Thank you for another great video. I found a late 2021 interview with Bill Bengen on Morningstar website. He discusses the CAPE (equity valuations) and the addition of factoring in inflation with the CAPE. Which then feeds into a withdrawal rate. And of course this is all based on history. Back in late 2021, the CAPE was high and inflation was revving up. He still does research today. He also buys asset allocation guidance (risk management) from a third party. It's an interesting read.
Bengen’s model used 1966 because that was a worst case scenario. His thinking was if you could survive that retirement timeframe you could survive any by taking approximately 4% from your portfolio. I didn’t go back and listen again so I’m not sure if you mentioned that the 4% only applies to the first year. Thereafter the amount you withdraw is adjusted for inflation in each subsequent year.
A year after retirement, my Large 100% C fund TSP (we have high risk tolerance from large pensions and 3+ year's worth of emergency money) has recovered nicely from the inflation bear market and is near its all time peak. So I figure it's a good time to start installments. I calculated 6% divided by 12 for my fixed monthly installments, no yearly inflation adjustment, stay in the C fund. It should last 30+ years if the C fund averages just 6% long term (has averaged about 10-11% depending on date range). Not touching my wife's 401k or my brokerage account, so they might double in size in 10-15 years. My 6% fixed does not adjust for inflation, so easy set it and forget it, steady lifetime income, and retirees tend to spend less as they get older. Worst case scenario and there is the Great Depression 2.0, I can immediately shut off installments and live off huge cash reserves. No debt, loans, or mortages.
@frankofva8803 Indeed! Although apply 4% to subsequent years as well, given sequence of returns in following years combined with interest rate environment.
@@TheFedCorner some guard rails in any scenario is important. I don’t believe any investor sticks to the same plan religiously throughout retirement. Common sense and flexibility are the watchwords. Thanks for your channel.
@@TheFedCorner Not that aggressive really. I retired a year ago as a federal physician at 30 years service plus 1.1 year of unused sick leave conversion so basically getting 31.1% of my working salary (I hit the salary cap and made as much as the President of the Untied States my last 3 years) and about 50% of my working take home pay because of far fewer deductions, withholding, and contributions. During my working years, I maxed out my Thrift Savings Plan contributions and received one-to-one agency matching up to 5% of my salary. So if I contributed 5% of my salary, the government contributed another 5% of my salary. I set my TSP account at 100% C fund (S&P 500 equivalent) decades ago, never got out or stopped contributing, and rode out every recession and bear market. The S&P 500 has always bounced back. My TSP total peaked at $3.2M, took a hit with the recent inflation bear market (Biden is the Worst President EVER!), but is up past $3M again, so good time to start installments. Not that aggressive because the S&P 500 is diversified over different sectors and 500 top companies, although with reallocations it is becoming the NASDAQ (but then again the future is in technology). I never owned individual stocks. My father only did individual stock day trading and lost everything about 3 times. THAT is aggressive....and stupid.
That can work in theory, but if you have cashflow needs when markets are down, then that can be tough to not touch your portfolio at all. Thanks for tuning in!
@@TheFedCorner I’m a big believer in cash buckets I have 4 to 6 years in a HSA accounts where I would not need to touch when down, thanks for the videos
