[Caymus]

Originally Posted by manaboutown

I have been reading the book and am about half way through. The book contains many graphs which illustrate when one retires makes a huge difference in how large safe withdrawals may be. The higher the Shiller CAPE at retirement the lower the safe withdrawal percentage. Right now we are off the charts on the high side of the Shiller CAPE so there is no historical data he could analyze (page 38).

BTW Bengen's chosen optimum portfolio is 55/40/5 - equities/bonds/cash.

I downloaded the book for free with Hoopla. Looks like a "hard" read.

[manaboutown]

Originally Posted by Caymus

I downloaded the book for free with Hoopla. Looks like a "hard" read.

That was my first impression which is why I put the book aside until I was ready to tackle it.

Surprisingly, his analyses turns out to be fairly easy to follow and understand. He greatly simplifies by ignoring all tax ramifications. He treats taxes as budget items when they arise from IRA distributions and taxable accounts. He thereby essentially ignores them which is not a bad approach as taxes significantly vary from individual to individual as well as from time to time for every person.

"Portfolio tax rates have a dramatic effect on SAFEMAX". Page 91. SAFEMAX is Bengen's acronym for safe maximum withdrawal rate.

[manaboutown]

Well, I finished reading Bengen's book. In a nutshell, maintaining his prescribed asset allocation is the key to both optimizing and stabilizing one's safe maximum withdrawal rate. My asset allocation has drifted to 70-30 stocks/bonds&cash, well away from his model as the stock market has been on an upward tear.

[CoachKandSportsguy]

Originally Posted by manaboutown

In a nutshell, maintaining his prescribed asset allocation is the key to both optimizing and stabilizing one's safe maximum withdrawal rate. My asset allocation has drifted to 70-30 stocks/bonds&cash, well away from his model as the stock market has been on an upward tear.

First, one can only backtest any asset allocation against known history. As long as history is similar to the past, which has a long track record of forging new paths, his allocation will work. .

Second, the stock market has no control group, and no counter factual, the future will be what the future will be regardless of the past, so IMHO, your equity position is too high, even though the current valuation feels very comfy and smart. .

of course, my opinion could be very wrong for a long time, or could be right sometime in the next X years, or both. . . having lost everything once in the stock market, I play much more risk adverse, and may not make a huge return, I just refuse to go backwards any significant amount. . . I have just seen a few people who have had very large amounts of money get very complacent or unable to sell, and have lost a substantial amount of money eventually. .

good luck. .