stpeter wrote: ↑
Wed Oct 23, 2019 7:15 pm
Do folks here have preferred software for financial planning (e.g., running retirement scenarios)? I've used Silver Planner but it didn't seem ideal for modeling investments like gold. Any suggestions are welcome. Thanks!
actual safe withdrawal safe withdrawal rate calculators are based on the worst of the worst of the worst outcomes which were 1907, 1929,1937 and 1965/1966 ... those are the cycles the safe withdrawal rates are based on .... there really was no accurate picture for gold yet in this country to use as a model .
however , what those dates do tell us is that the failures all had one common denominator ... when analyzed they all failed to hold a 4% draw rate when their real return average fell below 2% for the first 15 years of a 30 year retirement .
that can be easy enough to model and watch for regardless of what your allocation is ... however , keep in mind you can end 30 years with a buck and still be alive and have a very high success rate so in practice you really want more than that amount .
suppose you were so unlucky to retire in one of those worst time framess ,what would your 30 year results look like :
1907 stocks returned 7.77% -- bonds 4.250-- rebalanced portfolio 7.02- - inflation 1.64--
1929 stocks 8.19% - - bonds 1.74%-- rebalanced portfolio 6.28-- inflation 1.69--
1937 stocks 10.12 - - bonds 2.13 - rebalanced portfolio -- 7.24 inflation-- 2.82
1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38
for comparison the 140 year average's were:
stocks 8.39--bonds 2.85%--rebalanced portfolio 6.17% inflation 2.23%
so what made those time frames the worst ? what made them the worst is the fact in every single retirement time frame the outcome of that 30 year period was determined not by what happened over the 30 years but the entire outcome was decided in the first 15 years.
so lets look at the first 15 years in those time frames determined to be the worst we ever had.
1907--- stocks minus 1.47%---- bonds minus .39%-- rebalanced minus .70% ---inflation 1.64%
1929---stocks 1.07%---bonds 1.79%---rebalanced 2.29%--inflation 1.69%
1937---stocks -- 3.45%---bonds minus 3.07%-- rebalanced 1.23%--inflation 2.82%
1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%
it is those 15 year horrible time frames that the 4% safe withdrawal rate was born out of since you had to reduce from what could have been 6.50% as a swr down to just 4% to get through those worst of times. depending what kind of bonds you used and whether you used 1871 as a start date like firecalc or 1926 as a start date like the trinity and safemax you actually may heve failed 5 cycles at 4% and needed to go a bit lower .
while 6.50% to 4% does not sound like a lot 1 million at 4% is an initial draw rate of 40k , at 6.50% you could have had 65k . that is a whopping 60% more .
so in the end it does not matter what assets you use to model . all that is important is the math behind those assets . so you need at least 2% real return as your average the first 15 years to see 4% hold . that can come from investing in beaver cheese as how it is arrived at is irrelevant.
what your actual left over balance will be will be unique to only you . that involves what you own , when you bought it , when you added money , when you sold , when you rebalance and your personal tax situation.
so you can monitor and make sure 4% will hold in real time but your exact left over balance is unpredictable .