Author Topic: Anyone using McClung's 'Living off your money'?  (Read 7889 times)

spokey doke

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Anyone using McClung's 'Living off your money'?
« on: September 23, 2017, 12:00:56 PM »
I've been reading McClung's book "Living off your money" and find it to be very compelling in providing a comprehensive set of strategies for...err...living off your money after you retire.  Aside from the black hole that is the future of health care coverage in the U.S., just how to make the best use of my stache throughout retirement was the biggest question and source of anxiety for me.  I'm psyched to be getting some well supported and illustrated answers.

I'd love to hear of other people's experiences using his recommended tools (or how you chose among the tools he reviews).

RecoveringCarClown

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Re: Anyone using McClung's 'Living off your money'?
« Reply #1 on: November 11, 2017, 12:28:23 PM »
Never heard of it, suggest you post a one paragraph book review to entice others to read it?  It should answer the question of what makes it different, say compared to all the typical draw down strategies.

NaturallyHappier

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Re: Anyone using McClung's 'Living off your money'?
« Reply #2 on: November 11, 2017, 07:34:27 PM »
I read what I could on Amazon preview and I am intrigued.  My library does not carry it.  I might have to buy it.

spokey doke

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Re: Anyone using McClung's 'Living off your money'?
« Reply #3 on: November 13, 2017, 10:06:39 AM »
Never heard of it, suggest you post a one paragraph book review to entice others to read it?  It should answer the question of what makes it different, say compared to all the typical draw down strategies.

this should do serve that purpose well:

https://www.bogleheads.org/forum/viewtopic.php?t=192105

NaturallyHappier

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Re: Anyone using McClung's 'Living off your money'?
« Reply #4 on: November 13, 2017, 07:29:42 PM »
spokey doke.  You made me spend money on a book for the first time this year.  I read what I could on the Amazon preview and then bought the book.  It comes Wednesday.  Can't wait to continue reading it.

spokey doke

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Re: Anyone using McClung's 'Living off your money'?
« Reply #5 on: November 19, 2017, 11:54:05 AM »
Good to hear (that you will be reading it)...I'm inclined to put it into practice when the time comes, but would like to hear about other's experience doing so...

less4success

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Re: Anyone using McClung's 'Living off your money'?
« Reply #6 on: November 20, 2017, 10:33:45 PM »
I haven't read that book yet, but I was intrigued after reading a very positive review on Monevator:
http://monevator.com/review-living-off-your-money-by-michael-mcclung/

There was also a very brief discussion in the book club:
https://forum.mrmoneymustache.com/mustachian-book-club/living-off-your-money/

Rubic

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Re: Anyone using McClung's 'Living off your money'?
« Reply #7 on: November 21, 2017, 07:48:27 AM »
You can download the first 3 chapters from the link off his website:

 http://livingoffyourmoney.com

CowboyAndIndian

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Re: Anyone using McClung's 'Living off your money'?
« Reply #8 on: November 21, 2017, 09:42:46 AM »
You can download the first 3 chapters from the link off his website:

 http://livingoffyourmoney.com

Thanks. That is good reading. Seriously considering buying this book

spokey doke

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Re: Anyone using McClung's 'Living off your money'?
« Reply #9 on: November 21, 2017, 11:39:53 AM »

There was also a very brief discussion in the book club:
https://forum.mrmoneymustache.com/mustachian-book-club/living-off-your-money/

Doh...forgot there was a book club forum...I was thinking this was a good place to draw people who are in retirement, practicing some sort of draw-down strategy (let's see what happens...)

steveo

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Re: Anyone using McClung's 'Living off your money'?
« Reply #10 on: November 25, 2017, 08:56:01 PM »
I've been reading this and it really makes sense to me. The problem is that now I think I have too high a stock percentage in my asset allocation.

justchristine

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Re: Anyone using McClung's 'Living off your money'?
« Reply #11 on: November 26, 2017, 05:00:07 AM »
I've been reading this and it really makes sense to me. The problem is that now I think I have too high a stock percentage in my asset allocation.

I just got the book yesterday and skimmed through it.  It all seems well thought out and reasonable but the asset allocation seems a little off for a long retirement.  I'm going to need to reread it a few times and do some more research

spokey doke

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Re: Anyone using McClung's 'Living off your money'?
« Reply #12 on: November 26, 2017, 09:20:02 AM »
I've been reading this and it really makes sense to me. The problem is that now I think I have too high a stock percentage in my asset allocation.

I just got the book yesterday and skimmed through it.  It all seems well thought out and reasonable but the asset allocation seems a little off for a long retirement.  I'm going to need to reread it a few times and do some more research

I need to go back through it again too on this point, as that was one of the few things that stood out as not making sense to me on its face (that is, a relatively low equities allocation).

MarcherLady

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Re: Anyone using McClung's 'Living off your money'?
« Reply #13 on: November 26, 2017, 02:08:31 PM »
Yes, I'm working through it at the moment.  The Excel sheet is going to be useful, I think.

I'm at the Tilt chapter (9 - Picking the initial withdrawal rate) at the moment - I'm going to have to read that one a couple more times, I think, before it really sinks in enough to evaluate it for my use. 

I think that one challenge between the book and MMM philosophy is the length of retirement periods included - 40 years seems to be the highest he really considers, which, given increased longevity doesn't seem long enough for a Mustachian retirement.

steveo

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Re: Anyone using McClung's 'Living off your money'?
« Reply #14 on: November 28, 2017, 01:39:10 AM »
I think the asset allocation makes sense. The idea is to use Bonds as a buffer against selling stocks in down markets. It's also backed up by facts - i.e. analysis of historical data.

spokey doke

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Re: Anyone using McClung's 'Living off your money'?
« Reply #15 on: November 28, 2017, 08:14:19 AM »
I think the asset allocation makes sense. The idea is to use Bonds as a buffer against selling stocks in down markets. It's also backed up by facts - i.e. analysis of historical data.

Yes, it is just that the recommended range seems a bit lower than a number of current analyses of available data suggest (esp. for longer retirement periods).  Not THAT out of line, but lower stock allocations in the 55-60% range for me.

Then again, it is interesting to spend time on Bogleheads where some talk about 100% equities, and many seem to be in the 70-80% range...but then go back to threads that discuss AA back in 2008-09 and the most common allocations I see mentioned are at or close to 50/50.  Recency effects may explain much of this, as much as new analyses...

CowboyAndIndian

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Re: Anyone using McClung's 'Living off your money'?
« Reply #16 on: November 28, 2017, 09:41:08 AM »
I think the asset allocation makes sense. The idea is to use Bonds as a buffer against selling stocks in down markets. It's also backed up by facts - i.e. analysis of historical data.

Come to think about it, the method that Dr. Doom suggests (CD Ladder and cash) could be quite similar to the bonds here. (https://livingafi.com/2014/05/18/drawdown-part-3-strategy/)

Mutual Funds -> 2-year laddered CD portfolio -> 1 year Cash Account

In the McClung method, you do not use CD or cash account, but would keep 3 years of your money in Bonds. Assuming 4% rule, that may be only 12% of your portfolio. If your asset allocation before retirement had 20% bonds, then you would have a 32% of bonds in retirement.

PS: I have read the free sampler on his website. Have not read the whole book.

steveo

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Re: Anyone using McClung's 'Living off your money'?
« Reply #17 on: November 28, 2017, 03:13:57 PM »
McClung doesn't suggest any time period to be in bonds. It's a range from 50% stocks through to 65% stocks in relation to expected retirement period and investing more aggressively. The higher stock percentage is based though on a 90% successful WR and a longer time period in relation to being retired.

I'm thinking of upping the stock percentage to 70% but following the same basic pattern.

I like this book a lot because it describes basically everything post retirement whereas most studies in my opinion are a little simplistic. They typically focus on a fixed withdrawal percentage and retaining your asset allocation as is pre and post retirement.

The book describes:-

1. Asset allocations.
2. The process of withdrawing from various assets. Basically only withdraw from stocks if stocks are up unless you have no bonds left. You can sell stocks but never buy stocks and you only sell if they are up 120% with the idea to replenish the bond portfolio.
3. A flexible withdrawal amount.

The only point I'd make is that all of those pieces only increase the maximum SWR from say 4% to 4.5% however I am pretty sure that this is based on 100% success rate. He also only really considers stocks and bonds as asset classes.

Still this in my opinion is better than all the other analysis that I've seen on the topic.
« Last Edit: November 28, 2017, 05:06:49 PM by steveo »

frompa

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Re: Anyone using McClung's 'Living off your money'?
« Reply #18 on: December 03, 2017, 07:28:17 PM »
Thanks for suggesting this one.  I read what I could (first 108 pages) and am awaiting my copy of the book.  (I couldn't get this from our library, unfortunately.)  I'll be interested in continuing the discussion after I've read the entirety.  I'm finding it helpful to have some solid info to figure out our own next steps, having relatively recently left the cash-generating portion of our lives. 

Doubleh

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Re: Anyone using McClung's 'Living off your money'?
« Reply #19 on: December 04, 2017, 06:57:31 AM »
My takeaway from reading the free chapters was pretty much that the method he suggests felt somewhat involved and probably wasn't what I would follow in detail. But the analysis that got him there was very detailed and extremely useful.

It showed that some methods pretty consistently work better than others - from memory some of the bucket type methods that are often touted did quite poorly, while a simple stocks / bonds % allocation with annual rebalancing worked pretty well.

I think he also tries to formalise some sort of rule based approach to setting a floor & ceiling for varying withdrawal rate, which is a useful idea to think about. I suspect most here will pretty much end up doing this to an extent - I can't imagine many people will continue to spend exactly their inflation adjusted 4% into the teeth of the next market crash - so thinking about ways to formalise that variability seems well worthwhile.

spokey doke

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Re: Anyone using McClung's 'Living off your money'?
« Reply #20 on: December 04, 2017, 07:55:20 AM »
My takeaway from reading the free chapters was pretty much that the method he suggests felt somewhat involved and probably wasn't what I would follow in detail. But the analysis that got him there was very detailed and extremely useful.

It showed that some methods pretty consistently work better than others - from memory some of the bucket type methods that are often touted did quite poorly, while a simple stocks / bonds % allocation with annual rebalancing worked pretty well.

I found the comparisons using commonly recommended strategies pretty eye opening too...BUT...rebalancing did not fare so well (and that was one of the surprises). IIRC, he seems to refer to it as a prime example of how the conventional wisdom is not so wise...

kaizen soze

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Re: Anyone using McClung's 'Living off your money'?
« Reply #21 on: December 13, 2017, 01:58:22 PM »
I've read the first three chapters, which are free.  I think the book is pretty rigorous in terms of back-testing his recommended income harvesting strategy using different data sets.  I do see some potential issues for early retirees, and wonder if others have similar concerns.

First, the recommended prime harvesting strategy has you periodically sell 20% of your stocks and buy bonds. You do this when your stock portfolio grows to over 20% of its inflation-adjusted starting point.  This will result in an occasional large sale of stocks, and it seems like it would be tax-inefficient.  You might do this within your 401k, IRA, or other tax-sheltered account. But the point is to use bonds to fund annual income withdrawals, which you can't do from your 401k if you're an early retiree.  The author states that he doesn't believe that tax considerations will drive choice of income harvesting method, but does not back that up.  It seems to be an assumption that he makes, which may be a good one for all I know. I'm not a CPA. Maybe you can smooth out such large income variations under the tax code somehow. 

Second, the author specifically states that he is looking for a harvesting strategy that maintains income, but not necessarily portfolio growth over a 30-year retirement period.  He recommends the prime income harvesting method based on this assumption.  But this may be a poor assumption if you're an early retiree. If all goes well, after 30 years you will have another 30-year retirement to fund.  Some of the surveyed income harvesting methods showed a lower SWR, but higher average ending balance after 30 years.  An early retiree might be better off with one of those methods.

Still considering buying the book, these are just my initial thoughts.

gerardc

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Re: Anyone using McClung's 'Living off your money'?
« Reply #22 on: December 15, 2017, 09:55:54 PM »
I'm surprised, this looked like yet another typical superficial book on intuitive retirement spending, but from skimming the table of contents it seems solid, deep and detailed.

2Birds1Stone

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Re: Anyone using McClung's 'Living off your money'?
« Reply #23 on: December 15, 2017, 10:02:36 PM »
I own a physical copy of the book, was hooked after the first three chapters which are free in PDF on his site.

It's excellent material if you are interested in this topic, whether or not you chose to implement the strategy the information is VERY valuable.

gerardc

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Re: Anyone using McClung's 'Living off your money'?
« Reply #24 on: December 15, 2017, 11:34:50 PM »
The author has a Bachelor's and Master's in Computer Science, I could tell from his writing style!

I read some of the free chapters. His survey of fixed withdrawal strategies is really great, even better than published research I could find. Basically with his prime harvesting strategy he can up the SWR from 4% to 4.5-5% for an equivalent success rate, simply by moving around stock allocation! That's pretty impressive.

I'm curious about what he says about variable withdrawal strategies, how to evaluate them, and what WR% he can roughly get.
But $40 for a book, I don't think so.

NaturallyHappier

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Re: Anyone using McClung's 'Living off your money'?
« Reply #25 on: December 16, 2017, 05:54:30 PM »
The author has a Bachelor's and Master's in Computer Science, I could tell from his writing style!

I read some of the free chapters. His survey of fixed withdrawal strategies is really great, even better than published research I could find. Basically with his prime harvesting strategy he can up the SWR from 4% to 4.5-5% for an equivalent success rate, simply by moving around stock allocation! That's pretty impressive.

I'm curious about what he says about variable withdrawal strategies, how to evaluate them, and what WR% he can roughly get.
But $40 for a book, I don't think so.

This is a great book.  He uses the same analytical approach to evaluate withdrawal strategies.  It is well worth the $40.00.  I read it once and I am rereading now and working on setting up my plan. 

Even if you reach different conclusions because your goals are a little different (this is my case and probably the case of most early retirees), working through the process of evaluating the options will help you think about the options more clearly and come to more rational decisions on what strategies are right for you.  It was an eye opener for me.

gerardc

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Re: Anyone using McClung's 'Living off your money'?
« Reply #26 on: December 16, 2017, 06:25:24 PM »
Care to give a summary of the variable withdrawal strategies chapter, and recommendations for WR?

gerardc

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Re: Anyone using McClung's 'Living off your money'?
« Reply #27 on: December 18, 2017, 11:24:04 PM »
Care to give a summary of the variable withdrawal strategies chapter, and recommendations for WR?

Nevermind, I found this :D
https://github.com/hoostus/prime-harvesting/blob/master/withdrawal/mcclung.py

Also the book is available as a PDF for $35:
https://gumroad.com/l/wJoW

MgoSam

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Re: Anyone using McClung's 'Living off your money'?
« Reply #28 on: December 19, 2017, 01:54:53 PM »
I want to read it based off the reviews I've read and the fact that people here are buying it, but I can't see myself paying more than $25 for a book. I would love to borrow anyone on here's copy if I may?

dragoncar

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Re: Anyone using McClung's 'Living off your money'?
« Reply #29 on: January 02, 2018, 04:21:42 PM »
Sign me up for the inter-mustachhian loan system.  Interested in reading more about the underpinnings of the strategy