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> Not for over a century, including the Great Depression and the .com crash, according to various studies as well as publically available data from which anyone

> Not for over a century, including the Great Depression and the .com crash, according to various studies as well as publically available data from which anyone can make the same calculations. Evidence, please? 1) Even the author of the study doesn't say what MMM does in regards to the 4% rule. http://www.bogleheads.org/wiki/Safe_withdrawal_rates#Limitations_of_the_Trinity_study http://www.bogleheads.org/wiki/Safe_withdrawal_rates#Limitat... http://www.bogleheads.org/forum/viewtopic.php?p=717195#p717195 http://www.bogleheads.org/forum/viewtopic.php?p=717195#p7171... > "The word planning is emphasized because of the great uncertainties in the stock and bond markets. Mid-course corrections likely will be required, with the actual dollar amounts withdrawn adjusted downward or upward relative to the plan. The investor needs to keep in mind that selection of a withdrawal rate is not a matter of contract but rather a matter of planning." > What the "4% SWR" means is not that you can treat a portfolio as if it were a guaranteed annuity. 2) https://ideas.repec.org/p/ngi/dpaper/10-12.html https://ideas.repec.org/p/ngi/dpaper/10-12.html > . From an international perspective, a 4 percent real withdrawal rate is surprisingly risky. Even with some overly optimistic assumptions, it would have only provided "safety" in 4 of the 17 countries. A fixed asset allocation split evenly between stocks and bonds would have failed at some point in all 17 countries. 3) http://www.usatoday.com/story/money/personalfinance/2014/11/08/cnbc-four-percent-withdrawal-retirement-rule/18509395/ http://www.usatoday.com/story/money/personalfinance/2014/11/... 4) Even if you believed in the 4% rule, it was designed for 30 years. Long periods raises the failure rates. etc. You need to realize the 4% rule is a cute thing that journalists latched onto in the 90s and was never intended to provide 100% coverage. It also has a non-zero failure rate. Under certain market conditions it does fail. Pretending it doesn't is silly and even in the Trinity paper it is stated its not 100% reliable. I'm really not going to get into the rest of it since you don't even know the basics of what you are talking about and I've wasted enough time arguing with you. What you fail to grasp, and what I am pretty sure you are going to refuse to believe at this point, is the 4% rule applied as you and MMM are suggesting is the same trap of overfitting that many people who engage in backtesting do. If you are not in the historical US, you have a success rate of ~23% with the 4% rule. Even the US? Is not the historical US. Its a new entity that is not guaranteed to perform 100% identically to the historical entity. Best of luck to you, believe what you want, I honestly don't care. I get that you want to believe a bunch of optimistic assumptions about reality but the reality is, they are optimistic.

JoshTriplett 11y ago
The study was for the US, and never claimed to be otherwise, nor am I claiming otherwise. If you start talking about other countries, you're changing the parameters of the analysis. Get the numbers for your target market and run the analysis. And yes, of course you have to be prepared to adjust based on conditions. You shouldn't just blindly withdraw 4% every year. Withdraw what you actually spend, and one of your many backup plans should be to spend less. More to the point, fine, if you don't think it's safe, have other backups in place. Work a few more years, or have access to means of part-time work, or build supplementary incomes, or any number of other solutions. What's your alternative proposal? "This doesn't work perfectly in all life circumstances, so give up and plan on retiring at 65"? Make plans to retire sooner than 65, and be prepared to adapt based on conditions. If you make a plan to retire at 40, and something goes wrong, maybe you'll retire at 45 instead. Oh no, you're only retiring 20 years sooner than everyone else; woe is you. I'm not making optimistic assumptions; I'm making tentative assumptions and estimates that I can adapt over time. For my particular case, for instance, it helps that while I'm saving like someone who wants to retire in my 30s, I don't plan to quit when I get enough to retire. I plan to keep working indefinitely, because I'm enjoying myself doing so. But it's sure nice to have backup plans, and to build a substantial excess for charitable purposes.
- fweespeech 11y ago
  > You: The study was for the US, and never claimed to be otherwise, nor am I claiming otherwise. > Me: What you fail to grasp, and what I am pretty sure you are going to refuse to believe at this point, is the 4% rule applied as you and MMM are suggesting is the same trap of overfitting that many people who engage in backtesting do. http://www.financial-math.org/blog/2014/04/faqs-on-backtest-overfitting/ http://www.financial-math.org/blog/2014/04/faqs-on-backtest-... > 5. I do not understand the meaning of backtest overfitting. If a strategy worked in the past, why shouldn’t it work in the future? Could you please provide a simple example? > Any random sample extracted from a population incorporates patterns. For example, after tossing a fair coin ten times we could obtain by chance a sequence such as {+,+,+,+,+,-,-,-,-,-}, where “+” means head and “-” means tail. A researcher could determine that the best strategy for betting on the outcomes of this coin is to expect “+” on the first five tosses, and for “-” on the last five tosses (a typical “seasonal” argument in the investment community). When we toss that coin ten more times, we may obtain a sequence such as {-,-,+,-,+,+,-,-,+,-}, where we win 5 times and lose 5 times. That researcher’s betting rule was overfit, because it was designed to profit from a random pattern observed in the past. The rule has absolutely no predictive power over the future, regardless of how well it appears to have worked in the past. http://blogs.barrons.com/focusonfunds/2014/06/13/backtests-damned-backtests-and-statistics/ http://blogs.barrons.com/focusonfunds/2014/06/13/backtests-d... > The point: Investors don’t know how many hypotheses the managers examined, didn’t like, and chucked out, before they found the perfect backtest. The more the data is tortured, the likelier the result is just a fluke. So: How often is a fluke passed off as “alpha,” or some kind of amazing financial innovation? ----- I'm just putting this here because you clearly missed the boat on my post and its possible others will to.

JoshTriplett 11y ago

The study was for the US, and never claimed to be otherwise, nor am I claiming otherwise. If you start talking about other countries, you're changing the parameters of the analysis. Get the numbers for your target market and run the analysis. And yes, of course you have to be prepared to adjust based on conditions. You shouldn't just blindly withdraw 4% every year. Withdraw what you actually spend, and one of your many backup plans should be to spend less. More to the point, fine, if you don't think it's safe, have other backups in place. Work a few more years, or have access to means of part-time work, or build supplementary incomes, or any number of other solutions. What's your alternative proposal? "This doesn't work perfectly in all life circumstances, so give up and plan on retiring at 65"? Make plans to retire sooner than 65, and be prepared to adapt based on conditions. If you make a plan to retire at 40, and something goes wrong, maybe you'll retire at 45 instead. Oh no, you're only retiring 20 years sooner than everyone else; woe is you. I'm not making optimistic assumptions; I'm making tentative assumptions and estimates that I can adapt over time. For my particular case, for instance, it helps that while I'm saving like someone who wants to retire in my 30s, I don't plan to quit when I get enough to retire. I plan to keep working indefinitely, because I'm enjoying myself doing so. But it's sure nice to have backup plans, and to build a substantial excess for charitable purposes.

fweespeech 11y ago
> You: The study was for the US, and never claimed to be otherwise, nor am I claiming otherwise. > Me: What you fail to grasp, and what I am pretty sure you are going to refuse to believe at this point, is the 4% rule applied as you and MMM are suggesting is the same trap of overfitting that many people who engage in backtesting do. http://www.financial-math.org/blog/2014/04/faqs-on-backtest-overfitting/ http://www.financial-math.org/blog/2014/04/faqs-on-backtest-... > 5. I do not understand the meaning of backtest overfitting. If a strategy worked in the past, why shouldn’t it work in the future? Could you please provide a simple example? > Any random sample extracted from a population incorporates patterns. For example, after tossing a fair coin ten times we could obtain by chance a sequence such as {+,+,+,+,+,-,-,-,-,-}, where “+” means head and “-” means tail. A researcher could determine that the best strategy for betting on the outcomes of this coin is to expect “+” on the first five tosses, and for “-” on the last five tosses (a typical “seasonal” argument in the investment community). When we toss that coin ten more times, we may obtain a sequence such as {-,-,+,-,+,+,-,-,+,-}, where we win 5 times and lose 5 times. That researcher’s betting rule was overfit, because it was designed to profit from a random pattern observed in the past. The rule has absolutely no predictive power over the future, regardless of how well it appears to have worked in the past. http://blogs.barrons.com/focusonfunds/2014/06/13/backtests-damned-backtests-and-statistics/ http://blogs.barrons.com/focusonfunds/2014/06/13/backtests-d... > The point: Investors don’t know how many hypotheses the managers examined, didn’t like, and chucked out, before they found the perfect backtest. The more the data is tortured, the likelier the result is just a fluke. So: How often is a fluke passed off as “alpha,” or some kind of amazing financial innovation? ----- I'm just putting this here because you clearly missed the boat on my post and its possible others will to.