Best Allocation: Living off just the interest

General Discussion on the Permanent Portfolio Strategy

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Kbg
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Re: Best Allocation: Living off just the interest

Post by Kbg » Thu Jul 19, 2018 11:40 am

Kriegsspiel wrote:
Thu Jul 19, 2018 11:22 am
KGB, have you ever read Secondhand Time by Svetlana Alexeivich? I haven't yet, but I believe the transition from Socialism to oligarchy was no picnic either, as the oligarchs Stolichnayevery one of the assets the Soviets had left for themselves and left the common people to plant potatoes in every scrap of land.
Nope...thanks for the tip! I'll get this one as it would be a good "round trip" after just finishing A People's Tradgedy.

We (the US) have been blessed/lucky as a country in that we have two characteristics that are rather exceptional in comparison to many countries.

1. While the British get slammed a lot for their colonial legacy (and often deservedly so), if one had to be colonized they generally left a legacy of excellent institutions and democratic habits after they got the boot. Not so much for other European colonizers.

2. We haven't had any ruthless tyrants willing to kill to rise to the top supported by equally ruthless followers.

And it's kbg not KGB. :-)
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Kriegsspiel
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Re: Best Allocation: Living off just the interest

Post by Kriegsspiel » Thu Jul 19, 2018 4:41 pm

Kbg wrote:
Thu Jul 19, 2018 11:40 am

And it's kbg not KGB. :-)
;) ;) ;) ;) ;) ;) ;) ;) ;) ;) ;) ;) ;)
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mathjak107
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Re: Best Allocation: Living off just the interest

Post by mathjak107 » Sat May 11, 2019 5:22 am

ahhrunforthehills wrote:
Thu May 31, 2018 4:04 pm
Hello Everyone,

I am curious on opinions of what the proper allocation would be for someone's goal of living off of JUST THE INTEREST of their investments (i.e. not touching the principle) with $10 or $20 million.

Surely, in that situation having access cash would not be as important since you would not need 25% to pay your monthly bills if the market took a dump. I also would think you would want to be heavier in equities because of the capital gains treatment (as opposed to regular income tax rates).

I would think something like a modified golden butterfly would be ideal (with the only real change being in the size of the cash component):

22.5% Total Stock
22.5% Small Cap Value
22.5% LT Bonds
22.5% GLD
10% ST Bonds/Cash

Thoughts?
there is no such thing as not touching principal . it is all principal ..everything in your accounts on any day is all your money ... are you trying to say if you had a 100k in 1987 and 4 million today that only the 100k counts as principal ???

whether you get interest or spend dividends or appreciation , it is irrelevant , you are spending your total return in all cases .

plus you have negative real return sequences to deal with when spending down .. you have market returns and interest that can be negative and you can have inflation as the wild card creating negative real returns . so in those years you may spend more then you get ...

all in all there really is no such thing as not spending principal since it is all "your money "

your draw would have to be so small as to be unaffected by sequences which to me makes little sense ... on the other hand a safe withdrawal rate always assumes what you have can be spent down to pretty much zero .
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Re: Best Allocation: Living off just the interest

Post by ahhrunforthehills » Wed May 22, 2019 5:08 pm

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Last edited by ahhrunforthehills on Wed Aug 18, 2021 12:20 pm, edited 1 time in total.
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mathjak107
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Re: Best Allocation: Living off just the interest

Post by mathjak107 » Thu May 23, 2019 3:51 am

the reality is that part of the success rate calculation since it is based on odds of success is actually far higher when life expectancy is entered in to the equation .

while good planning dictates we plan to 90-95 , the reality most of us will not live that long so statistically that ads quite a bit to the success rate
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Re: Best Allocation: Living off just the interest

Post by ahhrunforthehills » Thu May 23, 2019 12:40 pm

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Last edited by ahhrunforthehills on Wed Aug 18, 2021 12:21 pm, edited 1 time in total.
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Re: Best Allocation: Living off just the interest

Post by mathjak107 » Fri May 24, 2019 3:55 am

if we look at the 118 rolling 30 year periods , with a 60/40 allocation , it has ended with more than you started 90% of the time, 2x what you started with 67% of the time and 3x what you started with 50% of the time according to kitces.. if we eliminated the 5 dates the safe withdrawal rate is based on , 1907,1929,1937,1965, 1966 a safe withdrawal rate would actually be 6.50% ....
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