Current Research

Updated: June 21, 2006.

Current Research Index

Here is an index with links to my previous Current Research efforts.

Current Research Index

Current Research I: Latch and Hold

Latch and Hold Equations HSWR

Latch and Hold dramatically improves the upside of (stock allocation) switching when starting in times of typical and bargain level valuations. Latch and Hold retains the advantage of switching versus fixed allocations in times of high valuations.

I have calculated equations for 30-Year Historical Surviving Withdrawal Rates. They assume a balance of zero at year 30. The year 30 balance becomes negative if you increase the withdrawal rate by 0.1%.

These formulas include start years of 1923-1975. The shortened time period (versus 1923-1980) corresponds to completed 30-year sequences. This is necessary because my calculator will include Constant Terminal Value Rates and Half Constant Terminal Value Rates. Both require completed sequences.

Here are the equations along with typical results during times of high, typical and bargain level valuations.

Latch and Hold Equations HSWR

Latch and Hold Equations HCTVR

Latch and Hold dramatically improves the upside of (stock allocation) switching when starting in times of typical and bargain level valuations. Latch and Hold retains the advantage of switching versus fixed allocations in times of high valuations.

These are Half Constant Terminal Value Rate HCTVR equations. They assume a balance equal to one half of the initial balance (plus inflation) at year 30. The year 30 balance falls below one half of the original balance (plus inflation) if you increase the withdrawal rate by 0.1%.

Half Constant Terminal Value Rates are useful for those whose retirement is likely to last longer than 30 years. For example, a retiree may choose full safety in terms of a balance of zero at year 30. But he may allow himself a reasonable amount of risk at the Half Constant Terminal Value Rate.

Latch and Hold Equations HCTVR

Latch and Hold Equations CTVR

Latch and Hold dramatically improves the upside of (stock allocation) switching when starting in times of typical and bargain level valuations. Latch and Hold retains the advantage of switching versus fixed allocations in times of high valuations.

These are Constant Terminal Value Rate CTVR equations. They assume a balance equal to the initial balance (plus inflation) at year 30. The year 30 balance falls below the original balance (plus inflation) if you increase the withdrawal rate by 0.1%.

Constant Terminal Value Rates are useful for those whose retirement is likely to last longer than 30 years. They also allow us to make meaningful comparisons between conventional withdrawal strategies, which include income from capital gains as well as dividends, and a dividends-only approach. Both provide income indefinitely.

Keep in mind that dividends usually grow faster than inflation by 1% per year over long periods of time. Constant Terminal Value Rates match inflation exactly. Dividends occasionally lag inflation over shorter periods of time. This was an issue for retirements beginning in the late 1960s.

Latch and Hold Equations CTVR

Latch and Hold Spreadsheet A

I have added LH Spreadsheet A, which calculates the withdrawal rates of the Latch and Hold portfolios in Current Research I: Latch and Hold. You enter P/E10 and the percentage balance of your portfolio at year 30.

[For ease of use, the spreadsheet also converts P/E10 into current S&P500 values and displays the result.]

Look in the Latching Calculators folder in my Yahoo Briefcase.

Yahoo Briefcase