drumminj wrote: ↑Sat Feb 06, 2021 7:13 am
Tyler wrote: ↑Fri Feb 05, 2021 9:47 pm
BTW, if you're running a PP the equivalent SWR is closer to 5% than the 4% the classic studies found by only looking at stocks and bonds. So you may be even farther along than you realize. Congrats!
Does everyone here think these SWRs still hold true in the current climate?
My SO and I are on the glide path to soft-retirement (likely still work, but at least taking time off to disengage and figure out what will make us happy)....I think by Tortoise's description, we're at FI level 3. My model assumes 3% return on our savings, and a 25% effective tax rate -- that should cover our expenses.
The part I struggle with is whether it's still valid to model 3-4% return, or SWR/PWR, with rates so low, assets seeming so bubbly, etc.
Thoughts?
Kitces did the math .
For 4% to hold you need at least a 2% real return average the first 15 years of a 30 year retirement .
Of course you may end the 30th year with a buck .
All the worst time frames he found which were 1906 ,1927 , 1937 ,1965 and 1966 had the failures occur because the first 15 years left to little to late even though the 30 year records were better.
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%