glennds wrote:I think I get some of Budd's thinking. I wouldn't call it baloney if what he's saying is that the HBPP trades upside in an equity bull market for downside protection in a bear market (or better put - a period of inflation, deflation or recession). The issue is the opportunity cost of the upside you missed out on - in other words, the money you left on the table by not participating - far outweighs the protection you got in trade. If this is your point Budd, I see where you're coming from.
The difficulty is you can only know the value of this trade in hindsight. It's like asking if you paid too much for insurance and the answer is yes only if you didn't have a claim, which you can only know after the coverage period.
The other difficulty is knowing yourself as an investor. If you are a person who cannot tolerate the downside either financially or emotionally, then this must be factored in and not be taken lightly.
Budd, if you've only been investing since 2008, then you started at an ideal trough where you haven't ridden a cycle down and seen your gains evaporate although you lived through some malaise before things took off. Mostly, though you've been investing in a goldilocks period. That will change at some point which is when the protective features of the HBPP will look more real. Up until now they've probably been mostly theoretical for you.
This is me on all accounts.
Remember, I have both a 70/30 and HBPP.
I see value in the PP design and appreciate the inherent firewalls as well as cash as an emergency fund perspectives. These are the best features in my opinion.
BUT...for this safety you give up stock market gains. For the accumulator I think you give up too much. I compare the 70/30 and PP and that’s a lot to give up for insurance.
The insurance is worth lower returns in a taxable account which ultimately serves as an EF, but not in retirement accounts where I feel I need the gains before retirement is a possibility.
Jhogue, with respect to SWR’s my opinion may be different. I am talking to accumulation not decumulation.