The tech-dumbell portfolio

[mathjak107]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

[vnatale]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

It's possible for me in my frugal lifestyle to actually live off the social security which I will finally have to start collecting next year. Therefore, a large portion of my portfolio could be viewed as a huge self-insured medical insurance policy for some great procedure that would have to be self-paid.

Vinny

[Libertarian666]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

[vnatale]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

[Libertarian666]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

[vnatale]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

Not me. Mathjak. And, yes, that is a common criticism of using rolling data in this way.

Vinny

[pmward]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

It does not reduce the value of the analysis at all. It is important to look at every possible start and end year. You average them together to get a more accurate picture. This is exactly how Tyler does the analysis on his website. It's an angle that most people fail to look at, and it holds a lot of value to take rolling periods into account on top of just absolute returns from some arbitrary start and end date.

[vnatale]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

It does not reduce the value of the analysis at all. It is important to look at every possible start and end year. You average them together to get a more accurate picture. This is exactly how Tyler does the analysis on his website. It's an angle that most people fail to look at, and it holds a lot of value to take rolling periods into account on top of just absolute returns from some arbitrary start and end date.

You don't agree that a set of totally independent data points are going to be more valid than an equal number of data points that have significant overlaps between those data points?

Vinny

[pmward]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

It does not reduce the value of the analysis at all. It is important to look at every possible start and end year. You average them together to get a more accurate picture. This is exactly how Tyler does the analysis on his website. It's an angle that most people fail to look at, and it holds a lot of value to take rolling periods into account on top of just absolute returns from some arbitrary start and end date.

You don't agree that a set of totally independent data points are going to be more valid than an equal number of data points that have significant overlaps between those data points?

Vinny

I think they both have value. One gives you a nice average of time periods, like Tyler uses. The other gives you independent time frames to analyze. There is nothing wrong with either, and it's good to look at both, imo. Both have their biases. Both have their strengths and weaknesses. Both ways are simply clues, small puzzle pieces that form the whole picture.

[mathjak107]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

yes it is 120 - rolling 30 year cycles

[mathjak107]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

It does not reduce the value of the analysis at all. It is important to look at every possible start and end year. You average them together to get a more accurate picture. This is exactly how Tyler does the analysis on his website. It's an angle that most people fail to look at, and it holds a lot of value to take rolling periods into account on top of just absolute returns from some arbitrary start and end date.

You don't agree that a set of totally independent data points are going to be more valid than an equal number of data points that have significant overlaps between those data points?

Vinny

I think they both have value. One gives you a nice average of time periods, like Tyler uses. The other gives you independent time frames to analyze. There is nothing wrong with either, and it's good to look at both, imo. Both have their biases. Both have their strengths and weaknesses. Both ways are simply clues, small puzzle pieces that form the whole picture.

all we are really interested in is the worst time frames retirees have hit ... 1907,1929,1937 , 1965 ,1966 were the worst on record and the poster children for the worst outcomes and the time frames safe withdrawal rates were based on .....

michael kitces did some heavy duty numbers crunching and found all the worst time frames had one common denominator ...everyone failed to hold 4% when the real return average fell below 2% over the the first 15 years .

so all the other time frames are really not needed now that we understand the math behind the failures .

just monitor it along the way .... if 5 years years in you are less than 2% real return a red flag should go up

[mathjak107]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

It does not reduce the value of the analysis at all. It is important to look at every possible start and end year. You average them together to get a more accurate picture. This is exactly how Tyler does the analysis on his website. It's an angle that most people fail to look at, and it holds a lot of value to take rolling periods into account on top of just absolute returns from some arbitrary start and end date.

You don't agree that a set of totally independent data points are going to be more valid than an equal number of data points that have significant overlaps between those data points?

Vinny

no , because thanks to kitces doing the numbers crunching all we need to know is the math behind the failures ..they all failed for the same reason mathematically

[mathjak107]

suppose you were so unlucky to retire in one of those worst time frames ,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.

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 what it boils down to is any time you fall below a 2% real return average over the first 15 years you run the danger of 4% not holding. but even a 1/2% cut in spending will make you whole again over the next 15 years or longer.

[mathjak107]

just maintaining a 4% inflation adjusted draw off the balance for 30 years generally leaves a lot not spent regardless of amount .

we had 120 actual 30 year retirement cycles to date ...

with 50/50 to 60/40

90% of the time it left you with more than you started , 67% of the time you were left with 2x what you started , 50% of the time it left you with 3x what you started ...in fact the odds of failure are the same odds as ending with 6x what you started with .

so even sticking to 4% of your balance has in my opinion way to much most likely left for even the odds of living longer.

certainly raises would be in order along the way .

Wow, I didn't know that we had 360 years of retirement data!

It's not 360 years. It is 120 rolling years....1990 to 2019 would be one, 1989 to 2018 would be another and so on.

Vinny

In other words, you are reusing the same data, not independent data.
This greatly reduces the value of the analysis.

It does not reduce the value of the analysis at all. It is important to look at every possible start and end year. You average them together to get a more accurate picture. This is exactly how Tyler does the analysis on his website. It's an angle that most people fail to look at, and it holds a lot of value to take rolling periods into account on top of just absolute returns from some arbitrary start and end date.

to take it a step further , not only does what happens before and after the time frame you are looking at matter but so does how much you have invested at the time matter .

what happens now to my portfolio in dollars up or down is far greater of an impact then the same moves 30 years ago .

so it is all well and good i was part of th 1980's bull market , but the time frame leading in was some of the worst in history with markets dead for 20 years ... we had little money yet to take part in the great bull ... the size of your portfolio and when , can matter more than the market return itself .

so leading in and next up time frames matter a lot .

[pmward]

to take it a step further , not only does what happens before and after the time frame you are looking at matter but so does how much you have invested at the time matter .

what happens now to my portfolio in dollars up or down is far greater of an impact then the same moves 30 years ago .

so it is all well and good i was part of th 1980's bull market , but the time frame leading in was some of the worst in history with markets dead for 20 years ... we had little money yet to take part in the great bull ... the size of your portfolio and when , can matter more than the market return itself .

Absolutely, there is a start date lottery in a way. That's part of what Tyler really highlighted in his charts, as his data is all on averaging each start date to get a better understanding of the average ride each investor had. I wish Tyler were around today, he is more eloquent at describing these things than I am. The Tyler signal is beaming into the sky, let's see if he notices, lol.

[mathjak107]

Michael kitces did a whole paper on a recommended glide path based on the fact the damage done later on is severe when our fuel tanks are full vs when starting out or half way to retirement.

He found the best glide path to be what he calls a bond tent .....ten years pre retirement start to fill up the bond tent and reduce equities...ten years in to retirement start to bring them back up to your desired allocation....

It is a downward glide path and then a rising glide path

[mdwilson1991]

I don't guess it matters anymore, but really this belongs in the Vp forum. It is not the PP.

[dualstow]

I don't guess it matters anymore, but really this belongs in the Vp forum. It is not the PP.

No, you're right. It really does.

[Xan]

Moved.

[mathjak107]

here is kitces's paper on the " bond tent " and avoiding the dangerous red zone , when our portfolio's are largest .

https://www.kitces.com/blog/managing-po ... -red-zone/

[mathjak107]

I don't guess it matters anymore, but really this belongs in the Vp forum. It is not the PP.

No, you're right. It really does.

In 2001, the United States' military airdropped 2.4 million Pop-Tarts in Afghanistan during the US invasion.[11]

but they had no electricity for the toasters ....

[mathjak107]

ooooh no , the brown sugar ones were amazing hot

[Smith1776]

Libertarian666, do you mind sharing a bit more about your thoughts and reasoning behind your portfolio? What's the overall thesis?

How arbitrary are the percentages? Do you have a threshold/target price for gold? What would the rest of the capital markets have to look like for you to put some money into the more traditional assets? Even if you continue to eschew the most common equity funds, would you consider gold miners as part of your portfolio?

Very interested in hearing your perspective.

[Libertarian666]

Libertarian666, do you mind sharing a bit more about your thoughts and reasoning behind your portfolio? What's the overall thesis?

How arbitrary are the percentages? Do you have a threshold/target price for gold? What would the rest of the capital markets have to look like for you to put some money into the more traditional assets? Even if you continue to eschew the most common equity funds, would you consider gold miners as part of your portfolio?

Very interested in hearing your perspective.

The overall thesis is that when things are normal, missing out on maximum portfolio performance isn't disastrous.

But when things are insane, it's very important to have a portfolio that can handle such insanity. The last thing I need in a crisis is to have to worry about whether my savings are secure.

As for percentages, those are a byproduct of my foreseeable cash needs and available investing opportunities.

I.e., I bought the Swiss Franc annuity when it was available because I thought it combined low risk and possible capital gains (not for tax purposes but for portfolio purposes). I consider it "deep cash" that can go up in value but should not be accessed except in an emergency or when I can no longer defer taking payments (my age 85). When that happens, I'll probably cash it in rather than take the annuity payout, which isn't very attractive.

Other than that, until recently I've generally kept as much cash as I thought I might need in a couple of years, with the rest being in gold.

Recently I've upped that amount to about 7 years of excess expenses (after Social Security payments). I don't want to have to sell gold at a low point and having that much cash reduces how closely I have to monitor my cash balance.

[mathjak107]

With decent gains in the prosperity cycle it cushions the down cycles just fine in a diversified portfolio. I Could give half my portfolio away that I accumulated over the decades and still be way ahead , compared to protecting it by sticking it in t- bills