6 ms·

Foundations often make more than 10% / year by keeping 60% of their funds in S&P500, and 40% in bonds[1]. Therefore, 5% seems to be a completely safe level. [1

by krn 8y ago

Foundations often make more than 10% / year by keeping 60% of their funds in S&P500, and 40% in bonds[1]. Therefore, 5% seems to be a completely safe level. [1] https://www.foundationmark.com/indices https://www.foundationmark.com/indices

charlesdm 8y ago
Can yes. In good years. They can also lose 30% in a down year.
- krn 8y ago
  The average return has been 8.8% since 1926, including 20 years with loses[1]. [1] https://www.vanguard.com/us/insights/saving-investing/model-portfolio-allocations https://www.vanguard.com/us/insights/saving-investing/model-...
  - kgwgk 8y ago
    These are nominal returns, real returns are worse. And the returns over 10 years, for example, are quite irregular and can be negative. And over the next 10 years one should expect to get lower-than-average returns because valuation is high currently. https://www.researchaffiliates.com/en_us/publications/articles/313_year_end_capital_markets_commentary_and_forecast_yesterdays_gone.html https://www.researchaffiliates.com/en_us/publications/articl...
CompelTechnic 8y ago
If you look at safe withdrawal rates that do not result in portfolio depletion, 4% is about the most you could hope for from a fairly stock-heavy portfolio, and this is a rate really intended for funding a 30-year retirement, not indefinite. 3% is more realistic for a permanent withdrawal. 10% is absurd.
- usaar333 8y ago
  It matters how you are defining rate. The 4% rule is using a withdraw amount fixed to an initial start time, only increasing with inflation. If your withdraw in a given year is percentage of current portfolio size, you can tolerate a higher percentage.
jermaustin1 8y ago
Maybe there should be a minimum distribution of 5% of revenue from the previous year. So if you are adding money to the pot, or the investments are up last year, the organization has to either distribute or pay taxes. If in the prior year it doesn't take in any money (no donations, market down turn, etc), the organization can still operate in perpetuity.

by krn 8y ago

charlesdm 8y ago

Can yes. In good years. They can also lose 30% in a down year.

krn 8y ago
The average return has been 8.8% since 1926, including 20 years with loses[1]. [1] https://www.vanguard.com/us/insights/saving-investing/model-portfolio-allocations https://www.vanguard.com/us/insights/saving-investing/model-...
- kgwgk 8y ago
  These are nominal returns, real returns are worse. And the returns over 10 years, for example, are quite irregular and can be negative. And over the next 10 years one should expect to get lower-than-average returns because valuation is high currently. https://www.researchaffiliates.com/en_us/publications/articles/313_year_end_capital_markets_commentary_and_forecast_yesterdays_gone.html https://www.researchaffiliates.com/en_us/publications/articl...

CompelTechnic 8y ago

If you look at safe withdrawal rates that do not result in portfolio depletion, 4% is about the most you could hope for from a fairly stock-heavy portfolio, and this is a rate really intended for funding a 30-year retirement, not indefinite. 3% is more realistic for a permanent withdrawal. 10% is absurd.

usaar333 8y ago
It matters how you are defining rate. The 4% rule is using a withdraw amount fixed to an initial start time, only increasing with inflation. If your withdraw in a given year is percentage of current portfolio size, you can tolerate a higher percentage.

jermaustin1 8y ago

Maybe there should be a minimum distribution of 5% of revenue from the previous year. So if you are adding money to the pot, or the investments are up last year, the organization has to either distribute or pay taxes. If in the prior year it doesn't take in any money (no donations, market down turn, etc), the organization can still operate in perpetuity.