kindle:

http://m.wikihow.com/Add-a-PDF-to-a-Kindle

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Sun Jun 11, 2017 9:57 pm

mhalley wrote:(Sorry I don't know how to post the graph)
This is the chart mhalley is referring to

Image

Later on, McClung shows a "less volatile but affordable plan" which combines all of the strategies he recommends but maintains a 30% bond floor.
Figure 152 shows the results for both options combined: the initial stock percentage is lowered to 45%, and a 70% upper stock limit is maintained in Prime Harvesting. The initial income is also lowered appropriately by 5%. The total income average drops to 5.6%, compared to the 6% for the benchmark cases. The income average for the rest 10-years drops to 5.1% from 5.3%. The average percentage left drops to 38% from 56%. MSWR-100% also drops to 3.8% (triggering a failure if an EM floor of 4% was used). Unexpectedly, the income floor naturally rises with the lower volatility to 2.8%, up from the benchmark 2.5% floor.
He goes on to say
An earlier general conclusion still stands: the best way to lower risk is by lowering the withdrawal rate, or incorporating guaranteed income (as described in the following chapter), not by lowering the stock percentage below the established optimal.

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siamond
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by siamond » Mon Jun 12, 2017 7:28 am

Leif wrote:By the way, great work on continuing the research. I also hope to hear more from McClung. Too bad he left (driven off?) from the Bogleheads.
He wasn't driven off, he told me by e-mail that he was very pleased to see such active discussions about his research. But he landed a new high-tech job right after publishing his book, and he's clearly a focused guy!

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by Fclevz » Mon Jun 12, 2017 9:15 am

mhalley wrote:A couple of off topic questions answered:
1. To increase pdf font size, convert it to word.
http://www.techradar.com/news/the-best- ... -converter
2. To get a pdf to kindle:

http://m.wikihow.com/Add-a-PDF-to-a-Kindle
Or, simply email a PDF file to your particular Kindle's email address with the word convert in the subject line and Amazon will automatically convert the PDF to Kindle format, so you can then take advantage of standard Kindle functionality such as variable font size and annotations.

https://www.amazon.com/gp/sendtokindle/email

heyyou
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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by heyyou » Mon Jun 12, 2017 4:53 pm

Variable income sounds bad, but McClung suggests having enough steady income for most or all necessary expenses, so the variable income is intended for just your discretionary spending.

The deficiencies/risks of Bengen's SWR are continuing real WDs regardless of remaining portfolio value, and WDing only to fit the worst ever case, so all of the other cases have more unspent assets at death. I want to have a variable WD rate to buffer both of those too much/too little spending rates, including a longevity factor, expecting to both adapt and to spend down the retirement assets.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by LeeMKE » Mon Jun 12, 2017 6:47 pm

I want to have a variable WD rate to buffer both of those too much/too little spending rates, including a longevity factor, expecting to both adapt and to spend down the retirement assets.
Me too. McClung's approach calls for an annual adjustment for your withdrawals, so it will avoid this "Merry Widow" situation where we have too much leftover, too close to end of plan,(or run out of money too soon). The only problem I see is we might not want to be messing with these calculations late in life, and by that time, the variability of withdrawals could be set aside more safely.
The mightiest Oak is just a nut who stayed the course.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by heyyou » Mon Jun 12, 2017 9:42 pm

I expect the complex methods to become more familiar as I repeat the usage, similar to Roth conversions. If and when one WD method seems too complex, I'm changing to the age-based RMD percentage applied to the entire recent portfolio value. It is likely to be less optimal but still just fine in the short run, due to my limited remaining years.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Mon Jun 12, 2017 10:15 pm

heyyou wrote:If and when one WD method seems too complex, I'm changing to the age-based RMD percentage applied to the entire recent portfolio value. It is likely to be less optimal but still just fine in the short run, due to my limited remaining years.
Actually, this is exactly what David Blanchett recommends in "Simple Formulas to Implement Complex Withdrawal Strategies"
The R² for the RMD approach over the period (15 years or less) is 95.10 percent, versus 97.65 percent for a more complex four factor model. It is important to note that although the RMD approach results in an estimated withdrawal that is relatively similar to the actual withdrawal for periods of 15 years or less (R² of 95.10 percent), it is materially less useful for periods of 15 years or greater, with an R² of 45.76 percent.
In other words, once you have <15 years of life/retirement left switching to an RMD approach seems to work pretty fine. For most people that would mean when they are 80-85 they'd switch from a more complex thing to simple RMD.

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Re: New Book: Living off Your Money (Michael McClung)

Post by munemaker » Thu Aug 17, 2017 11:31 am

Fieldsy1024 wrote:
Thu May 26, 2016 2:28 pm
$60 bucks.....

no thanks
I just bought the paperback from Amazon for $28. I did not know this when I ordered it, but a pdf version is available on the book's website (not on Amazon) for $35. I would have much preferred the pdf to the paperback, had I known.

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Re: New Book: Living off Your Money (Michael McClung)

Post by munemaker » Thu Aug 17, 2017 11:55 am

Da5id wrote:
Thu May 26, 2016 2:37 pm
Living off Your Money:

Step 1 - use the library instead of buying expensive hardcovers
Step 2 - invest the saved money
Step 3 - Profit!

I belong to 3 library systems, 2 of them are very large. None of them have "Living Off Your Money" in any format.

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Re: New Book: Living off Your Money (Michael McClung)

Post by gkaplan » Thu Aug 17, 2017 7:55 pm

munemaker wrote:
Thu Aug 17, 2017 11:55 am
Da5id wrote:
Thu May 26, 2016 2:37 pm
Living off Your Money:

Step 1 - use the library instead of buying expensive hardcovers
Step 2 - invest the saved money
Step 3 - Profit!

I belong to 3 library systems, 2 of them are very large. None of them have "Living Off Your Money" in any format.
My library has the book. Have you tried Inter-library loan?
Gordon

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by rrppve » Thu Aug 17, 2017 11:10 pm

Pay the money to buy it. It's a worthwhile reference book that easily pays for itself if it lets you increase your withdrawal rate by just 0.1%
It's one of the few books to study how to take your withdrawals, income harvesting. It also has extensive comparisons of various variable withdrawal methodologies.
It's the best book I've seen on decumulation since Otar's. A very good investment for anyone who is living off their portfolio or soon will be. McClung deserves the income from this fine work.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by LeeMKE » Thu Aug 17, 2017 11:16 pm

+1 rrppve
The mightiest Oak is just a nut who stayed the course.

munemaker
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Re: New Book: Living off Your Money (Michael McClung)

Post by munemaker » Fri Aug 18, 2017 11:31 am

gkaplan wrote:
Thu Aug 17, 2017 7:55 pm
munemaker wrote:
Thu Aug 17, 2017 11:55 am
Da5id wrote:
Thu May 26, 2016 2:37 pm
Living off Your Money:

Step 1 - use the library instead of buying expensive hardcovers
Step 2 - invest the saved money
Step 3 - Profit!

I belong to 3 library systems, 2 of them are very large. None of them have "Living Off Your Money" in any format.
My library has the book. Have you tried Inter-library loan?
No, didn't think of that but I should have (since I have made inter-library loans in the past); have to wonder if any public libraries in PA would have it though, since Carnegie (Pittsburgh) and Free Library of Philadelphia don't have it. At this point, I already bought the paperback so it is water over the dam. Not really a big deal though. It is pretty heavy reading and I can take a little longer.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by tarheel » Thu Aug 24, 2017 11:41 am

What a thread! I've spent this week's lunches getting through it and I've made it to the end.

While I am ~25 years off from retirement, I knew much less about what to do at that point and spent the past week or so reading the McClung book (for free through UNC interlibrary loan, but I'm going to buy a copy). I was extremely impressed, and while it's a long way off I think I will be drinking the kool aid.

McClung goes into exhaustive depth to form his recommendations (I liked it as a scientist myself). He covers virtually every bad situation that can arise, and even invents some problems to test the strategy.

To be sure, there is no foolproof system. But I see using PrimeHarvesting (or alt-PrimeHarvesting which I plan to use) as letting your AA fluctuate a bit to reap major benefits in both safety AND available withdrawals. Until reading the book, I was going to follow some form of VPW starting with 3.5% and annual rebalancing. Now I believe that doing so 1) leaves a lot of harvestable money on the table and 2) increases risk by buying equities on the way down.

There was a lot of discussion on this thread about the "100% stock" issue. While I don't have the book with me, I am virtually certain that McClung covers this in the book. You can put bumpers on the AA if you have to, but then you just have to lower your withdrawals. That's one thing that I loved about the book - if you had a problem with virtually any aspect of the plan, you can change that aspect, just realize that it is likely suboptimal and you will need to withdraw less.

I for one was most impressed. Kudos to you Michael.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by Leif » Thu Aug 24, 2017 4:14 pm

tarheel,

I fully agree. I'm not going to concern myself too much with the withdrawal rate, which seems a bit complex. But I will be following the part of never buying stocks and selling when over the inflation adjusted stock limit, back to 100%. Otherwise funding my spending out of cash/CDs/bonds. I'm planning on 50/50 equity/fixed income.
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by htdrag11 » Thu Aug 24, 2017 6:57 pm

There is a brand new one on eBay for $26.34; the seller is a bookstore based on the handle.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by fozzy fosbourne » Fri Aug 25, 2017 9:56 am

Was there any discussion or analysis on using prime harvesting while accumulating wealth?

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Fri Aug 25, 2017 10:28 am

fozzy fosbourne wrote:
Fri Aug 25, 2017 9:56 am
Was there any discussion or analysis on using prime harvesting while accumulating wealth?
I wrote a blog post about it here: https://medium.com/@justusjp/prime-harv ... fe50c0818a

It seems to do slightly better at first glance.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by siamond » Fri Aug 25, 2017 11:20 am

fozzy fosbourne wrote:
Fri Aug 25, 2017 9:56 am
Was there any discussion or analysis on using prime harvesting while accumulating wealth?
Er... Did you check the numerous posts in this thread? Lots of discussion about Prime Harvesting... :shock:

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Re: New Book: Living off Your Money (Michael McClung)

Post by munemaker » Fri Aug 25, 2017 4:01 pm

coachz wrote:
Mon May 30, 2016 6:27 am

I'm also suprised taxes get only a mention on page 276 per the table of contents. I expected an entire chapter on it considering the title.
Just clarifying: The reference to taxes on page 276 says: "Taxes and investing expenses are generally beyond the scope of this book, but they must be kept in mind." He does write two subsequent paragraphs with high level reference to taxes. This is not a book on tax strategies.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by fozzy fosbourne » Fri Aug 25, 2017 10:30 pm

siamond wrote:
Fri Aug 25, 2017 11:20 am
fozzy fosbourne wrote:
Fri Aug 25, 2017 9:56 am
Was there any discussion or analysis on using prime harvesting while accumulating wealth?
Er... Did you check the numerous posts in this thread? Lots of discussion about Prime Harvesting... :shock:
Heh, yes I read the whole thread. I was wondering about Prime Harvesting while accumulating wealth and not just withdrawals!

Thanks for pointing me at the blog post AlohaJoe. Pretty interesting. I wonder how many basis points it works out to in those examples.

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Re: New Book: Living off Your Money (Michael McClung)

Post by bayview » Sun Aug 27, 2017 8:31 am

munemaker wrote:
Thu Aug 17, 2017 11:31 am
I just bought the paperback from Amazon for $28. I did not know this when I ordered it, but a pdf version is available on the book's website (not on Amazon) for $35. I would have much preferred the pdf to the paperback, had I known.
The hardback is currently out of stock on Amazon. Is the paperback version "trade" size, meaning as large as or nearly as large as a hardback? (as opposed to the mass market size of cheaper ones)
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by LeeMKE » Sun Aug 27, 2017 8:40 am

The hardback is currently out of stock on Amazon. Is the paperback version "trade" size, meaning as large as or nearly as large as a hardback? (as opposed to the mass market size of cheaper ones)
This book was only printed in the trade paperback, which is the larger size. No hardback is available, unless they print a new edition in hardback.
The mightiest Oak is just a nut who stayed the course.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by munemaker » Fri Sep 01, 2017 4:44 pm

LeeMKE wrote:
Sun Aug 27, 2017 8:40 am
The hardback is currently out of stock on Amazon. Is the paperback version "trade" size, meaning as large as or nearly as large as a hardback? (as opposed to the mass market size of cheaper ones)
This book was only printed in the trade paperback, which is the larger size. No hardback is available, unless they print a new edition in hardback.
Many of the graphs are large and you probably could not read them in the small paperback format. Maybe that's why there is no Kindle version? The large paperback size is a bit awkward to handle though and the cover has a weird coating on it. While readable, some of the charts were not printed as crisp as they should be.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by LeeMKE » Fri Sep 01, 2017 6:40 pm

Many of the graphs are large and you probably could not read them in the small paperback format. . . . The large paperback size is a bit awkward to handle though and the cover has a weird coating on it. While readable, some of the charts were not printed as crisp as they should be.
It reminded me of a textbook. Textbook authors tend to send PDF and other optical files which aren't especially crisp when put through a press. But since textbooks are going to students who tend to be much younger than we, it doesn't bother them at all. But us, we notice just how blurry the world is getting. . . :shock: :annoyed :confused :greedy
The mightiest Oak is just a nut who stayed the course.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by Park » Sat Sep 16, 2017 6:27 pm

On the book's website, the author gives mm@LivingOffYourMoney as an email address to contact him. For whatever reason, that email address doesn't work.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by kramer » Mon Nov 13, 2017 2:34 am

Recommendation: I purchased the paperback version of this book and I thought it was well worth the money. McClung really does "follow the data" wherever it takes him and I learned a lot from this book.

Asset Allocation: I am considering adopting the book's recommendations except that I would mostly stick with my current asset allocation which is close enough to what he recommends (a worldwide, diversified portfolio with some value indexes included).

Harvesting and taxes: I have a good mix of taxable, Roth, and traditional IRA accounts that allow me to avoid most of the capital gains tax problems with Prime Harvesting. So, for a "harvest", when you are supposed to sell about 16.66% of your stocks (the 20% part of the 120%), I would sell a few in taxable (up to the top of the 15% bracket) but I could immediately sell more in tax-free/deferred account until the taxable account caught up after several years... going slowly in the taxable account for tax reasons.

Questions: One question I have is that my withdrawal rate is low (under 2%). So maybe all of this makes less sense for my situation? I am trying to rethink my retirement about ways to intelligently spend more (this is a separate project)...up until last month I thought I was going to have to support my mom in old age but she just got remarried and suddenly this is no longer a concern ... but my withdrawal rate will probably never be real high. I am also interested in hearing if more people have decided to actually adopt McClung's recommendations after having understood and tested it more ...

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Mon Nov 13, 2017 9:21 am

kramer wrote:
Mon Nov 13, 2017 2:34 am
Questions: One question I have is that my withdrawal rate is low (under 2%). So maybe all of this makes less sense for my situation?
McClung's system -- assuming you are convinced -- is about making your retirement portfolio more efficient. If you're right on the edge then that bit of efficiency should be enough to tip you over into safety. If you're fortunate enough to have a larger margin of error then you have the luxury of not needing to squeeze every bit of efficiency out of a portfolio. On the other hand, every bit of efficiency helps. Perhaps you decide that 2% is all you need...but you also decide that by following McClung's strategies you feel confident donating another 2% to a charity of your choice. Or maybe when your nephew calls for help with a kidney transplant operation, you're not worried about what that 10% withdrawal will do to your portfolio.
I am also interested in hearing if more people have decided to actually adopt McClung's recommendations after having understood and tested it more ...
With the benefit of hindsight, additional research, and the collaborative discussion of Bogleheads...I think that McClung's recommendations are "good enough". I think they are a distinct improvement over the strategies most retirees use. There is room for argument about whether they are the best possible or whether the theoretical underpinnings are perfect ... those are largely academic discussions or marginal improvements around the edges.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by kramer » Tue Nov 14, 2017 5:55 am

Thanks, AlohaJoe, I really enjoy your posts. And I have read most of your blog posts on this topic.

I guess my worry is that when using this system with a low withdrawal rate my portfolio could become too bond-heavy although that would take awhile. I still (hopefully) have a 40 year horizon (age 52). I will use my Social Security at age 70 as the Guaranteed Income portion.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by AlohaJoe » Tue Nov 14, 2017 6:54 am

kramer wrote:
Tue Nov 14, 2017 5:55 am
I guess my worry is that when using this system with a low withdrawal rate my portfolio could become too bond-heavy although that would take awhile. I still (hopefully) have a 40 year horizon (age 52). I will use my Social Security at age 70 as the Guaranteed Income portion.
A portfolio can't become "bond-heavy" with McClung's strategies. Let me show you what I mean....

This assumes a 1984-retiree (because they had great returns) and withdrawing around 2.5% a year

Image

At first glance, yes, bonds balloon up to over 80% of the portfolio. But just looking at percentages is misleading. The way Prime Harvesting works, you'll only have high bond percentages if stocks are doing well. And if stocks are doing well then the only time you sell stocks is when you are harvesting them. That means, while bonds make up an increasing percentage of the portfolio, the absolute dollar amount you have in stocks is still the same.

The way this would play out in reality is that your portfolio would look something like this...

Image

So, yes, bonds make up 80% of the portfolio and stocks only 20%. But 20% of $3 million is $600,000 -- which is exactly what you started with 30 years earlier. And if $600,000 in stocks was enough when you had a 40-year retirement horizon then surely it is even better when you only have a 10- or 15-year retirement horizon...especially given you have nearly $2.5 million in bonds to use as well.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by kramer » Tue Nov 14, 2017 7:39 am

OK, that makes more sense. So if bonds are ballooning as a percentage of portfolio (typically due to multiple stock harvests), I still have roughly the same real amount in stocks as at the start of retirement.

I guess in the 1984 retirement situation that you described, after say 13 years of retirement, the retiree would be wise to carefully think about the purpose of his expanded portfolio -- if he is not going to increase spending then he would be investing for heirs or charity. Of course, we would be fortunate to be in that situation.

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by Leif » Tue Nov 21, 2017 8:31 pm

kramer wrote:
Tue Nov 14, 2017 5:55 am
I guess my worry is that when using this system with a low withdrawal rate my portfolio could become too bond-heavy although that would take awhile. I still (hopefully) have a 40 year horizon (age 52). I will use my Social Security at age 70 as the Guaranteed Income portion.
I'm also planning on using Prime. I expect to also have a rather low withdrawal rate. Particular after SS kicks in at 70. Actually with a low withdrawal rate almost any reasonable withdrawal plan will work. I'm thinking to set my stock harvest point at 10%. If I see my % bonds gets high I will probably increase my inflation adjusted stock $ base. I've not yet worked out the boundaries of a stock base increase. I will start with 50/50. Probably I will not let my stock % drop much below 30%. A conservative number, but in late retirement fixed income may be need for health care. I'm planning to self insure on long term care.
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

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Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

Post by kramer » Tue Nov 21, 2017 10:55 pm

kramer wrote:
Mon Nov 13, 2017 2:34 am
Harvesting and taxes: I have a good mix of taxable, Roth, and traditional IRA accounts that allow me to avoid most of the capital gains tax problems with Prime Harvesting. So, for a "harvest", when you are supposed to sell about 16.66% of your stocks (the 20% part of the 120%), I would sell a few in taxable (up to the top of the 15% bracket) but I could immediately sell more in tax-free/deferred account until the taxable account caught up after several years... going slowly in the taxable account for tax reasons.
I should add that, upon a closer reading of the book, one would sell 20% of all stocks in the above situation, not just go down to 100%. So if the value of my stocks was an inflation-adjusted 122% at the end of the year, one would sell 20% of all stocks, or 24.4%, and the subsequent value would be 97.6%.

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