Sequence of Return Risk

This has great science behind it - it is not a life expectancy calculator (those are not great anyway for personalised results, they can't be given how long into the future they typically have to predict) but shows the risk of dying in the next 5 years. It's from the UK Biobank research which is the best study done so far on mortality risk factors.

Calculate your Ubble age

 

Pension loan scheme - check it out. It was designed specifically for these sorts of situations and is run by the government at competitive rates.

 

Hi @dunno , is your dynamic spending similar to Michael Kitces' guardrail strategy? I suppose the only risk is that in a prolonged bear market the retiree may not have the capacity to cut spending for multiple years, so a starting conservative withdrawal rate is prudent.

I often wonder how much meaning historical returns have on new models for current withdrawal rates, as most people have the view that future returns would be much lower than the past, considering the unprecedented low interest rate environment. Although I suppose since the future is impossible to know that history is the only data points we have.

 

Michael Kitces was on Rational Reminder Podcast recently..

The Rational Reminder Podcast: Michael Kitces on Retirement Research and the Business of Financial Advice (EP.112)

 

Thanks @dunno for your calculations and your input. It really helped. I’ll start using time value of money calculations.

 

February 4, 2021
Episode 135: William Bengen: The 5% Rule for Retirement Spending

William P. Bengen practiced fee-only financial planning in Southern California for 25 years. He received a B.S. from MIT in Aeronautics and Astronautics. He retired from financial advising in 2013 but remains active in researching topics related to the so-called "4% rule." He plans an update to his book in late 2021.

Key Points From This Episode:

• Introducing today’s guest, financial advisor and 4% rule creator William Bengen. [0:00:15]
  
  
• Exploring William’s original 1994 research that led to the 4% rule. [0:03:58]
  
  
• Hear why the 4% rule has been so impactful to the world of financial planning. [0:05:06]
  
  
• William shares details about the ‘hate mail’ his findings inspired. [0:06:07]
  
  
• Why William updated his theory to include small-cap stocks. [0:07:43]
  
  
• William’s view that you might be able to get away with withdrawal rates that are higher than 4.5%. [0:08:26]
  
  
• Whether young retirees should adhere to the 4% rule. [0:11:48]
  
  
• The scenarios that break the 4% rule. [0:13:02]
  
  
• How the 4% rule applies in countries outside of Canada and the US. [0:13:55]
  
  
• Insights into how much you should be spending in your retirement. [0:15:28]
  
  
• What your triggers should be if you want to deviate from the 4% rule. [0:17:45]
  
  
• William’s views on dynamic spending. [0:20:09]
  
  
• Tips on keeping track of your expenses and William’s throughs on fixed annuities. [0:21:20]
  
  
• Whether you should taper your retirement income. [0:22:54]
  
  
• The role of bonds versus small-cap stocks in your retirement portfolio. [0:24:04]
  
  
• From rocket scientist to financial advisor, hear about William’s extraordinary career. [0:28:29]
  
  
• Reasons why financial planning should be fee and not commission-based. [0:32:02]
  
  
• Reflecting on the impact that William has made on his client’s lives and in the financial world. [0:32:55]
  
  
• Details on William’s current research and what most excites him. [0:34:48]\
  
  
• How William defines success for himself. [0:37:01]
  

 

“Blue zones are ********.

Buettner cherry-picks and ignores areas that have both high consumption of animal products and high life expectancies (Hong Kong, Switzerland, Spain, Australia, … ). He praises Adventists for their health, but doesn’t do the same for Mormons. He misrepresents the Okinawa and Sardinia diets, which actually include much more meat. He also doesn’t mention that the lifespan of Japan has gone up with increased meat intake, while the lifespan of Okinawa has gone down with reduced meat intake. The number of centenarians in blue zones is likely based on birth certificate fraud.”

Dr. Saul Newman: debunking the 'Blue Zone' longevity myth

 

From Early Retirement Now

The Safe Withdrawal Rate Series – A Guide for First-Time Readers

How often should we rebalance our portfolio? – SWR Series

 

From Accumulation to Distribution

 

In the 70's the market crash lasted about 10 yrs.
In Japan when the credit bubble burst it went for about 30 yrs.
And the index did not recover.

 

Regarding Japan you can use this calculator to see how it went

You may have been investing regularly for years and enjoyed the run-up and subsequent fall, you may have bought at the top (or bottom) and kept investing regularly, or you may have retired a month or two before the fall

The Dow lost 17 years in 1965-1982, and 25 years after the 1929 crash

Diversification makes sense

 

Def makes sense. But where can you hide after a credit bust?
Japan was just a huge credit bubble.
Anyone who watched the 2021 Berkshire AGM stream saw the slide on the world's biggest corp 30 yrs ago. Japan ruled, all on borrowed money. None of them are on list now.
Will we go through a credit bust? Will the EU or US get there first?
Keep printing $$$ Forever?

 

Real-Life Retiree Investment Returns
Updated on April 1, 2021

An interesting blog and read

John Greaney is a former US civil engineer who retired at the age of 38 in 1994, by saving and investing in the stock market

The article linked above looks at a number of portfolio's

Cont....

 

Bit hard to read on a phone but I’ll save this. That Harry Browne is an interesting character

 

I came across this doco on the Japan bubble.
I'm cynical but even this is a little over the top.
And now I ask myself the question: Are we due for economic structural change? Will our debt get to 2 trillion and demand for change of our system?



Will it be used for this agenda?

 

Flipping this thread in it's head.

Sequence of Return Opportunity

Market peaks are the best time to start investing because you have little to lose. Imagine starting your first day of work in 1929, or 1968 or 1987 and DCA for 40 years.

The only thing that would beat those for would be starting today as it would mean I was decades younger than I am now

I spent the first half of my adult life being overly concerned about risk. It's served me well considering who I am but in reality have left a *lot* on the table.

 

This is a great explanation of Sequence risk, and a nice deep dive...

https://breakingthemarket.com/how-to-maximize-wealth-in-retirement/

 

Now revisiting SWR as it’s likely I’ll have completely slipped the surly bonds of labour within the next 12 months.

A year ago, I thought that the 2.5-3.0% range made sense, with limited dynamic spending heuristics applied and healthy buffers.

That was when I thought I’d live forever. That was when I didn’t know I’d been gifted some pretty dodgy genes from my biological father and had some underlying health issues that would mean, in fact, that I would not live forever!

So, addressing the elephant in the room in your post - I’m pushing the boat out a little further.

1. Default 3.5% Static WR
2. With a very simple dynamic overlay ;
a) Natural belt tightening during turmoil -20% spend
b) Big ticket purchases exceeding WR at around ATHs
3. Ample cash and bond buffers ; 6-7 years expenses (a SANF thing)
4. Future home way more valuable than required = additional store of value.

I expect there will still be more than plenty for the kids, but I’m going to get on with spending a bit more now as I’ve become much more aware that time on the clock is limited.

 

Hope all is well mate and it’s nothing too serious on the health front.

Sometimes we get so caught up on planning and working towards future goals that we forget to live for the now. Looks like your plan is a good balance between living for today while thinking about tomorrow.

 

Ahhh yes. That moment when we don’t live forever changes from theory to tangible. Hope you are doing relatively well despite this insight. I highly recommend a midlife crisis for dealing with some of life’s big realisations.

I reckon you are still miles from pushing the safe spending boundaries – not surprising for somebody with a natural accumulation instinct. Your natural risk management instinct is also unlikely to abate, so ongoing dynamic risk management is just a given, so long as mental capacity remains.

Given the above I too expect there will be plenty left for the kids after spending as you see fit even in the absence of further labour compensation. Australia seems hell bent on wealth inequality and widening class structures with reduced mobility between them. If you have the chance to not see your kids in the working poor, HEC’s burdened, forced renter class, I think that is something worth spending your success on. Excessive housing to needs or helping them out at appropriate time with housing needs seems a rational way to pass wealth in our irrational society.

Stay well.