the 2000 retiree would have been 10-15% better with a 7-15 year bond tent. That is almost best case for the strategy (i.e. bonds do abnormally well and stocks do poorly. Think 1929 is better but haven't run the numbers). But it is also money you don't need as the 2000 retiree is likely to make it. On the other hand look at the 1966 retiree when bonds didn't outperform stocks for the first 15 years. The bond tent doesn't help.willthrill81 wrote: ↑Sun May 05, 2019 11:18 am
I'm not sure that they do nothing about SRR. But it's certainly true that they are based on the assumption of mean reversion of returns, an assumption that may not hold when you need it to be there (e.g. after experiencing poor portfolio returns after the first decade). After their first decade of retirement, for instance, year 2000 retirees would have been in significantly better shape had they followed a bond tent approach. Had the subsequent decade not been as good for stocks as it was, they could have been in trouble.
OTOH, if you adopt a bond tent approach and bond yields are low enough that your portfolio declines significantly with your withdrawals during that first decade, then stocks suffer as you begin shifting into them, you could be in trouble as well.
All roads carry risk.
Now the question is how often does the bond tent hurt. If we looked at the say the 1965 retiree with a 7 year bond tend end up with a lower SWR than the 1965 retiree that just held 50/50? I haven't done the math but I expect there are few cases where it actively hurts.