Hi Rick
- quote -

retirement since I’m on disability. They tell you here 3 to 5 years
before one retires, one should change it over mostly or all to bonds.

I have another 9 years till I’m 60, but if the interest rates would be
like they are now I would be very reluctant.

What can one do? One could either keep everything in stock funds (and
hope a crash doesn’t come) or put part in junk funds (which is just as
risky as stock funds can be).

joetaxpayer wrote:
- quote -

Google Groups to read the forum, my profile should link you to the
post. The spreadsheet has been done by someone else, I cannot
duplicate it YET. My formulas have an error. I will e-mail J O E T A
X P A Y E R at the domain above when completed.

jIM wrote:
- quote -

I'd love to seewhat you came up with, and offer some kind
comments/suggestions.
I'm [at]comcast.net

JOE

joetaxpayer wrote:
- quote -


I gave up on PV for the time being... I could not get numbers which
worked backwards and forwards.

I worked up an "easy" spreadsheet with known inputs:

amount needed for first year's income $X, amount of principal in
account at start $Y, inflation percentage (to increase income) a%,
yield on investments b%, growth of capital c%. In addition retirement
age and death age are input.

If you want to see it I can e-mail it or post it somewhere.

- quote -

Seven years is about OK at median national income $46K.
That presumes Social security replaces 38% (42% minus medicare
deduction)
and and you've been saving 15%. Thus you have to replace 39% (8% SS
tax
subtracted too). Long term treasuries or CDs yielding 5% suggests a
base of
7.8 incomes to generate 39% replacement income.

Its more like 12 incomes if one is at double national medium income,
94K this year. That's where the maximum SS pension occurs.

Most advisors suggest putting this much income in a balanced fund
(40-50% stocks)
to give the extra kick for inflation (4% past two years).

"jIM" <noreplysoccer[at]hotmail.com> writes:

- quote -

Only way I can think of is an immediate fixed annuity
(and a person old enough to get that rate). That leaves
nothing for heirs, of course, but if that's all you
have and you really need that $75k, it's do-able, though
probably without an inflation adjustment. Play with
some of the numbers you get from
http://www.immediateannuities.com
for example.

I'm not too comfortable with folks putting all of their
eggs into the annuity basket, but for someone with a
million dollar portfolio, putting 25-50% into annuities
guarantees a pretty decent base income (on top, presumably,
of social security) and would let them take some greater
risk (ie. heavier load of equities) with the remainder
of their portfolio.


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

jIM wrote:
- quote -

I'd like to see what you discover.
Any PV calculations I've seen are used for Mortgage payments and/or
Bonds. The principal value would change, that's not the issue. It's the
payment/withdrawal rising over time that these calculators would not handle.
JOE

- quote -

If anything suggested I was questioning the 4% withdraw rate, I did not
mean to imply this. I understand this number has been proven by others
and I accept 4% as standard withdraw rate (and I use 3% to make my
calculations more conservative).
- quote -

My question was directed at PV... the PV calculation itself does not
account for change in principal balance from year n to year n+1,
correct?
- quote -

percentage, my questions was specific to PV and if this static
percentage could be changed to a dynamic percentage. I have an idea I
will try and get back to you.

- quote -

I have similar "rules of thumb" I use.

for example if I make $X now and will retire in 36 years, I assume
inflation will double twice (72/4%=18, so inflation doubles every 18
years). Meaning in 36 years I need income equal to 4*$X to maintain my
current standard of living. Take 80% of this number (I can live on
less than I make now), and that is income I need to generate from a
portfolio of value $Y.

How to achieve $Y is another set of calculations and check points (like
savings percentage, assett allocation, rates of return). In the end is
comes out to about 20-30x my annual income now.

jIM wrote:

- quote -

jIM,
There were a number of studies that came to the 4% conclusion. A number
of links can be found at http://www.retireearlyhomepage.com/

Question 1 answer - the presumption is that you start with say, $1M, and
may have a first year withdrawal of $40,000. The next year, you may
withdraw $41,200 regardless of what the market does. The studies were
based on Monte Carlo analysis and going through 'worst case' scenarios.
Tinkering, say adding the rule "do not take an inflation adjustment
after a down year", will allow a slight increase to the initial
withdrawal rate.

Question 2 answer - No. I can write a spreadsheet which adjusts for
inflation to the desired withdrawals by X% per year, but has a fixed
annual % increase to portfolio. As you proved, an average 8% per year
forecast has issues with a series of bad years as occurred in the 70s
and early 00s. I don't know of a spreadsheet function that can handle
that type of random generation. Although I suppose you could create
pseudo-random numbers based on an 8% average and 14% standard deviation,
and then, after creating a series of 30 long number sequences, feed
those into the spreadsheet.

The math needed to save is far easier (to me). I need 20 times my annual
withdrawal needs, and can do the math using certain assumptions. Each
year, I adjust my assumptions a bit. For example, my 10 year return
forecast is for 8% growth, lower than the historical 10%, due to
multiple factors. I don't calculate how much I'll retire with, that
number is fixed. I calculate at what age I'll hit that goal, and I watch
that date move out in a bad year, and get accelerated in a good one.
JOE

- quote -

That complicated math gets me every time (payment/interest rate=
principal amount needed).

2 Questions on PV type calculations (which assume draw down of
principal)-

1) Does the withdraw rate in a PV calculation take into account
portfolio growth between the periods of withdraw?

Meaning I draw down 3% in year 1, then portfolio increases 6% and I
withdraw 3%+ inflation index.

2) Is their a simple spreadsheet function to allow for portfolio
percentage withdraw increases (each period increases amount withdraw by
1%, for example).

Thank you

"DFIGTREE" <david.Feigenbaum[at]verizon.net> wrote
- quote -

Why do you say this, and with the emphasis "in a hurry"?

Especially after reading this person's other posts, s/he
seems quite competent at managing his/her own portfolio.

sligorm[at]yahoo.com wrote:
- quote -

Any suggestions? You need a fee-only financial planner in a hurry.
How's your estate planning?

Good luck,
Dave

"jIM" <noreplysoccer[at]hotmail.com> wrote in message
news:1158972237.272762.160990[at]h48g2000cwc.googlegroups.com...
- quote -

Well, if they say 4% is the safe withdrawal rate, then it should be safe to
take only $40k annually from a $1 million portfolio. No? If you need $75k,
then, by this theory, you should have a portfolio worth about $1,875,000. Of
course this is just ball parking it. I only used a regular calculator. I'm
sure with a spreadsheet you could get a little closer.

Elizabeth Richardson

- quote -

The risk is you don't know next year's return when the decision is to
be made (take gains out or leave them in). 73 and 74 would be definite
no's, taking two years cash out in 75 would still deplete a portfolio
quite a bit.

assume 75k needed each year in income

$1,000,000 down 14.31% is $857,000
$857,000 down 25.9% is $635,000

$635,000 increases to 870,000
take out $215,000 (3 years expenses)
down to $655,000

Not sure is 1,000,000 portfolio is "large enough" to generate a 75k
income stream using any technique, I'd think so, but I don't have all
my financial spreadsheets on this computer to look. The portfolio is
2/3 of its start value after 3 years. That appears to be weak.

thoughts?

joetaxpayer wrote:

- quote -

Joe, this is the *arithmetic* average. The S&P was at 31.3 in September
of 1929. It didn't return to that level until September of 1954. If
you adjust for dividends, you get back to even by January of 1945, for a
whopping 0% annualized return over the course of 15 years.

-Will

Will Trice wrote:

- quote -

Will, see http://www.moneychimp.com/articles/r...me_horizon.htm
and enter 1929 - 1945
You get 7.2% annual return.
You need to quit in 42 to drag it down to 2.9%.

And the CPI barely budged during this timespan. (17.1 in 1929, 17.8 in 1945)
JOE

joetaxpayer wrote:

- quote -

Well, even adjusting for dividends you have the 1929 - 1945
crash/recovery...

-Will

The Guy wrote:

- quote -

The 70's got an undeserved bum rap. These are the returns of the S&P
with dividend yields added back in. The annualized return is about 5.8%
per year. Admittedly, it didn't keep pace with inflation, just
underperforming. When jIM's plan is run through these returns, he comes
out just fine, the two killer year are sandwiched between two pair of
two good years. (and he replenishes cash only after good years). And
lest one think himself bright enough to time the market, he likely
misses some or all of the 75/76 recoveries.

70 3.56
71 14.22
72 18.76
73 -14.31
74 -25.90
75 37.00
76 23.83
77 -6.98
78 6.51
79 18.52


JOE

In article <1158935155.639295.181020[at]b28g2000cwb.googlegroups.com> ,
"jIM" <noreplysoccer[at]hotmail.com> wrote:

- quote -

Seven years as the worst case seems a reasonable assumption but as I
recollect the down market lasted more than that in the '70s...maybe 10
yrs was it? ...hopefully it won't happen again in our livetimes.
--
Chainyanker

Your approach
- quote -

I think the higher withdraw rate might have more to do with concept
this requires "more assetts". If you can come up with numbers to
prove/disprove this, let me know.

- quote -

Being an engineer as well, I like numbers. I like spreadsheets (and my
wife dreads them). Most of the rules I see/read are based on withdraw
rate, or amount of overall principal. Some rules go further into
allocation, but few rules take into account what happens with a bad
year, or a bad period of 3-5 years. This is where I am spending most
of my thinking and analysis for myself.