Welcome to Early Retirement Planning Insights.
Even before the October 2008 meltdown, my latest research had lifted the Safe Withdrawal Rate to 6%.
Welcome to Early Retirement Planning Insights.
This site contains cutting edge research related to retirement investment planning.
At this site, we find out how different approaches affect safe withdrawal rates. Safe withdrawal rates tell us how much money retirees can withdraw from their investments with a high degree of safely. Safe withdrawal rates describe what is likely, looking forward. Safe withdrawal rates are best described in terms of probabilities and statistics.
Most of the time, we determine safe withdrawal rates after looking at what would have survived historically. Safe withdrawal rates are similar to historical surviving withdrawal rates, but they are not the same. Everything related to what would have survived historically is part of the past. It is already known. Safe withdrawal rates look into the future.
We determine safe withdrawal rates by making mathematical calculations. We learn from safe withdrawal rates by looking for cause and effect and by making sensitivity studies. We look at safe withdrawal rates from many perspectives, each based on historical data, but each with its own emphasis.
I am careful to use an analytically valid methodology. Earlier researchers attempted to present their findings in a way that avoided probability and statistics. Their attempts have failed. Such methods end up creating a new set of problems, which are much worse than those associated with probability and statistics.
These studies provide us with powerful insights that assist us with our early retirement planning.
I place my greatest emphasis on retirement investments during the distribution stage. But I look at accumulation as well. Both are important.
Take advantage of the Guidelines section. It will help bring you up to speed.
Be sure to read my article: Building Blocks. It ties everything together.
Visit the Foundations section for a theoretical overview. Check the Notes section for my reference regarding statistics.
I introduce new articles in the Notes section. Take advantage of the Notes Index to locate topics of interest.
All of this will assist you with your early retirement planning.
I have included the Stock-Return Predictor. It calculates the Most Likely future stock market return at Years 10, 20, 30, 40, 50 and 60. It includes confidence limits. The Stock-Return Predictor has a slider for you to enter P/E10. After you press CALCULATE, it displays the corresponding S&P500 index level (for today’s level of earnings) as well as stock returns.
[I have found Professor Robert Shiller’s P/E10 to be the best single measure of valuation so far. It is the current (real) price of the S&P500 index level (price) divided by the average of the most recent (trailing) ten years of (real) earnings.]
Press the Year 15 SWR and Year 30 SWR buttons on the left. They present a full picture. They show the likelihood of success at different withdrawal rates. You will be able to choose Year 15 and 30 portfolio balances other than zero. Combine this with the Stock Returns Predictor and the TIPS Table to plan for extended retirements.
I have developed an SWR (Safe Withdrawal Rate) Translator. It uses the historical sequence method to generate the kind of information that comes from Monte Carlo models. As with a Monte Carlo model, you put in your assumptions as to how well the market will perform and it tells you how likely your approach will succeed.
Rob Bennett (PassionSaving.com) and I have pooled our resources to build the Scenario Surfer. It is an advanced Monte Carlo simulation that allows you to refine your skills at all stages: accumulation, approaching retirement and during retirement.
Rob Bennett (PassionSaving.com) and I have pooled our resources to build the Investment Strategy Tester. It automates the Scenario Surfer.
Never rely on numbers alone. You should use our numbers to identify cause and effect and to determine sensitivities. Temper your actions from what you learn from sensitivity studies.
I pay a lot of attention to what happens when we insist upon a high level of safety. This does not mean that you must restrict yourself to using the safest approaches. Rather, you should make your choices based upon what is best for you and your own needs. I provide information to help you make knowledgeable decisions. I do not demand that you follow any of my solutions. Use numbers as an aid. Never let them become a master.
Use my email to make feedback. Never hesitate to ask.
John Walter Russell*