meeting your retirement goals with the pp

[Pointedstick]

the problem was , for most americans the time leading up to that time frame was one of the worst. it was near impossible to save a dime with the high inflation and poor markets . don't forget 401k's didn't even exist. it was all well and good the party was here but few had money.

but isn't that typical of life  ha ha ha

Indeed! That's also why we like the PP. The time before you started was marked by high inflation and poor markets. The PP did fine. The last 15 years have been market by poor markets and a huge gold run-up. The PP did fine. Right now, the markets are great, and gold is suffering. I won't say the PP is still doing fine, but it's surviving. None of us are losing our shirts. Although I will admit many are struck by returns envy!

[Tyler]

What am I missing, Mathjak? If I go to http://www.firecalc.com and plug in a 6.5% withdrawal rate on a 50/50 or 60/40 portfolio, I get success rates under 50% for all time periods since 1871. At 4%, the success rate goes up to 80-95%.

From Mathjak's Kitkes article, the average SWR for stocks/bonds over the years is 6.5%. But the entire point of doing retirement studies is to point out the great risk that comes with volatility and uncertainty.  Especially when you account for the stock market boom years, averages are extremely deceptive.  A 50% success rate is decent odds in Vegas but is a terrible retirement plan. 

[mathjak107]

firecalc is including those worst scenarios.  you could never pull 6.50% including those time frames . that was my point about the pp.

without including the  4 worst time frames looking at the time frames they extended into like the 1966 group  ran through the 1970's you are not actually comparing a safe withdrawal rate by just starting the pp off in the 1970's..

[Tyler]

without including the  4 worst time frames looking at the time frames they extended into like the 1966 group  ran through the 1970's you are not actually comparing a safe withdrawal rate by just starting the pp off in the 1970's..

But the PP has handled the worst the markets have thrown at it since 1972 much better than the 60-40 portfolio over the same timeframe.  I believe that's a strong indicator that it would similarly perform better in earlier economic conditions.  You cannot accept that without direct proof.  We just have different perspectives.  At some point we all have to make a decision that will help us sleep at night and roll with it -- to each his own.  I do believe there's more than one good path to retirement finances.

In any case, I agree with you that flexibility with expenses is far more important than putting all your faith in SWRs.  All of these studies have so many assumptions baked in that they rarely resemble real life. 

[MachineGhost]

I have zero worries about the PP being able to survive those kinds of crises. My worry is your other one: that the PP will miss out on a lot of growth during good times. But you can't have it both ways. The PP isn't going to grow more slowly than a stock-heavy portfolio during prosperity and then fell on its face when the markets crash or inflation picks up or interest rates rise.

Yes, that's my worry too and thanks to mathjak for bringing it up.  I figure you can either increase the equity and scale the other three assets down or just do a better job with the 25%.  One thing mathjak likes to overlook is the behavioral effect of increased maximum drawdowns with heavier equity portfolios.  He also seems to discount the possibility of another 50% correction over the next couple of years.  How can anyone in retirement stand up to that along with ultra low interest rates?  I can't see where the recovery will come from.  We've never had a dual overvalued equity and bond market before which makes it risky to any portfolio.

So must we reduce our duration on the PP as well as enhancing the equity?  Its really annoying to have to do that, but I guess that's life.  Nothing works forever.

[mathjak107]

one of the reason retirement planning is so vague now is because we have zero scenario's ever like now to simulate. low rates and high valuations never happened before and they may be just as deadly spending down from the  pp as a conventional mix.

which goes back to what I said earlier about insurance products playing A much bigger role along with our own investing . I have been looking in to this a lot lately and I am quite intrigued by some of the usages .

I am using a dynamic method of withdrawing based on each years actual balance and I left plenty of slack in the budget.

to be honest ,with 3 weeks to go I am nervous as heck.

[screwtape]

I have zero worries about the PP being able to survive those kinds of crises. My worry is your other one: that the PP will miss out on a lot of growth during good times. But you can't have it both ways. The PP isn't going to grow more slowly than a stock-heavy portfolio during prosperity and then fell on its face when the markets crash or inflation picks up or interest rates rise.

Yes, that's my worry too and thanks to mathjak for bringing it up.

My way of making this a little less worrisome is to just not re-balance so frequently. When I first started out with the PP I stuck religiously to the 25% allocations but for the past couple of years I just check it in February and only re-balance if I exceed the bands. I was pretty close last year but let it ride for another year, so I'm probably over now but not bothering to check.  I figure if it wants to get stock heavy during a time of prosperity, why fight it, as long as it doesn't exceed a reasonable degree of risk.

[mathjak107]

without including the  4 worst time frames looking at the time frames they extended into like the 1966 group  ran through the 1970's you are not actually comparing a safe withdrawal rate by just starting the pp off in the 1970's..

But the PP has handled the worst the markets have thrown at it since 1972 much better than the 60-40 portfolio over the same timeframe.  I believe that's a strong indicator that it would similarly perform better in earlier economic conditions.  You cannot accept that without direct proof.  We just have different perspectives.  At some point we all have to make a decision that will help us sleep at night and roll with it -- to each his own.  I do believe there's more than one good path to retirement finances.

In any case, I agree with you that flexibility with expenses is far more important than putting all your faith in SWRs.  All of these studies have so many assumptions baked in that they rarely resemble real life.

over  all rolling 30 year periods  you are saying the pp did better than 60/40  since 1972 ?  i would have to see that to believe it .  i would be very skeptical of that claim. .

[mathjak107]

OK, but... if someone had used the PP as their accumulation phase portfolio, their portfolio size is likely smaller at retirement. So the PP has a higher SWR on a smaller amount. But if we forgot about the SW RATE and go after the SW absolute amount, based on a $10,000 investment made four decades before retirement, probably the 60/40 does not fail more than the PP.

If one establishes their needed portfolio size based on expenses, then the issue is not how large the portfolio is at retirement but how long it takes to reach your "number".

Starting from zero and saving $2k/month, a 60-40 portfolio would get you to $1mm (in today's dollars) in 16-24 years.  That's an 8-year window, and market dives right before retirement can push it out 8 years. Under the same conditions, the PP hits $1mm in 21-24 years.  A 3-year window.  So it's true that a 60-40 portfolio could get you there faster than the PP.  But they both pretty much guarantee retirement the same year. 

So IMHO it may come down to where you are in life.  I would have absolutely no problem with a younger investor preferring a 60-40 portfolio for the long haul.  It's a perfectly fine way to invest and has a chance for excellent returns.  I discovered the PP several years before retirement, and found the lower volatility a godsend for making my own plans.  While others stressed about whether markets may dive in their final few years of accumulation, I could predict my exit date pretty accurately within a few months. 




Again, note the color distribution.

As an aside, the higher your savings percentage relative to your income, the more irrelevant investment returns are to how fast you reach your goal.  My secret to retiring very early honestly had nothing to do with investments.  When I saw this chart, I cut the wasteful spending that wasn't making me happy anyway and upped my savings rate to 80%.  Even the worst markets couldn't hold me back at that point. 

the argument i would have is  the accumulation stages run 25-40 years  not 10 or 15.  most folks do not use 40% bonds either through their accumulation stage.

i am on the 401k committee at work  and the median is 80-100% equity's under the age of 50 with most in target date funds . they wouldn't see 40% bonds until pretty much retirement.


i don't think you can find many 30 year time frames where the spread  between the pp and the typical target date fund  or similar allocation wouldn't be very sizable .

[Tyler]

i don't think you can find many 30 year time frames where the spread  between the pp and the typical target date fund  or similar allocation wouldn't be very sizable .

That's true.  If one has the fortitude to ride a single total stock market fund for 30 years and never look at their accounts, they'll very likely make more money than they would with the PP.

But most people don't ride out their entire career in a single fund without touching it.  The median duration in any single fund is historically only five years.  Some people try something new and give up after only a few weeks.    People constantly move things around where the action is hot, sell in a panic when things are dire, and inevitably lose money.  Studies have shown that the average investor only barely beats inflation in the longrun.  That's where backtests that ignore investor psychology (including PS's point that most people carry way more cash than they assume when looking at portfolio returns) miss the boat. 

I do agree that the typical accumulation phase is closer to 40 years.  I personally find that to be shame and an artifact of corporate brainwashing rather than an assumption we should just accept.  There's so much more to life than working 5 days a week for 40 years at a job you probably don't even care for before calling it quits and not even remembering how to feel fulfilled without a boss giving you daily direction.  It doesn't have to be that way.  But that's a topic for another discussion.

[screwtape]

I do agree that the typical accumulation phase is closer to 40 years.  I personally find that to be shame and an artifact of corporate brainwashing rather than an assumption we should just accept.  There's so much more to life than working 5 days a week for 40 years at a job you probably don't even care for before calling it quits and not even remembering how to feel fulfilled without a boss giving you daily direction.  It doesn't have to be that way.  But that's a topic for another discussion.

Amen to that, but probably belongs over in other discussions.

Maybe we could get Bob Dylan to write a song about it.... 40 years of working and they put you in the drawdown phase. But not to worry, you still have "end of life issues" to plan for. Don't forget about those.

[mathjak107]

i don't think you can find many 30 year time frames where the spread  between the pp and the typical target date fund  or similar allocation wouldn't be very sizable .

That's true.  If one has the fortitude to ride a single TSM fund for 30 years and never look at their accounts, they'll very likely make more money than they would with the PP.

But most people don't ride out their entire career in a single TSM fund without touching it.  The median duration in any single fund is historically only five years.  Some people try something new and give up after only a few weeks.    People constantly move things around where the action is hot, sell in a panic when things are dire, and inevitably lose money.  Studies have shown that the average investor only barely beats inflation in the longrun.  That's where backtests that ignore investor psychology (including PS's point that most people carry way more cash than they assume when looking at portfolio returns) miss the boat. 

I do agree that the typical accumulation phase is closer to 40 years.  I personally find that to be shame and an artifact of corporate brainwashing rather than an assumption we should just accept.  There's so much more to life than working 5 days a week for 40 years at a job you probably don't even care for before calling it quits and not even remembering how to feel fulfilled without a boss giving you daily direction.  It doesn't have to be that way.  But that's a topic for another discussion.

you can't measure human emotion or investors acting badly in to the equation because it is a variable you can't measure.

but i can tell you we have so many participants in our plan that do not fiddle. they leave things alone and just don't pay attention.

the bottom line is that if you want to compare you have to compare apples to apples.

i think the inflation adjusted return for the s&p 500 cagr from 1980 to 2014 was 8.35% .  most growth models run about 80-90% equity for decades before falling off . no matter how you slice it the potential was there for a considerable difference  if someone wanted the volatility of a growth model.

to compare the pp to a growth model for the accumulation stage is just silly . it would be no contest. 

now i am not saying that a growth model is foer everyone ..  many do not want that level of swing .  but to do comparisons of a typical accumulation stage model and  use  a 60/40 mix isn't being fair either in the comparison .

the pp is for those who do not really want to have the volatility that goes with that superior growth and that is a fine idea..  i am just against showing short 10 or 15  year time frames and 60/40 mixes and showing how superior the pp would be in the accumulation stage.  not a very accurate picture of that stage and its potential. historically with more suitable allocations for that stage..

we can only talk about up to this moment since we can't predict what  is a head. . .

[MachineGhost]

it really depends on the actual portfolio and the time frame .

as I posted above in my 27 year time frame 10k in the pp was 67k.  10k in the very conservative wellesley income  I think was 167k . my own portfolio 10k was 203k .  you really can't compare in general terms nor imply amounts.

From 1987 starting with $10K:

For 60/40 I get 150K. 
For Wellesley I get 113K.

For Vanilla PP I get $72K.
For Vanilla PP with 5-year CD ladder I get $74K.
For Vanilla PP with EW MC equity I get $86K.
For Vanilla PP with MoMo equity I get $136K.
For Vanilla PP with Quality Value equity I get $224K.

Squeezing blood from a rock here!  Literally.

[Pointedstick]

i think the inflation adjusted return for the s&p 500 cagr from 1980 to 2014 was 8.35% .  most growth models run about 80-90% equity for decades before falling off . no matter how you slice it the potential was there for a considerable difference  if someone wanted the volatility of a growth model.

to compare the pp to a growth model for the accumulation stage is just silly . it would be no contest. 

https://www.portfoliovisualizer.com/bac ... sisResults shows that the nominal CAGR of a 100% stock portfolio during that time was 11%, while the PP was 7.85%.

But what if your accumulation phase was only 5-10 years because your goal was super-early retirement? If your 5-10 accumulation years had been anytime during 1982-1998, you'd feel like the king of the world. But what if you happened to start working in 1998? Uh-oh. Looks like your accumulation phase is going to be more like 15 years...

The point of the PP for this type of application is to reduce the yearly volatility so you can stick to your plan. If your goal is to make the maximum amount of money over 2-3 decades without looking at it or touching it or caring about volatility, then sure, I bet you could get everyone here to agree with you that a more stock-heavy portfolio would on average yield more. But that's not what most of us here are doing. This forum is heavily self-selected from among the ERE crowd precisely because it's such a good short accumulation early retirement portfolio. If there are any members of this forum in their 20s who anticipate working 3 more decades, please raise your hands! I haven't seen many. That's because the PP is an obviously inferior choice for the person who wants to maximize their potential upside over the course of decades.

[screwtape]

the pp is for those who do not really want to have the volatility that goes with that superior growth and that is a fine idea..  i am just against showing short 10 or 15  year time frames and 60/40 mixes and showing how superior the pp would be in the accumulation stage.  not a very accurate picture of that stage and its potential. historically with more suitable allocations for that stage..

I've gathered that you jumped into the PP and then got out. Would you care to summarize for us succinctly what led to your decision in both directions?  Complicated ideas with charts and figures and such don't work well with me because I'm a financial dumb-ass.

[Tyler]

you can't measure human emotion or investors acting badly in to the equation because it is a variable you can't measure.

Just because it's difficult to measure doesn't mean it isn't real.

[img width=500]http://www.investmentu.com/assets/image ... -chart.jpg[/img]

But yes, I will happily concede that there are better portfolios out there purely for long-term growth than the PP.  I don't at all believe that there's one single portfolio that is best for every investor or situation.  The trick is picking the right one ahead of time and sticking with the plan.  The PP works very well for me personally because of the reasonable returns, low volatility, and neutral economic outlook.  But every person is different and will have different priorities.

BTW, the real CAGR for the total stock market since 1972 is 6.0%  For the PP it is 5.0%.  Let's not demand more years of history for SWRs but pick shorter periods for average returns. 

[mathjak107]

oooh we know it is real .  small investors stink .  i assume you see that the investor return vs the fund return is given on most funds in morningstar.

they track the money in and out and small investors do the wrong thing at the wrong time. but that still does not mean the difference in potential for someone staying the course isn't going to be pretty big most likely.

[MachineGhost]

over  all rolling 30 year periods  you are saying the pp did better than 60/40  since 1972 ?  i would have to see that to believe it .  i would be very skeptical of that claim. .

Code: Select all

  		 60/40 	 PP 
1928	1957	6.03%	2.86%
1929	1958	5.85%	2.72%
1930	1959	6.17%	2.96%
1931	1960	6.46%	3.23%
1932	1961	7.54%	3.64%
1933	1962	7.18%	3.54%
1934	1963	6.48%	2.68%
1935	1964	6.79%	2.62%
1936	1965	6.00%	2.26%
1937	1966	5.03%	2.01%
1938	1967	6.09%	2.99%
1939	1968	5.44%	2.78%
1940	1969	4.95%	2.49%
1941	1970	5.22%	2.66%
1942	1971	6.08%	3.35%
1943	1972	6.33%	3.78%
1944	1973	5.22%	3.82%
1945	1974	3.97%	3.72%
1946	1975	3.79%	2.91%
1947	1976	5.11%	3.59%
1948	1977	4.98%	3.93%
1949	1978	4.76%	4.09%
1950	1979	4.14%	4.65%
1951	1980	3.88%	4.51%
1952	1981	3.24%	3.97%
1953	1982	3.75%	4.47%
1954	1983	4.08%	4.44%
1955	1984	3.11%	3.87%
1956	1985	3.45%	4.11%
1957	1986	0.76%	1.88%
1958	1987	0.88%	2.11%
1959	1988	0.40%	1.77%
1960	1989	0.99%	2.04%
1961	1990	0.70%	1.82%
1962	1991	0.91%	1.76%
1963	1992	1.21%	1.69%
1964	1993	1.20%	1.81%
1965	1994	0.63%	1.47%
1966	1995	1.57%	1.97%
1967	1996	2.17%	2.18%
1968	1997	2.69%	1.81%
1969	1998	3.36%	2.04%
1970	1999	3.96%	2.47%
1971	2000	3.88%	2.37%
1972	2001	3.35%	2.06%
1973	2002	2.58%	1.54%
1974	2003	3.82%	1.76%
1975	2004	4.95%	1.85%
1976	2005	4.45%	2.02%
1977	2006	4.15%	2.12%
1978	2007	4.61%	2.47%
1979	2008	4.61%	2.47%
1980	2009	4.75%	1.71%
1981	2010	4.97%	2.09%
1982	2011	5.75%	2.85%
1983	2012	5.18%	2.39%
1984	2013	5.27%	2.27%
1985	2014	5.70%	2.63%

[mathjak107]

i think the inflation adjusted return for the s&p 500 cagr from 1980 to 2014 was 8.35% .  most growth models run about 80-90% equity for decades before falling off . no matter how you slice it the potential was there for a considerable difference  if someone wanted the volatility of a growth model.

to compare the pp to a growth model for the accumulation stage is just silly . it would be no contest. 

https://www.portfoliovisualizer.com/bac ... sisResults shows that the nominal CAGR of a 100% stock portfolio during that time was 11%, while the PP was 7.85%.

But what if your accumulation phase was only 5-10 years because your goal was super-early retirement? If your 5-10 accumulation years had been anytime during 1982-1998, you'd feel like the king of the world. But what if you happened to start working in 1998? Uh-oh. Looks like your accumulation phase is going to be more like 15 years...

The point of the PP for this type of application is to reduce the yearly volatility so you can stick to your plan. If your goal is to make the maximum amount of money over 2-3 decades without looking at it or touching it or caring about volatility, then sure, I bet you could get everyone here to agree with you that a more stock-heavy portfolio would on average yield more. But that's not what most of us here are doing. This forum is heavily self-selected from among the ERE crowd precisely because it's such a good short accumulation early retirement portfolio. If there are any members of this forum in their 20s who anticipate working 3 more decades, please raise your hands! I haven't seen many. That's because the PP is an obviously inferior choice for the person who wants to maximize their potential upside over the course of decades.

as i stated over and over the pp is perfect for protecting the money once your goal is reached. if you have 10 years until retirement that is perfect since you better have most of your funds already in place if you are retiring early,

[MediumTex]

I have zero worries about the PP being able to survive those kinds of crises. My worry is your other one: that the PP will miss out on a lot of growth during good times. But you can't have it both ways. The PP isn't going to grow more slowly than a stock-heavy portfolio during prosperity and then fell on its face when the markets crash or inflation picks up or interest rates rise.

Yes, that's my worry too and thanks to mathjak for bringing it up.

My way of making this a little less worrisome is to just not re-balance so frequently. When I first started out with the PP I stuck religiously to the 25% allocations but for the past couple of years I just check it in February and only re-balance if I exceed the bands. I was pretty close last year but let it ride for another year, so I'm probably over now but not bothering to check.  I figure if it wants to get stock heavy during a time of prosperity, why fight it, as long as it doesn't exceed a reasonable degree of risk.

BINGO!

If your mind isn't loose and relaxed when you think about your investments, you're missing out on one of the biggest benefits the PP has to offer an investor.

[MachineGhost]

My way of making this a little less worrisome is to just not re-balance so frequently. When I first started out with the PP I stuck religiously to the 25% allocations but for the past couple of years I just check it in February and only re-balance if I exceed the bands. I was pretty close last year but let it ride for another year, so I'm probably over now but not bothering to check.  I figure if it wants to get stock heavy during a time of prosperity, why fight it, as long as it doesn't exceed a reasonable degree of risk.

Have you examined the effect of wider rebalancing bands at peak2through?

[mathjak107]

over  all rolling 30 year periods  you are saying the pp did better than 60/40  since 1972 ?  i would have to see that to believe it .  i would be very skeptical of that claim. .

Code: Select all

  		 60/40 	 PP 
1928	1957	6.03%	2.86%
1929	1958	5.85%	2.72%
1930	1959	6.17%	2.96%
1931	1960	6.46%	3.23%
1932	1961	7.54%	3.64%
1933	1962	7.18%	3.54%
1934	1963	6.48%	2.68%
1935	1964	6.79%	2.62%
1936	1965	6.00%	2.26%
1937	1966	5.03%	2.01%
1938	1967	6.09%	2.99%
1939	1968	5.44%	2.78%
1940	1969	4.95%	2.49%
1941	1970	5.22%	2.66%
1942	1971	6.08%	3.35%
1943	1972	6.33%	3.78%
1944	1973	5.22%	3.82%
1945	1974	3.97%	3.72%
1946	1975	3.79%	2.91%
1947	1976	5.11%	3.59%
1948	1977	4.98%	3.93%
1949	1978	4.76%	4.09%
1950	1979	4.14%	4.65%
1951	1980	3.88%	4.51%
1952	1981	3.24%	3.97%
1953	1982	3.75%	4.47%
1954	1983	4.08%	4.44%
1955	1984	3.11%	3.87%
1956	1985	3.45%	4.11%
1957	1986	0.76%	1.88%
1958	1987	0.88%	2.11%
1959	1988	0.40%	1.77%
1960	1989	0.99%	2.04%
1961	1990	0.70%	1.82%
1962	1991	0.91%	1.76%
1963	1992	1.21%	1.69%
1964	1993	1.20%	1.81%
1965	1994	0.63%	1.47%
1966	1995	1.57%	1.97%
1967	1996	2.17%	2.18%
1968	1997	2.69%	1.81%
1969	1998	3.36%	2.04%
1970	1999	3.96%	2.47%
1971	2000	3.88%	2.37%
1972	2001	3.35%	2.06%
1973	2002	2.58%	1.54%
1974	2003	3.82%	1.76%
1975	2004	4.95%	1.85%
1976	2005	4.45%	2.02%
1977	2006	4.15%	2.12%
1978	2007	4.61%	2.47%
1979	2008	4.61%	2.47%
1980	2009	4.75%	1.71%
1981	2010	4.97%	2.09%
1982	2011	5.75%	2.85%
1983	2012	5.18%	2.39%
1984	2013	5.27%	2.27%
1985	2014	5.70%	2.63%

nice work .  it looks like no contest for the pp in comparison to even the 60/40 .  i wouldn't have thought there would be that big a difference using 60/40 but if your numbers are correct the pp has a lot less growth over a typical long term accumulation stage with very few exceptions..

[MachineGhost]

The point of the PP for this type of application is to reduce the yearly volatility so you can stick to your plan. If your goal is to make the maximum amount of money over 2-3 decades without looking at it or touching it or caring about volatility, then sure, I bet you could get everyone here to agree with you that a more stock-heavy portfolio would on average yield more. But that's not what most of us here are doing. This forum is heavily self-selected from among the ERE crowd precisely because it's such a good short accumulation early retirement portfolio. If there are any members of this forum in their 20s who anticipate working 3 more decades, please raise your hands! I haven't seen many. That's because the PP is an obviously inferior choice for the person who wants to maximize their potential upside over the course of decades.

Okay then!  Please come up with a formula for how much to increase the PP equity to per a given age so that it decreases down to 25% at retirement age.  I betcha that will work.

[MediumTex]

over  all rolling 30 year periods  you are saying the pp did better than 60/40  since 1972 ?  i would have to see that to believe it .  i would be very skeptical of that claim. .

Code: Select all

  		 60/40 	 PP 
1928	1957	6.03%	2.86%
1929	1958	5.85%	2.72%
1930	1959	6.17%	2.96%
1931	1960	6.46%	3.23%
1932	1961	7.54%	3.64%
1933	1962	7.18%	3.54%
1934	1963	6.48%	2.68%
1935	1964	6.79%	2.62%
1936	1965	6.00%	2.26%
1937	1966	5.03%	2.01%
1938	1967	6.09%	2.99%
1939	1968	5.44%	2.78%
1940	1969	4.95%	2.49%
1941	1970	5.22%	2.66%
1942	1971	6.08%	3.35%
1943	1972	6.33%	3.78%
1944	1973	5.22%	3.82%
1945	1974	3.97%	3.72%
1946	1975	3.79%	2.91%
1947	1976	5.11%	3.59%
1948	1977	4.98%	3.93%
1949	1978	4.76%	4.09%
1950	1979	4.14%	4.65%
1951	1980	3.88%	4.51%
1952	1981	3.24%	3.97%
1953	1982	3.75%	4.47%
1954	1983	4.08%	4.44%
1955	1984	3.11%	3.87%
1956	1985	3.45%	4.11%
1957	1986	0.76%	1.88%
1958	1987	0.88%	2.11%
1959	1988	0.40%	1.77%
1960	1989	0.99%	2.04%
1961	1990	0.70%	1.82%
1962	1991	0.91%	1.76%
1963	1992	1.21%	1.69%
1964	1993	1.20%	1.81%
1965	1994	0.63%	1.47%
1966	1995	1.57%	1.97%
1967	1996	2.17%	2.18%
1968	1997	2.69%	1.81%
1969	1998	3.36%	2.04%
1970	1999	3.96%	2.47%
1971	2000	3.88%	2.37%
1972	2001	3.35%	2.06%
1973	2002	2.58%	1.54%
1974	2003	3.82%	1.76%
1975	2004	4.95%	1.85%
1976	2005	4.45%	2.02%
1977	2006	4.15%	2.12%
1978	2007	4.61%	2.47%
1979	2008	4.61%	2.47%
1980	2009	4.75%	1.71%
1981	2010	4.97%	2.09%
1982	2011	5.75%	2.85%
1983	2012	5.18%	2.39%
1984	2013	5.27%	2.27%
1985	2014	5.70%	2.63%

nice work .  it looks like no ontest for the pp in comparison to even the 60/40 .

Remember there is a lot of survivorship bias built into those figures.

I suspect that a German, French, Italian, Greek, Russian, Mexican, Cuban, Lebanese, Japanese, Chinese or British PP wouldn't have fared nearly so well during many of those periods above.

[MediumTex]

The point of the PP for this type of application is to reduce the yearly volatility so you can stick to your plan. If your goal is to make the maximum amount of money over 2-3 decades without looking at it or touching it or caring about volatility, then sure, I bet you could get everyone here to agree with you that a more stock-heavy portfolio would on average yield more. But that's not what most of us here are doing. This forum is heavily self-selected from among the ERE crowd precisely because it's such a good short accumulation early retirement portfolio. If there are any members of this forum in their 20s who anticipate working 3 more decades, please raise your hands! I haven't seen many. That's because the PP is an obviously inferior choice for the person who wants to maximize their potential upside over the course of decades.

Okay then!  Please come up with a formula for how much to increase the PP equity to per a given age so that it decreases down to 25% at retirement age.  I betcha that will work.

I don't think that risk tolerance is as much a function of age as many people think. 

I believe that a person's risk tolerance is more a function of his psychological makeup than his age.