New Posts Starting December 1, 2007

Updated: January 2, 2008.

Elements of Skill

Here are several elements of skill that you can adopt as your own.

Elements of Skill

Threshold Distortion

Threshold Distortion describes a common analysis error.

Threshold Distortion

Easing into 5%

This time, I examined the conventional withdrawal strategy, one that includes selling shares.

I used the Scenario Surfer to determine whether I could lift the 30-Year withdrawal rate to 5% of the original balance (plus inflation) after a five year delay at 4%. I found that I could, but only if I adjusted withdrawals in accordance with valuations.

Easing into 5%

Seeking 5%

I examined the conventional strategy with variable withdrawals. I tried to lift the 30-Year withdrawal rate to 5% of the original balance (plus inflation) except for brief periods at 4%.

It is better to ease into a 5% withdrawal rate with the first five years at 4%.

Seeking 5%

Waiting for the Big Drop

I tried to reach a 5% withdrawal rate with a conventional withdrawal strategy, one that includes selling shares. This time I limited my stock allocation to 50% unless I encountered a big drop: 10% of the original balance (plus inflation).

Once again, I failed.

Waiting for the Big Drop

Reaching for 5%

We routinely exceed a 5% (plus inflation) withdrawal rate with the Dividend Blend and related strategies. What about conventional strategies, those that include selling shares?

With conventional strategies and in today’s market, 5% is beyond our reach.

Reaching for 5%

Conventional Portfolios at 4%

Traditional studies suggested that a 4% withdrawal rate (plus inflation) would be safe. Our research shows otherwise. This is what is likely to happen at today’s valuations.

Conventional Portfolios at 4%

Twice Income

This characterizes another variable withdrawal strategy: withdrawing twice the income (dividends plus interest) produced by the portfolio.

Twice Income

The Rule of 20-20

You need to save 20 times your desired retirement income. Worst case, your buying power will drop briefly by 20%.

The Rule of 20-20

I am 40 and Worried

Suppose that you are 40 and you have $100000. You have limited income. You are worried. Will you have enough at age 70? Will you be out on the street?

You will be OK. Use commonsense and pay attention to dividends.

I am 40 and Worried

Fatally Flawed

Traditional Safe Withdrawal Rate studies are fatally flawed.

Fatally Flawed

Inflation Sensitivity Study

I ran a short sensitivity test on a Taken At Face Value condition.

Inflation Sensitivity Study

Dollar Cost Averaging Today: Revisited

I looked at Dollar Cost Averaging with the Scenario Surfer. I used P/E10=26.

Dollar Cost Averaging Today: Revisited

When P/E10=8

If the stock market follows its normal course, P/E10 will fall to 8 at some time within the next 10 to 15 years. Those who have preserved their capital will face a glorious future.

When P/E10=8