Gyroscopic Investing

What I think of as a 'regular' YouTube finance channel that used a portfolio with gold in a video that wasn't about having gold in the portfolio
(60% SP500; 30% 10-Year Treasury; 10% Gold)

Not something I recall seeing



(Note: she recently started using the 4.7% rule as the standard safe withdrawal rate, not just for this video)

i would argue 4.7% for a 30 year return is a draw rate , not a safe withdrawal rate since it has failed already to last enough times to achieve a 90% success rate based on what we already saw in america .

it already failed to last 25 time frames for a mere 80% success rate

while it doesn’t have gold as a component and gold has beaten bonds the last two decades, it hadn’t beaten equities, so this mix below was run at 75% equities , using gold and lowering equites would have done a bit less in gains


FIRECalc Results
Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.
FIRECalc looked at the 125 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 125 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,421,295 to $5,045,572, with an average at the end of $1,336,423. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 25 cycles failed, for a success rate of 80.0%.


looking at other time frames will change things but seeing at least a 90% success rate is what one would want to be considered a safe withdrawal rate .

one can take raises in draw over time if they are not a worst case outcome , but one would never know that in advance so planning around less then 90% initially would not be a good idea

no one actually spends like a robot so typically a safe withdrawal rate based on a certain percentage applies to our first year .

there are many reasons why i would not use what’s called the constant dollar method of withdrawal which is what the 4% swr is based on , for a lot of reasons .

personally i use a dynamic method the last 11 years in retirement called 95/5

it’s actually based on setting your goal posts each year based on 4% of the actual balance each december 31

in a down year you take the higher of 4% of the balance or 5% less than you took the previous year .

it’s fast and simple and works great .

it includes all inflation adjusting and raises if you are doing better than worst case scenario in a simple calculation.

it is so popular firecalc has a tab in withdrawal method to select this as a method as opposed to the conventional, overly complex constant dollar method which is what it’s called when we take our old draw and each year just add inflation adjusting.


the problem is 90% of those 125 rolling 30 year periods had one ending with more than they started with the old convectional method

so to avoid leaving money un enjoyed it requires a method of taking raises which can become overly complex to do safely .

the 95/5 method avoids this .

at this stage good markets have taken us and put us out well ahead of the curve .

even though we can draw 4% of the balance , in practice we are in the low 3% range 11 years in .

with 11 years less life to support we actually can spend 6 figures more than we do ,so we do things like fund 529 plans for our 6 grandkids and we make distributions of thousands of dollars to our 3 kids now .

it allows us to give with warm hands instead of cold .

so finding a method of withdrawal that fits your resources and lifestyle is important .

we find 95/5 perfect for us .

the only drop down we had in draw was in 2022 . but even then m 95/5 allows you much more in the first place as opposed to the constant dollar method that even with the 5% cut it was ctualky higher than it would have been under the conventional draw method

I watch quite a few of Erin's videos. They seem to be intended for a more general audience, but they are always well produced.

Portfolio Charts shows the safe withdrawal rate of the 60/30/10 portfolio she describes to be 4.8% over 30 years.

I had to chuckle at some of the comments saying it's crazy to hold so much gold.

portfolio charts does not go back far enough to even pick up on all the time frames that failed.

the worst time frames to have retired are 1907 , 1929 , 1937 , 1965 and 1966 .

we have not had anything as bad since 1966

the trinity and safe max go back to 1926 , firecalc goes back to 1871 so it picks up one more failure date 1907.

the safe withdrawal rate concept is based on what draw rate would a retiree have needed to get thru the worst retirement dates to date and those are the worse outcome dates .

so ifyou are not basing the draw on the same worst dates then it isn’t an apples to apples comparison.

in fact kitces found if we eliminated those 5 dates above a withdrawal rate could be 6.50% but it would not meet the criteria a safe withdrawal rate is based on