4% withdrawals against a 50/50 portfolio.

A place to talk about speculative investing ideas for the optional Variable Portfolio

Moderator: Global Moderator

Post Reply
User avatar
joypog
Executive Member
Executive Member
Posts: 561
Joined: Wed Apr 27, 2022 7:42 pm

4% withdrawals against a 50/50 portfolio.

Post by joypog » Sun Jun 12, 2022 10:07 am

Here's an interesting article on the 4% rule for retires.
https://compoundadvisors.com/2022/how-t ... retirement

Basically if you got $1M and follow the 4% rule (start first year of retirement withdrawing 4%, then track for inflation thereafter)...you'll be fine, (or even up) when backtested against the great depression, stagflation, and the dotcom bust.

Aside from the saving up $1M before retirement...are there any assumptions that are problematic?
1/n weirdo. US-TSM, US-SCV, Intl-SCV, LTT, STT, GLD (+ a little in MF)
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Sun Jun 12, 2022 1:27 pm

You will only be fine if mathematically you can hold at least a 2% real return the first 15 years of a 30 year retirement .

Every failure to date has happened because of the first 15 years being worst case outcomes .

1907 ,1929 ,1937 ,1965 and 1966 are your worst case 15 year periods as starting years . .

No matter how great the bull market was after that , there just was not enough money left to act on .

The reality is that 60/40 has ended the 129 rolling 30 year periods we have had to date with more than one started with 90% of the time , more than 2x what you started with 67% of the time and 3x 50% of the time .

To date , leaving to much unspent and not enjoyed has been the biggest problem so the 4%swr has actually needed a system of raises other then just inflation adjusting..

Those years above would have required dropping less then 4% …somewhere around 3.50% to 3.66 was required to make it through.

Kitces did a lot of research on this


https://www.kitces.com/blog/what-return ... ased-upon/
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: 4% withdrawals against a 50/50 portfolio.

Post by Kbg » Sun Jun 12, 2022 7:34 pm

If one really wants to geek out on this stuff definitely head over to earlyretirementnow.com.

Right now 4% is pretty dicey
User avatar
joypog
Executive Member
Executive Member
Posts: 561
Joined: Wed Apr 27, 2022 7:42 pm

Re: 4% withdrawals against a 50/50 portfolio.

Post by joypog » Sun Jun 12, 2022 7:53 pm

Kbg wrote:
Sun Jun 12, 2022 7:34 pm
Right now 4% is pretty dicey
Yeah. with all the insanity in the market, If I was near retirement, I'd seriously consider delaying it and if already retired I'd seriously consider looking for part time work just to limit the early drawdowns during this volatile time.
1/n weirdo. US-TSM, US-SCV, Intl-SCV, LTT, STT, GLD (+ a little in MF)
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Mon Jun 13, 2022 2:21 am

Kbg wrote:
Sun Jun 12, 2022 7:34 pm
If one really wants to geek out on this stuff definitely head over to earlyretirementnow.com.

Right now 4% is pretty dicey
One year does not determine dicey or not..

An extended down turn is dicey and we don’t know that yet.

Even those who retired in 2008 or 2000 are just fine today at 4%

Anyone retiring today would have that 4% based on an already reduced balance , and those already retired likely already have some up years as a cushion.

That is why even spending down from 100% equities has a track record pretty much the same as 50/50 , as the up years cushion the spending in down years

odds of failure so far have been the same odds as ending with 6x what you started with , so 4% has been very conservative .

so far nothing has compared to the dates its based on .

certainly it is way to early to tell about todays situation
User avatar
dualstow
Executive Member
Executive Member
Posts: 14231
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by dualstow » Mon Jun 13, 2022 9:43 am

You up at 3:00am mathjak?
Sam Bankman-Fried sentenced to 25 years
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Mon Jun 13, 2022 11:56 am

dualstow wrote:
Mon Jun 13, 2022 9:43 am
You up at 3:00am mathjak?
3:00 to 3:30 am is my norm .

But by 8 pm I am out.

When I left the music business I hated staying up late as if I saw morning I was coming home …

So I ended up with early bed times .

I know seem to get up way early but by 8pm I am out …

I went to an Al dimeola show last weekend which started at 8:15 .

I had to load up on coffee
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: 4% withdrawals against a 50/50 portfolio.

Post by Kbg » Mon Jun 13, 2022 12:22 pm

mathjak107 wrote:
Mon Jun 13, 2022 2:21 am
Kbg wrote:
Sun Jun 12, 2022 7:34 pm
If one really wants to geek out on this stuff definitely head over to earlyretirementnow.com.

Right now 4% is pretty dicey
One year does not determine dicey or not..
You're right, but that wasn't what I was refereeing to. CAPE ratio however, is a statistically significant predictive measure and 4% is dicey given where the CAPE ratio is (but that could be rapidly changing at this point in time).
User avatar
dualstow
Executive Member
Executive Member
Posts: 14231
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by dualstow » Mon Jun 13, 2022 12:23 pm

I went to an Al dimeola show last weekend which started at 8:15 .
Nice! Didn’t know he was still playing.
Sam Bankman-Fried sentenced to 25 years
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Mon Jun 13, 2022 12:29 pm

Not only playing , but he became a master chef .

He has three levels of dinners you can attend at his home .

GOLD PACKAGE:
MEET, GREET & EAT

Enjoy a truly once-in-a-lifetime Dinner Experience with Al Di Meola at his New Jersey home 30 minutes outside of New York City! Al will prepare a Gourmet three course Italian Dinner in your presence while discussing anything you ever wanted to know about his music, life and body of work.

Inside stories about Return to Forever, the Guitar Trio with John McLaughlin and Paco de Lucia, the Abbey Road Sessions, as well as collaborations with greats such as Pavarotti, Paul Simon, Steve Winwood, Steve Vai, Frank Zappa and many others will serve for an unforgettable evening. Before you leave, don’t forget to take pictures and videos and get an exclusive selection of signed Merchandise and a specially designed T-Shirt to honor this unique occasion.
Price: $7,500 for up to 2 people


PLATINUM PACKAGE:
IN DEPTH STUDIO SESSION, PRIVATE SHOW, MASTERCLASS AND JAM

This Upgrade includes everything mentioned above

PLUS an intensive tour of Al’s home studio, equipment and guitar collection that has never been shown to the public before. After that, you are invited to sit down in the front row for a 60 minute private show, followed by an in depth ONE-ON-ONE Masterclass and jam session with Al.

Masterclass Topics:
- Al's approach to improvisation
- picking techniques and exercises
- writing and composition strategies

Price: $9,500 for up to 2 people


DIAMOND PACKAGE:
THE GUITAR DREAM

This Experience includes all above (GOLD and PLATINUM)

PLUS signed copies of Al’s hand written music charts and a ONE-ON-ONE guitar lesson or jam where you get to play Al’s personal guitars starting with his legendary Black Custom Les Paul (used on all Return to Forever albums, Land of the Midnight Sun and Elegant Gypsy), never seen before custom Gibson prototypes, his Ovation used on Friday Night in San Francisco and a wide selection of acoustic and electric guitars.

Finally, pick between a PRS Prism electric guitar or an Al Di Meola OVATION steel string (both played by Al on tours and previous recordings) as the ultimate treat to yourself!
Price: $16,500 for up to 2 people
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Tue Jun 14, 2022 4:38 am

Kbg wrote:
Mon Jun 13, 2022 12:22 pm
mathjak107 wrote:
Mon Jun 13, 2022 2:21 am
Kbg wrote:
Sun Jun 12, 2022 7:34 pm
If one really wants to geek out on this stuff definitely head over to earlyretirementnow.com.

Right now 4% is pretty dicey
One year does not determine dicey or not..
You're right, but that wasn't what I was refereeing to. CAPE ratio however, is a statistically significant predictive measure and 4% is dicey given where the CAPE ratio is (but that could be rapidly changing at this point in time).
I use bob clyatts 95/5 so my draw is dynamic …..if we stay down until years end I would get the higher of 4% of the actual balance or 5% less then this years draw .

The cut is really not going to effect much since all the up years has my draw higher then the traditional constant dollar method which is the 4% draw inflation adjusted method we usually refer to .

But there are other draw methods out there .

I much prefer setting my years goal posts with clyatts 95/5.

Firecalc does have a tab for 95/5
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: 4% withdrawals against a 50/50 portfolio.

Post by Kbg » Tue Jun 14, 2022 8:59 am

mj,

Where can I read more about clyatt's approach?

I have a hard time getting too passionate/opinionated about this particular subject...the more I read about it the more all of it seems fine tuned to backtests and/or based on quite a few assumptions.

I'm leaning toward the RMD calculation because it is based on actuarial statistics but I understand it is massively conservative.

Thoughts?
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by vnatale » Tue Jun 14, 2022 11:07 am

Kbg wrote:
Tue Jun 14, 2022 8:59 am

mj,

Where can I read more about clyatt's approach?

I have a hard time getting too passionate/opinionated about this particular subject...the more I read about it the more all of it seems fine tuned to backtests and/or based on quite a few assumptions.

I'm leaning toward the RMD calculation because it is based on actuarial statistics but I understand it is massively conservative.

Thoughts?


This looks like two places:

https://www.youtube.com/watch?v=o9ajBSptmAE

https://www.retireearlyhomepage.com/clyatt.html
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Tue Jun 14, 2022 2:20 pm

The rmd tables are the opposite of a safe withdrawal rate .

The rmd table draw is all over the map based on returns .

A big down year can leave you unable to pay bills .

The idea of a safe withdrawal rate is to provide a safe , secure , CONSISTENT income , in good and bad times

It also gives you a bigger percentage draw as you age and do less and spend less and a smaller draw when you are younger and able to do more and tend to buy more
Last edited by mathjak107 on Wed Jun 15, 2022 3:04 am, edited 1 time in total.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Tue Jun 14, 2022 2:20 pm

vnatale wrote:
Tue Jun 14, 2022 11:07 am
Kbg wrote:
Tue Jun 14, 2022 8:59 am
mj,

Where can I read more about clyatt's approach?

I have a hard time getting too passionate/opinionated about this particular subject...the more I read about it the more all of it seems fine tuned to backtests and/or based on quite a few assumptions.

I'm leaning toward the RMD calculation because it is based on actuarial statistics but I understand it is massively conservative.

Thoughts?
This looks like two places:

https://www.youtube.com/watch?v=o9ajBSptmAE

https://www.retireearlyhomepage.com/clyatt.html
Bob clayatts book live more ,work less
Kbg
Executive Member
Executive Member
Posts: 2815
Joined: Fri May 23, 2014 4:18 pm

Re: 4% withdrawals against a 50/50 portfolio.

Post by Kbg » Wed Jun 15, 2022 9:17 am

Thanks fellas!
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Wed Jun 15, 2022 10:01 am

I have been using 95/5 for 7 years ..

It is easy as can be to implement….
Kevin K.
Executive Member
Executive Member
Posts: 516
Joined: Mon Apr 26, 2010 2:37 pm

Re: 4% withdrawals against a 50/50 portfolio.

Post by Kevin K. » Thu Jun 16, 2022 10:06 am

Clyatt’s book is actually called “Work Less, Live More” and he continues to maintain an eponymous website:

http://www.workless-livemore.com/

Tyler at Portfolio Charts has a nice post about Bob on his site and also includes his Sandwich Portfolio. Bob’s a pioneer in the ER world and his book, though dated in some areas, remains the most user-friendly introduction to modern portfolio theory I’ve come across.

I use the 95% rule too.

Bear in mind that unlike Bergen’s 4% guideline there’s no inflation adjustment. So a succession of bad years would entail some pretty epic belt tightening if inflation stays anywhere near current levels. More in this thread:

https://www.early-retirement.org/forum ... 20484.html
Last edited by Kevin K. on Thu Jun 16, 2022 2:44 pm, edited 1 time in total.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: 4% withdrawals against a 50/50 portfolio.

Post by mathjak107 » Thu Jun 16, 2022 1:31 pm

Because raises are built in and we have much more up years then down years , the draw is typically higher then it would be with the standard 4% swr .

Belt tightening would likely still leave you ahead of your draw had you used the more traditional method ….
Post Reply