Author Topic: WSJ Retirement Section -- WTF?  (Read 7239 times)

dude

  • Handlebar Stache
  • *****
  • Posts: 2353
WSJ Retirement Section -- WTF?
« on: October 29, 2014, 10:14:24 AM »
Their retirement "Ask the Experts" section is a litany of "why you shouldn't retire early" advice:

http://blogs.wsj.com/experts/category/retirement/

Check out this one from Alicia Munnel (who's a pretty big name in the retirement biz):

http://blogs.wsj.com/experts/2014/10/14/before-retiring-early-ask-yourself-this-simple-question/

Selected quote:
"So unless you are very rich, you should not even think about withdrawing from the labor force at 55 or 60, much less before!"

RFAAOATB

  • Pencil Stache
  • ****
  • Posts: 576
Re: WSJ Retirement Section -- WTF?
« Reply #1 on: October 29, 2014, 10:35:46 AM »
What is WSJ's motivation against retiring early?  As the 45+ set leaves the workforce, would they not open up space for ambitious young blood who can put more vigor into their jobs?

Is it that the middle aged are prime consumers and transitioning to a retirement lifestyle would put a damper on that? 

gimp

  • Handlebar Stache
  • *****
  • Posts: 2348
Re: WSJ Retirement Section -- WTF?
« Reply #2 on: October 29, 2014, 10:43:28 AM »
What is WSJ's motivation against retiring early?

Owned by fox news.

Left

  • Handlebar Stache
  • *****
  • Posts: 1159
Re: WSJ Retirement Section -- WTF?
« Reply #3 on: October 29, 2014, 10:44:56 AM »
I just don't get the working more = bigger 401k argument. Yes, I get it gets bigger... so does not withdrawing it right away. Unless the company match is very good, if you don't withdraw from it, it would only grow additionally between $17500 and 52k (contribution limit). By retirement time, I'm hoping the 401k is growing more than the contribution limit on it's own. So leaving it alone for a few years would also accomplish the same thing

forestbound

  • Stubble
  • **
  • Posts: 245
  • Location: midwest
Re: WSJ Retirement Section -- WTF?
« Reply #4 on: October 29, 2014, 12:05:59 PM »
Wow a whole page of "Negative Nancys" on WSJ! Really??!!

Louis the Cat

  • Stubble
  • **
  • Posts: 109
  • Age: 37
  • Location: Front Range Area, CO
Re: WSJ Retirement Section -- WTF?
« Reply #5 on: October 29, 2014, 12:13:41 PM »
Well, Munnel starts off with this:

I would ask, “Have you really put aside enough money to support yourself for 35 or 40 years?”

If so, go ahead: Play golf, go fishing, do whatever you want. But my suspicion is that most people would say, “No, I haven’t saved that much,” in which case retiring early is a foolish thing to do.


I think everyone here would agree with this.

Lizzy B.

  • Stubble
  • **
  • Posts: 116
  • Location: Texas
Re: WSJ Retirement Section -- WTF?
« Reply #6 on: October 29, 2014, 01:57:10 PM »
What is WSJ's motivation against retiring early?  As the 45+ set leaves the workforce, would they not open up space for ambitious young blood who can put more vigor into their jobs?

I'm a regular reader of the WSJ thanks to some airline miles I had no better use for. The focus on early retirement is pretty recent and probably a sign that "our kind" is getting more well known.  I'm not sure their negative comments towards RE have an agenda. The two recent articles discouraging RE aren't "articles". They're guest contributions from financial advisors who probably don't see frugal types very often.  As we keep seeing with each new "Americans haven't saved enough for retirement" study, few people have taken sufficient care of their finances to be in a position to RE.  Those advisors are probably speaking to the masses, not the mustachioed. :-)

HairyUpperLip

  • Pencil Stache
  • ****
  • Posts: 897
Re: WSJ Retirement Section -- WTF?
« Reply #7 on: October 29, 2014, 02:28:08 PM »
"And the notion that they may start a business or do something entrepreneurial is excessively optimistic given that so many small-business efforts fail."

I do kind of agree with that comment though. I think it's interesting how many people on here hope to start a blog to help with ER, but honestly most of the blogs suck and get boring quickly.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6256
  • Location: BC
Re: WSJ Retirement Section -- WTF?
« Reply #8 on: October 29, 2014, 02:36:32 PM »

Help me out with this:  From the first article on the link...

The 4% rule doesn’t apply to early retirees, because that rule of thumb is specifically calibrated to retirements lasting 30 years at most.

For that reason, and also because early retirees will need a larger contingency fund to deal with a greater range of unexpected expenses over a longer planning horizon, early retirement will require a more conservative withdrawal strategy in order to ensure that financial assets can be sustained.


Huh?   I thought the average return after inflation was 5.6%, so using 4% was conservative and allowed for slightly lower returns in the early years when it could be a disaster....  why on earth is it saying that it is only for a 30 year horizon or less?


senecando

  • Bristles
  • ***
  • Posts: 486
  • Age: 29
  • Location: Madison, Wi
Re: WSJ Retirement Section -- WTF?
« Reply #9 on: October 29, 2014, 03:01:57 PM »

Help me out with this:  From the first article on the link...

The 4% rule doesn’t apply to early retirees, because that rule of thumb is specifically calibrated to retirements lasting 30 years at most.

For that reason, and also because early retirees will need a larger contingency fund to deal with a greater range of unexpected expenses over a longer planning horizon, early retirement will require a more conservative withdrawal strategy in order to ensure that financial assets can be sustained.



Huh?   I thought the average return after inflation was 5.6%, so using 4% was conservative and allowed for slightly lower returns in the early years when it could be a disaster....  why on earth is it saying that it is only for a 30 year horizon or less?

It's about sequence of returns. If average is 50 percent returns (it's not), and the first year is zero and the second year is a hundred, you're boned.

The original study that we get the number from, I think, was for thirty year periods, because that is what's common. It looked at rolling 30 year periods of retirement, and anything below 4.something left you with cash at the end.

However,

Quote
Assuming starting wealth of $100, it is in fact true that final wealth is still over $100 in about 96% of the scenarios; in only 3 instances is wealth lower than the $100 starting amount, including 1937, 1968, and 1969 (the latter being the scenario when the account winds down to $0 by the end, and is thus why ~4.5% is the "safe" limit). On the other hand, as mentioned earlier, in almost 96% of the remaining cases, final wealth is at least $100. In fact, the median wealth level after 30 years is a whopping $460! That's right, 50% of the time you do your lifetime spending at a 4.5% withdrawal rate, and more than quadruple your account balance on top of it!

More information is here. (The above quote isn't counting inflation yet.)

More people here know more about this than I do.

sirdoug007

  • Pencil Stache
  • ****
  • Posts: 587
  • Age: 38
  • Location: Houston, TX
Re: WSJ Retirement Section -- WTF?
« Reply #10 on: October 29, 2014, 03:56:06 PM »
What crap.  These articles basically say it is impossible to have enough.  There is always more you NEED.  Then they come up with reasons you can't possibly have enough. 

The 4% rule is based on the absolute worst 30 year scenario in the about the last 84 years.  So the odds of hitting that scenario around 1%.  It's pretty damn conservative. 

No consideration of ability to earn money after retirement, social security, or adjust spending down in a bad recession.

The fact is there is such a thing as enough and you don't' have to be "very rich" by WSJ standards to do it.

Little Nell

  • 5 O'Clock Shadow
  • *
  • Posts: 82
Re: WSJ Retirement Section -- WTF?
« Reply #11 on: October 29, 2014, 09:09:09 PM »
Cui bono? Money managers want more money to manage.

vern

  • Pencil Stache
  • ****
  • Posts: 573
Re: WSJ Retirement Section -- WTF?
« Reply #12 on: October 30, 2014, 12:42:40 AM »
Selected quote:
"So unless you are very rich, you should not even think about withdrawing from the labor force at 55 or 60, much less before!"

Too late!

Holyoak

  • Bristles
  • ***
  • Posts: 447
  • Age: 52
Re: WSJ Retirement Section -- WTF?
« Reply #13 on: October 30, 2014, 04:12:57 AM »
Yeah, amazing how far we have become from need and want...  Good Lord, I rent a beautiful home, eat good nutritious food, have water/electricity/gas at my fingertips, and freedom to do about anything I wish...  I have a level of luxury kings could not have imagined just a few generations removed, and should kiss the ground that I was fortunate enough to be born into and live in a rich nation.  Oh yeah, I do all of this on about $19k/year. 

Good old "scare the shit outa you" reporting, and "real" retirement means keep at that soul killing job, then it's bloated luxury vacations, you better be doing something but "wasting" your time fishing, be fully entertained AT ALL TIMES, buy a goddamn uber pretentious luxury home and clown car because you deserve it, and continue by all means to spend, spend, spend.  Eff the WSJ, and the shell of their former selves. 

odput

  • Bristles
  • ***
  • Posts: 414
  • Age: 34
  • "I reject your reality and substitute my own"
Re: WSJ Retirement Section -- WTF?
« Reply #14 on: October 30, 2014, 08:58:54 AM »

Help me out with this:  From the first article on the link...

The 4% rule doesn’t apply to early retirees, because that rule of thumb is specifically calibrated to retirements lasting 30 years at most.

For that reason, and also because early retirees will need a larger contingency fund to deal with a greater range of unexpected expenses over a longer planning horizon, early retirement will require a more conservative withdrawal strategy in order to ensure that financial assets can be sustained.


Huh?   I thought the average return after inflation was 5.6%, so using 4% was conservative and allowed for slightly lower returns in the early years when it could be a disaster....  why on earth is it saying that it is only for a 30 year horizon or less?

It makes me really sad that Wade Pfau is lumped in with this nonsense, given that most people point to him as the withdrawal rate expert of recent years.  Surely he has enough that he doesn't need the pittance that WSJ is paying him to write such garbage?

For shame.

Elderwood17

  • Pencil Stache
  • ****
  • Posts: 525
  • Location: Western North Carolina
Re: WSJ Retirement Section -- WTF?
« Reply #15 on: October 30, 2014, 09:34:06 AM »
The definition of "very rich" is so key.  I love how MMM refers to his life of frugality as one of "luxury".  People don't want to realize we have great abundance and all our needs can be met with very little, relative to historic terms where you might have to forage all day just to eat.  My spend-aholic co workers think "very rich" means what the quote above likely is thinking of, that you can spend like crazy on whatever consumerist crap that comes out and still cannot run out of money.

frugalecon

  • Pencil Stache
  • ****
  • Posts: 532
Re: WSJ Retirement Section -- WTF?
« Reply #16 on: October 31, 2014, 06:30:08 PM »
Yeah, amazing how far we have become from need and want...  Good Lord, I rent a beautiful home, eat good nutritious food, have water/electricity/gas at my fingertips, and freedom to do about anything I wish...  I have a level of luxury kings could not have imagined just a few generations removed, and should kiss the ground that I was fortunate enough to be born into and live in a rich nation.  Oh yeah, I do all of this on about $19k/year. 

Good old "scare the shit outa you" reporting, and "real" retirement means keep at that soul killing job, then it's bloated luxury vacations, you better be doing something but "wasting" your time fishing, be fully entertained AT ALL TIMES, buy a goddamn uber pretentious luxury home and clown car because you deserve it, and continue by all means to spend, spend, spend.  Eff the WSJ, and the shell of their former selves.
+ 1 to this! The problem with the WSJ and such money publications are that when it comes to retirement they can't seem to phantom (or is that fathom - where are the Grammar Nazis when ya need them :-)) that people can not only actually live on less, but can be completely happy and fulfilled.  They make it sound like anything under a $100K/year income and you are destined to live in a hovel in some slummy part of the city eating cans of cat food you scrounged from the trash. They need to broaden their experience and realize that a nice life can be had on far, far less then they seem to think is needed.

Exactly. The U.S. Median household income is less than $55,000/year. [edited] Most people live on little. My parents live in a paid-off house with a boy $60,000, and they basically have whatever they want.

But the key is to realize who the WSJ's actual customers are. It's not the readers. It is the advertisers. There is no point in cultivating a readership of Mustachians, because they are not great targets for advertisers.

« Last Edit: October 31, 2014, 07:33:29 PM by frugalecon »

frugalecon

  • Pencil Stache
  • ****
  • Posts: 532
Re: WSJ Retirement Section -- WTF?
« Reply #17 on: October 31, 2014, 06:37:58 PM »
Their retirement "Ask the Experts" section is a litany of "why you shouldn't retire early" advice:

http://blogs.wsj.com/experts/category/retirement/

Check out this one from Alicia Munnel (who's a pretty big name in the retirement biz):

http://blogs.wsj.com/experts/2014/10/14/before-retiring-early-ask-yourself-this-simple-question/

Selected quote:
"So unless you are very rich, you should not even think about withdrawing from the labor force at 55 or 60, much less before!"

If I work until 60, my spouse and I should have pensions worth abou $80,000/year and over $2 million in financial assets, in today's dollars, plus a paid-off house. Would this qualify as rich enough to stop doing the 9-to-5 thing? Sheesh. Of course, I have colleagues who earn similar salaries who don't have two nickels to rub together.

gimp

  • Handlebar Stache
  • *****
  • Posts: 2348
Re: WSJ Retirement Section -- WTF?
« Reply #18 on: October 31, 2014, 07:21:43 PM »
To nitpick: median is around 50k, more like 53k, per household.

nawhite

  • Handlebar Stache
  • *****
  • Posts: 1057
  • Location: An RV somewhere in the West
    • The Reckless Choice
Re: WSJ Retirement Section -- WTF?
« Reply #19 on: November 01, 2014, 10:07:24 AM »

Help me out with this:  From the first article on the link...

The 4% rule doesn’t apply to early retirees, because that rule of thumb is specifically calibrated to retirements lasting 30 years at most.

For that reason, and also because early retirees will need a larger contingency fund to deal with a greater range of unexpected expenses over a longer planning horizon, early retirement will require a more conservative withdrawal strategy in order to ensure that financial assets can be sustained.


Huh?   I thought the average return after inflation was 5.6%, so using 4% was conservative and allowed for slightly lower returns in the early years when it could be a disaster....  why on earth is it saying that it is only for a 30 year horizon or less?

It makes me really sad that Wade Pfau is lumped in with this nonsense, given that most people point to him as the withdrawal rate expert of recent years.  Surely he has enough that he doesn't need the pittance that WSJ is paying him to write such garbage?

For shame.

Well, a lot of Wade Pfau's most recent research has come to conclusions like "the 4% SWR is likely too optimistic for people retiring within the next few years" and "you should be pretty heavy in bonds in the last couple years before retirement and the first couple years of retirement and then slowly transition to more stocks over time." Both of those findings are pretty darn contrary to the general consensus here. Also, he does research meant to help everyone, not just crazy mustachians.

Granted you have to keep in mind that he uses very strict assumptions because he has to as a researcher. Those assumptions (withdrawal amount is fixed and rises with inflation, no supplementary income in retirement, having one dollar at the end of 30 years equals "ok", etc.) don't necessarily jive with our reality.

MoneyCat

  • Handlebar Stache
  • *****
  • Posts: 1754
  • Location: New Jersey
Re: WSJ Retirement Section -- WTF?
« Reply #20 on: November 02, 2014, 05:30:36 AM »
The only real use I have for the WSJ is as lining underneath my cats' litter box.  Their opinion of ER is "get back to work and do as you are told."