Author Topic: William Bernstein - The worst retirement investing mistake  (Read 27517 times)

arebelspy

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William Bernstein - The worst retirement investing mistake
« on: April 20, 2014, 09:22:23 PM »
http://money.cnn.com/2012/09/04/retirement/investing-mistakes.moneymag/

Quote
You want to end up with a portfolio that matches your liabilities, meaning the amount you'll need to spend in retirement. The rule of thumb I came up with, based on annuity payouts and spending patterns late in life, is that you should save 20 to 25 times your residual living expenses -- that is, the yearly shortfall you have to make up after Social Security and any pension.

This portfolio should be in safe assets: Treasury Inflation-Protected Securities, annuities, or even short-term bonds.

Anything above that, you can invest in risky assets. That's your risk portfolio. If you dream about taking an around-the-world trip, and the risk portfolio does well, you can use it for that. If the risk portfolio doesn't do well, at least you're not pushing a shopping cart under an overpass.

I like his idea of "when you've won the game, stop playing."
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foobar

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Re: William Bernstein - The worst retirement investing mistake
« Reply #1 on: April 20, 2014, 10:14:36 PM »
The problem is to win by his definition you have to save pretty much 1 year of income for every year you expect to retire given the rate of return expected on safe investments. If you want to retire at 40, you need 50x in savings (versus 25-30 with a normal portfolio).  That makes winning the game much harder. His plan makes a lot more sense when you start talking about 65+ year olds who only need to plan for 15-20 year time period.

In reality, if you had a 60/40 portfolio in 2007 and where taking out 4%/yr, you would have had a rough 18 months as stocks dropped but you would have recovered most of those losses by 2011 (and then pretty lost 10% in the bear market). And no you wouldn't have sold your stocks at the bottom. You would have sold your bonds to buy stocks.



http://money.cnn.com/2012/09/04/retirement/investing-mistakes.moneymag/

Quote
You want to end up with a portfolio that matches your liabilities, meaning the amount you'll need to spend in retirement. The rule of thumb I came up with, based on annuity payouts and spending patterns late in life, is that you should save 20 to 25 times your residual living expenses -- that is, the yearly shortfall you have to make up after Social Security and any pension.

This portfolio should be in safe assets: Treasury Inflation-Protected Securities, annuities, or even short-term bonds.

Anything above that, you can invest in risky assets. That's your risk portfolio. If you dream about taking an around-the-world trip, and the risk portfolio does well, you can use it for that. If the risk portfolio doesn't do well, at least you're not pushing a shopping cart under an overpass.

I like his idea of "when you've won the game, stop playing."

happy

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Re: William Bernstein - The worst retirement investing mistake
« Reply #2 on: April 20, 2014, 11:44:05 PM »
I like this idea too. I think I first understood it from the LTR blog when he advised something similar for someone with a big pot of money. I guess the tricky thing is knowing when you have enough to be able reduce risk and returns moving from accumulation to preservation. Conversely Foobar, if you need to rely on high returns then maybe you don't have enough?

One could pick a number that clearly ought to be enough e.g. 5 million,  but beneath that is 25x enough, or 33 or even 50?. I will stop now because I sense a 4% rule discussion/debate could be emerging which would be boring.

arebelspy

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Re: William Bernstein - The worst retirement investing mistake
« Reply #3 on: April 21, 2014, 12:12:30 AM »
I will stop now because I sense a 4% rule discussion/debate could be emerging which would be boring.

Indeed.  Hopefully others can show the restraint you have.  :)

I see several things one might get out of this article.

I think the takeaway for me personally is that I should reduce volatility once I have more than enough.  In other words, I expect my assets to keep compounding and growing in FIRE, and when that happens I may want to consider a move to reduce volatility, even at the expense of leaving money on the table via lower returns, and even if I can stomach the swings.
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innerscorecard

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Re: William Bernstein - The worst retirement investing mistake
« Reply #4 on: April 21, 2014, 12:59:39 AM »
Makes total sense. When you actually have enough so that even very conservative investments return enough, you really don't gain much from increased exposure to stocks. But you can stand to lose a lot. Thus, you should *rationally* be very, very risk averse.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #5 on: April 21, 2014, 06:54:50 AM »
Bernstein is an amazing man!  Liked the article (and the Kindle book).  Thank you.

Once you can match your retirement liabilities, Bernstein says to partition your money into the riskier and low risk liability matching portfolios.  It's a finance doubleheader. 


matchewed

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Re: William Bernstein - The worst retirement investing mistake
« Reply #6 on: April 21, 2014, 07:31:41 AM »
It reminds me of something I've often read about how most of the very rich have a very large percentage of their AA in very safe assets (TIPS, money market accounts, bonds..etc.). It's not a bad idea. I don't think it is 100% applicable to this crowd but there are some good takeaways from it. Make sure your foundation is as solid as your risk tolerance allows it. And I'm not saying risk tolerance solely as AA but also as in your success rate of your model in things like cFIREsim or similar models and what SWR you have.

Milspecstache

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Re: William Bernstein - The worst retirement investing mistake
« Reply #7 on: April 21, 2014, 08:13:42 AM »
Great article:

"At the end of your career, you have no more earnings capacity left beyond Social Security or a pension. You have less of what life-cycle theory calls "human capital.""

Fantastic way to explain what we know here and try to explain to others.

foobar

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Re: William Bernstein - The worst retirement investing mistake
« Reply #8 on: April 21, 2014, 09:35:00 AM »
The very rich have their assets in stocks. If Warren Buffet loses 75% of wealth in a stock market crash, it doesn't change his life. It is the moderately rich that end up having top lay it safe because going from 10 million to 3 million does result in drastic life changes.

Personally I think working another 5+ years to get to the level where you can invest in risk free products versus investing in the market is a poor trade off for most people.  It is like using a 2% SWR rate with a 60/40 portfolio. Yes it is safer but the cost in needing so much more money needs to be quantified.   

The absolute safest way of going for retirement is to work til your 75. It drastically reduces your chance of running out of money. It does have the obvious downside though of having to work til 75:)


It reminds me of something I've often read about how most of the very rich have a very large percentage of their AA in very safe assets (TIPS, money market accounts, bonds..etc.). It's not a bad idea. I don't think it is 100% applicable to this crowd but there are some good takeaways from it. Make sure your foundation is as solid as your risk tolerance allows it. And I'm not saying risk tolerance solely as AA but also as in your success rate of your model in things like cFIREsim or similar models and what SWR you have.

matchewed

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Re: William Bernstein - The worst retirement investing mistake
« Reply #9 on: April 21, 2014, 09:45:35 AM »
The very rich have their assets in stocks. If Warren Buffet loses 75% of wealth in a stock market crash, it doesn't change his life. It is the moderately rich that end up having top lay it safe because going from 10 million to 3 million does result in drastic life changes.

Personally I think working another 5+ years to get to the level where you can invest in risk free products versus investing in the market is a poor trade off for most people.  It is like using a 2% SWR rate with a 60/40 portfolio. Yes it is safer but the cost in needing so much more money needs to be quantified.   

The absolute safest way of going for retirement is to work til your 75. It drastically reduces your chance of running out of money. It does have the obvious downside though of having to work til 75:)


It reminds me of something I've often read about how most of the very rich have a very large percentage of their AA in very safe assets (TIPS, money market accounts, bonds..etc.). It's not a bad idea. I don't think it is 100% applicable to this crowd but there are some good takeaways from it. Make sure your foundation is as solid as your risk tolerance allows it. And I'm not saying risk tolerance solely as AA but also as in your success rate of your model in things like cFIREsim or similar models and what SWR you have.

We're just going to talk past each other on this one as I view someone with 10 million in assets as very rich not just "moderately" rich.

*Edit to include more information*

The world wealth report of 2013 showed that people who are high net worth individuals (>$1mil in net worth) had 40% of their portfolios in more conservative investments. Just because Warren Buffett is doing something doesn't mean all wealthy people are. Source pg. 16
« Last Edit: April 21, 2014, 09:53:49 AM by matchewed »

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Re: William Bernstein - The worst retirement investing mistake
« Reply #10 on: April 21, 2014, 10:31:36 AM »
Makes total sense. When you actually have enough so that even very conservative investments return enough, you really don't gain much from increased exposure to stocks. But you can stand to lose a lot. Thus, you should *rationally* be very, very risk averse.

I think you're correct in that you don't have much to gain financially. If I were going to take risks at that point, those risks would be for the financial benefit of others, not me. Specifically:

1) My children.
2) Charitable missions.
3) Society in general - job creation, funding of research, etc.

I'm not saying I will do this for sure, but it does interest me to some extent. Nords mentioned something in another thread recently about Hawaii having some tax credits for Angel investors and it was intriguing to me. It would be fun to finance some startups, research projects, etc. and help others once you've helped yourself adequately.

sirdoug007

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Re: William Bernstein - The worst retirement investing mistake
« Reply #11 on: April 21, 2014, 10:42:52 AM »
Here is a link to the book they are talking about:  http://www.amazon.com/The-Ages-Investor-Life-cycle-Investing-ebook/dp/B008CM2T2A

Seems like it may be worth a read.

Note that if you own a kindle you can get it for FREE from the Kindle Lending Library :)

foobar

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Re: William Bernstein - The worst retirement investing mistake
« Reply #12 on: April 21, 2014, 11:26:21 AM »
2-5 million is in the top 1% of net worth in the US. Thats rich. Very rich is in the .1% which is around 30 million. The 1% have more in common with the bottom 99% than they do with the top .1%.  I don't consider the 75 year old guy living next door with 1 million dollars as rich.  He is a guy living the same upper middle class lifestyle as when he was making 100k/yr.  Now compared to  the average person in africa, the american making 40k/yr would be rich.


But lets look at page 14. Where are these people investing? In the US
Risky
--
37% stocks
9% in hedge funds and business
13% Real estate

Safe
----
Cash 21
Fixed 18%

Thats pretty much a 60/40 portfolio allocation which most people classify as moderate growth. Bernstein would classify that as hyper aggressive for a retiree:). World wide the ratio is more like 56/44. If you assume the population skews old (generally true for wealth but I didn't see it listed in the study), it might even be more aggressive than normal.





The very rich have their assets in stocks. If Warren Buffet loses 75% of wealth in a stock market crash, it doesn't change his life. It is the moderately rich that end up having top lay it safe because going from 10 million to 3 million does result in drastic life changes.

Personally I think working another 5+ years to get to the level where you can invest in risk free products versus investing in the market is a poor trade off for most people.  It is like using a 2% SWR rate with a 60/40 portfolio. Yes it is safer but the cost in needing so much more money needs to be quantified.   

The absolute safest way of going for retirement is to work til your 75. It drastically reduces your chance of running out of money. It does have the obvious downside though of having to work til 75:)


It reminds me of something I've often read about how most of the very rich have a very large percentage of their AA in very safe assets (TIPS, money market accounts, bonds..etc.). It's not a bad idea. I don't think it is 100% applicable to this crowd but there are some good takeaways from it. Make sure your foundation is as solid as your risk tolerance allows it. And I'm not saying risk tolerance solely as AA but also as in your success rate of your model in things like cFIREsim or similar models and what SWR you have.

We're just going to talk past each other on this one as I view someone with 10 million in assets as very rich not just "moderately" rich.

*Edit to include more information*

The world wealth report of 2013 showed that people who are high net worth individuals (>$1mil in net worth) had 40% of their portfolios in more conservative investments. Just because Warren Buffett is doing something doesn't mean all wealthy people are. Source pg. 16

matchewed

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Re: William Bernstein - The worst retirement investing mistake
« Reply #13 on: April 21, 2014, 11:52:18 AM »
2-5 million is in the top 1% of net worth in the US. Thats rich. Very rich is in the .1% which is around 30 million. The 1% have more in common with the bottom 99% than they do with the top .1%.  I don't consider the 75 year old guy living next door with 1 million dollars as rich.  He is a guy living the same upper middle class lifestyle as when he was making 100k/yr.  Now compared to  the average person in africa, the american making 40k/yr would be rich.


But lets look at page 14. Where are these people investing? In the US
Risky
--
37% stocks
9% in hedge funds and business
13% Real estate

Safe
----
Cash 21
Fixed 18%

Thats pretty much a 60/40 portfolio allocation which most people classify as moderate growth. Bernstein would classify that as hyper aggressive for a retiree:). World wide the ratio is more like 56/44. If you assume the population skews old (generally true for wealth but I didn't see it listed in the study), it might even be more aggressive than normal.





The very rich have their assets in stocks. If Warren Buffet loses 75% of wealth in a stock market crash, it doesn't change his life. It is the moderately rich that end up having top lay it safe because going from 10 million to 3 million does result in drastic life changes.

Personally I think working another 5+ years to get to the level where you can invest in risk free products versus investing in the market is a poor trade off for most people.  It is like using a 2% SWR rate with a 60/40 portfolio. Yes it is safer but the cost in needing so much more money needs to be quantified.   

The absolute safest way of going for retirement is to work til your 75. It drastically reduces your chance of running out of money. It does have the obvious downside though of having to work til 75:)


It reminds me of something I've often read about how most of the very rich have a very large percentage of their AA in very safe assets (TIPS, money market accounts, bonds..etc.). It's not a bad idea. I don't think it is 100% applicable to this crowd but there are some good takeaways from it. Make sure your foundation is as solid as your risk tolerance allows it. And I'm not saying risk tolerance solely as AA but also as in your success rate of your model in things like cFIREsim or similar models and what SWR you have.

We're just going to talk past each other on this one as I view someone with 10 million in assets as very rich not just "moderately" rich.

*Edit to include more information*

The world wealth report of 2013 showed that people who are high net worth individuals (>$1mil in net worth) had 40% of their portfolios in more conservative investments. Just because Warren Buffett is doing something doesn't mean all wealthy people are. Source pg. 16

I find it interesting that you group real estate as risky. I'm not sure if I'd agree with that given that housing prices track inflation but if you're buying homes to rent out I'm not sure what level of risk you'd assess to that. Or if you're buying buildings for retail or other business needs like business parks and the like I'm not sure the level of risk. I'd actually view that as more of almost 50/50. But then again it's just as easy to say real estate is risky as it is not because it truly depends on the type of real estate and how you're investing in it. It's just not so easy to lump real estate into the equity side of risk and call it a day. It is probably easier to say the portfolio is

As for the age distribution page 43.
Under 40 - 20%
40-49 - 28%
50-50 - 27%
60+ - 25%

What is "normal" when you say it might be more aggressive than normal?

Regardless I still think that having 40% of your AA in classifies as a very large percentage of the AA and stand by my original statement. Trotting out Buffett and telling my what I already mentioned from the pdf isn't going to change whether that statement is true or not. 40% is a large percentage of anything. The high net worth people in North America have 40% of their assets in cash and fixed income, therefore high net worth people have a very large percent of their AA in safe investments. You may view it as moderate or aggressive. Fine that is an opinion, a reasonable one but still just a value judgement. But it is still a large percentage.

foobar

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Re: William Bernstein - The worst retirement investing mistake
« Reply #14 on: April 21, 2014, 12:37:34 PM »
Look at a chart of house prices between 2000-2010 and as your self what the volatility of that investment class is:) Saying it tracks inflation is like saying stocks on average beat inflation. Both true statements but only if you have a long view.  This latest house bubble was unique for being national but local declines in prices of 10-20% happen routinely when local economies (large company moves out, air force base closes,....) go south.

The general rule of thumb is your age in bonds. So for this group they are being more aggressive as their average age is well over 50. Some people prefer 110-age in stocks which is slightly aggressive.

 I am not arguing against being conservative when your 70.  But that is being something like 30/70.   Going to the  extreme 0/100% end of the spectrum is going to far. Bernstein goes even farther as he isn't a fan of most bonds for retirees. You pretty much get stuck with some TIPs, short term Cds, and annuities where at best you match inflation and in a lot of cases you lose it. I see it as an overreaction to the past 15 years.  Maybe he was talking about this in the 90s but I sure as heck don't remember reading about it:)

I fear having to work 5 more years (i.e. prime retirement years) much more than I do of running out of money at 90. If the early years have poor returns, the adjustment is to cut spending by 20% and deal with it. Having to do a big trip (the 3 weeks in Australia type ones) every other year would be a bummer but nothing major. Not being able to go on those trips because of health issues/death on the other hand..... YMMV




I find it interesting that you group real estate as risky. I'm not sure if I'd agree with that given that housing prices track inflation but if you're buying homes to rent out I'm not sure what level of risk you'd assess to that. Or if you're buying buildings for retail or other business needs like business parks and the like I'm not sure the level of risk. I'd actually view that as more of almost 50/50. But then again it's just as easy to say real estate is risky as it is not because it truly depends on the type of real estate and how you're investing in it. It's just not so easy to lump real estate into the equity side of risk and call it a day. It is probably easier to say the portfolio is

As for the age distribution page 43.
Under 40 - 20%
40-49 - 28%
50-50 - 27%
60+ - 25%

What is "normal" when you say it might be more aggressive than normal?

Regardless I still think that having 40% of your AA in classifies as a very large percentage of the AA and stand by my original statement. Trotting out Buffett and telling my what I already mentioned from the pdf isn't going to change whether that statement is true or not. 40% is a large percentage of anything. The high net worth people in North America have 40% of their assets in cash and fixed income, therefore high net worth people have a very large percent of their AA in safe investments. You may view it as moderate or aggressive. Fine that is an opinion, a reasonable one but still just a value judgement. But it is still a large percentage.

grantmeaname

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Re: William Bernstein - The worst retirement investing mistake
« Reply #15 on: April 21, 2014, 04:25:18 PM »
Pleeeeeease put the quote box at the top of the post.

I can't agree with Bernstein. If the xx% rule works (sorry), and you feel comfortable with that amount, there is no reason to continue working and accumulate so much that you only need xx-1%. It's just the other side of the "one more year" trap - "one more percent". And the research seems pretty clear that the xx% rule works!

arebelspy

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Re: William Bernstein - The worst retirement investing mistake
« Reply #16 on: April 21, 2014, 04:37:20 PM »
I can't agree with Bernstein. If the xx% rule works (sorry), and you feel comfortable with that amount, there is no reason to continue working and accumulate so much that you only need xx-1%. It's just the other side of the "one more year" trap - "one more percent". And the research seems pretty clear that the xx% rule works!

It works on a long time frame.. but if you hit it with the wrong timing, there could be issues and/or major cutbacks needed.

Now, that being said, I 100% agree with you.  No way I'm working longer than I have to.   I'm planning on higher than a 4% SWR (due to real estate, but I likely still would even if I was solely in equities).

However, if you note what I said earlier: I'll likely end up with way more than necessary.  Most runs of FIRE using a 4% rule end up with way more than necessary - look at all the cFIREsim lines that go up and to the right.  At that point, it may be worth going more conservative, because you've already won the game.

I'm not reading this as a "work one more year" or "one less percent SWR" but as a "if you're getting older and your assets support going more conservative, you might as well do so... no reason to take the risk at that point."

That's what I got out of it, at least.
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Re: William Bernstein - The worst retirement investing mistake
« Reply #17 on: April 21, 2014, 04:47:46 PM »
Very relevant for me, because at age 60 I think I am there, ie feel like we have enough to last us the rest of our lives and the only obvious risks are a complete financial collapse or hyperinflation. But I really don't like the idea of moving significant assets into tips. Do they still yield nominal negative? %?

grantmeaname

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Re: William Bernstein - The worst retirement investing mistake
« Reply #18 on: April 21, 2014, 07:05:56 PM »
His whole argument seems predicated on all investors bailing out of the market when stocks go down. I can see the value of the "having won" idea if you're one of those people, but is it worth anything to those of us who aren't?

arebelspy

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Re: William Bernstein - The worst retirement investing mistake
« Reply #19 on: April 21, 2014, 07:35:28 PM »
His whole argument seems predicated on all investors bailing out of the market when stocks go down. I can see the value of the "having won" idea if you're one of those people, but is it worth anything to those of us who aren't?

Because even if you don't do that, the market can sometimes take a long time to recover.  09 was amazing in that we popped back up over a very quick timeframe.  If you're at a point in ER where your assets allow you to be more conservative, you don't have to take the risk anymore of hitting a bad spot that would cause ER failure (but likely won't, over a long enough timeframe, which you won't necessarily have).
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Re: William Bernstein - The worst retirement investing mistake
« Reply #20 on: April 21, 2014, 08:47:15 PM »
To me the ideal situation is FIRE but with the ability to make extra income on the side. If there is a tough period, you won't have to dip into your portfolio and will be able to wait it out while keeping a cool head. Ideally it is something that you are passionate about and would do for free anyways.

grantmeaname

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Re: William Bernstein - The worst retirement investing mistake
« Reply #21 on: April 22, 2014, 05:36:25 AM »
Because even if you don't do that, the market can sometimes take a long time to recover.
It doesn't look that way to me. The Dow seems to always have bounced back within a year or two, with the exception of the great depression itself. And the typical real recession is something like 9 months in the modern era. (And, again, the 4% rule takes this into account.)

matchewed

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Re: William Bernstein - The worst retirement investing mistake
« Reply #22 on: April 22, 2014, 05:46:41 AM »
Look at a chart of house prices between 2000-2010 and as your self what the volatility of that investment class is:) Saying it tracks inflation is like saying stocks on average beat inflation. Both true statements but only if you have a long view.  This latest house bubble was unique for being national but local declines in prices of 10-20% happen routinely when local economies (large company moves out, air force base closes,....) go south.

The general rule of thumb is your age in bonds. So for this group they are being more aggressive as their average age is well over 50. Some people prefer 110-age in stocks which is slightly aggressive.

 I am not arguing against being conservative when your 70.  But that is being something like 30/70.   Going to the  extreme 0/100% end of the spectrum is going to far. Bernstein goes even farther as he isn't a fan of most bonds for retirees. You pretty much get stuck with some TIPs, short term Cds, and annuities where at best you match inflation and in a lot of cases you lose it. I see it as an overreaction to the past 15 years.  Maybe he was talking about this in the 90s but I sure as heck don't remember reading about it:)

I fear having to work 5 more years (i.e. prime retirement years) much more than I do of running out of money at 90. If the early years have poor returns, the adjustment is to cut spending by 20% and deal with it. Having to do a big trip (the 3 weeks in Australia type ones) every other year would be a bummer but nothing major. Not being able to go on those trips because of health issues/death on the other hand..... YMMV




I find it interesting that you group real estate as risky. I'm not sure if I'd agree with that given that housing prices track inflation but if you're buying homes to rent out I'm not sure what level of risk you'd assess to that. Or if you're buying buildings for retail or other business needs like business parks and the like I'm not sure the level of risk. I'd actually view that as more of almost 50/50. But then again it's just as easy to say real estate is risky as it is not because it truly depends on the type of real estate and how you're investing in it. It's just not so easy to lump real estate into the equity side of risk and call it a day. It is probably easier to say the portfolio is

As for the age distribution page 43.
Under 40 - 20%
40-49 - 28%
50-50 - 27%
60+ - 25%

What is "normal" when you say it might be more aggressive than normal?

Regardless I still think that having 40% of your AA in classifies as a very large percentage of the AA and stand by my original statement. Trotting out Buffett and telling my what I already mentioned from the pdf isn't going to change whether that statement is true or not. 40% is a large percentage of anything. The high net worth people in North America have 40% of their assets in cash and fixed income, therefore high net worth people have a very large percent of their AA in safe investments. You may view it as moderate or aggressive. Fine that is an opinion, a reasonable one but still just a value judgement. But it is still a large percentage.

Cherry picking one piece of data and refuting my point with it is a bit silly. I should have said generally tracks inflation. You even mention it's unique later in your post. I understand local markets may have individual performance but we're talking about high net worth individuals. I'm not sure they suffer from the same risk of that happening as their neighborhoods may have other high net worth people and it can create a buffer of rich folks. Property values probably didn't impact them as much.

Again we're talking about high net worth people. The general rule of thumb for bonds your age is for the average person. These people are not it. That's the point of my original comment. If you've got way more than you need to live on; AKA >1million in net worth, then the rules of thumb are a bit silly and 40% of your AA in safe assets is huge. Their cash position alone is massive.

I'm not certain what this discussion is even about anymore. It seems like you're just disagreeing with me to disagree. Everything you've said I'd agree with if we weren't talking about high net worth people.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #23 on: April 22, 2014, 07:58:33 AM »
It works on a long time frame.. but if you hit it with the wrong timing, there could be issues and/or major cutbacks needed.

Now, that being said, I 100% agree with you.  No way I'm working longer than I have to.   I'm planning on higher than a 4% SWR (due to real estate, but I likely still would even if I was solely in equities).

However, if you note what I said earlier: I'll likely end up with way more than necessary.  Most runs of FIRE using a 4% rule end up with way more than necessary - look at all the cFIREsim lines that go up and to the right.  At that point, it may be worth going more conservative, because you've already won the game.

I'm not reading this as a "work one more year" or "one less percent SWR" but as a "if you're getting older and your assets support going more conservative, you might as well do so... no reason to take the risk at that point."

That's what I got out of it, at least.

Arebelspy, I understand the logic of what you are saying, but at the same time it seems counterintuitive to dial back risk once you become better positioned to handle it.  If you are comfortable enough with a given level of risk to declare FIRE, why would you no longer be comfortable with that level of risk once it has become clear that you are on a good glide path and your risk of portfolio failure, needing to cut back, etc., has now exponentially decreased?

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Re: William Bernstein - The worst retirement investing mistake
« Reply #24 on: April 22, 2014, 08:23:42 AM »
I am leaning towards following this philosophy.  Keep enough for what I believe will meet my minimum needs in fairly safe investments (no annuities for me, though), and invest the balance in things that have greater risk, but also potential of greater returns.  I don't necessarily want to be broke when I die, but I also don't want to live with insecurity in the attempt to try and increase my wealth beyond what I realistically will need.  Maybe this is naive, but I don't want to stress over losing investments in my retirement or feel the need to work a couple more years if the market takes a downturn when I am getting ready to retire.  BTW, I am towards the end of the "accumulation" phase.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #25 on: April 22, 2014, 08:29:05 AM »
It works on a long time frame.. but if you hit it with the wrong timing, there could be issues and/or major cutbacks needed.

Now, that being said, I 100% agree with you.  No way I'm working longer than I have to.   I'm planning on higher than a 4% SWR (due to real estate, but I likely still would even if I was solely in equities).

However, if you note what I said earlier: I'll likely end up with way more than necessary.  Most runs of FIRE using a 4% rule end up with way more than necessary - look at all the cFIREsim lines that go up and to the right.  At that point, it may be worth going more conservative, because you've already won the game.

I'm not reading this as a "work one more year" or "one less percent SWR" but as a "if you're getting older and your assets support going more conservative, you might as well do so... no reason to take the risk at that point."

That's what I got out of it, at least.

Arebelspy, I understand the logic of what you are saying, but at the same time it seems counterintuitive to dial back risk once you become better positioned to handle it.  If you are comfortable enough with a given level of risk to declare FIRE, why would you no longer be comfortable with that level of risk once it has become clear that you are on a good glide path and your risk of portfolio failure, needing to cut back, etc., has now exponentially decreased?

Because if you dialed back the risk too early, you'd be more likely to hit portfolio failure.  You need the riskier assets for the higher returns.  That means that, yes, there's a chance of needing to earn some income, cut back some spending, etc. in down years.

On the other hand, it also means you'll likely (when things are good, as they almost always are) end up with more than you need.  At that point you can dial back the risk, simply because you don't need the return, whereas before you did.

Let's say you start with a 4% SWR and a 70/30 portfolio.  Over 20 years it goes pretty decent, your portfolio doubles in real terms, and you're down to a 2% SWR, spending the same as before (inflation adjusted).  You do have enough to ride out bad times, so you can either go more aggressive, or less, or the same.  I used to be in the camp of might as well let it ride, because you can afford to.  Now I'm leaning towards the "there's no point in doing so."  If you have enough, what does more get you?  Might as well reduce the risk and volatility.
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Re: William Bernstein - The worst retirement investing mistake
« Reply #26 on: April 22, 2014, 08:53:16 AM »
Arebelspy, I understand the logic of what you are saying, but at the same time it seems counterintuitive to dial back risk once you become better positioned to handle it.  If you are comfortable enough with a given level of risk to declare FIRE, why would you no longer be comfortable with that level of risk once it has become clear that you are on a good glide path and your risk of portfolio failure, needing to cut back, etc., has now exponentially decreased?
Larger 'staches are more likely to fail due to crashes, whereas smaller 'staches are more likely to fail due to low long-term growth. Bonds are "safer" than stocks, but only in the sense that they have a lower volatility. At 25x expenses, 100% stocks is much safer than 100% bonds!

With a big enough 'stache, the more reliable (but lower) growth of bonds is enough to cover your expenses. It's not that you are no longer comfortable with the safety of your earlier asset allocation, it's more that you have new, safer option that wasn't available before.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #27 on: April 22, 2014, 08:57:27 AM »
It's not that you are no longer comfortable with the safety of your earlier asset allocation, it's more that you have new, safer option that wasn't available before.

Very well said. Thanks for putting it so clearly warfreak2.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #28 on: April 22, 2014, 09:00:03 AM »
Great post wf2.

I always focused on this part before:
At 25x expenses, 100% stocks is much safer than 100% bonds!

And I completely agree.  Now I'm thinking past that point, to a future point where the stache is quite large and WR has gotten small.  At that point I'm thinking about moving to "safer" (less beta) assets, something I wouldn't have considered before.

If you've already won the game, stop playing.
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Re: William Bernstein - The worst retirement investing mistake
« Reply #29 on: April 22, 2014, 09:37:25 AM »
Let's say you start with a 4% SWR and a 70/30 portfolio.  Over 20 years it goes pretty decent, your portfolio doubles in real terms, and you're down to a 2% SWR, spending the same as before (inflation adjusted).  You do have enough to ride out bad times, so you can either go more aggressive, or less, or the same. I used to be in the camp of might as well let it ride, because you can afford to.

This is a nice summation of how the same set of facts can induce two completely-opposite responses, both entirely rational. That's why I find it weird that someone as experienced as Bernstein would come down so strongly on one side. It seems like a very "first-order" level of thinking to ignore the "if you've already won, keep playing since you don't need that money anyway" aspect. I think the very unsettleability of this issue hints at why asset-allocation/risk-tolerance will always be a very personal issue, and that despite all the math and research we can do to optimize various aspects of investing across the population, this is one area where there will always be multiple, divergent answers.

However, math and research can still help. Even someone who comes down on Bernstein's side and decides to "stop playing" can fuck themselves over.

Using your example, according to cFIRESim, a 2% withdrawal from a 100% bond portfolio results in 20% failure over 50 years, while a 4% withdrawal from a 100% stock portfolio results in only a 13% failure. Anything less than 20% stocks is more risky than a higher stock-allocation over that timeframe.

Or in another comparison, at an equal 2% withdrawal rate, a 100% stock portfolio and a 70/30% portfolio both have 0 failures over 50 years. But the 100% stock portfolio has a "lowest ending portfolio" value larger than the mixed portfolio, indicating it's actually the less-risky of the two un-risky choices.

I think the corrosive effects of inflation over long timeframes make the actual details of how to "stop playing" significantly less obvious for early-retirees than they may be for the too-rich old people that Bernstein is advising.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #30 on: April 22, 2014, 09:44:37 AM »
I like some of what Bernstein mentioned in this article, but this statement gave me pause:

Quote
I've flown airplanes, and as a doctor, I've taken care of kids who can't walk. Investing for retirement is probably harder than either of those first two activities, yet we expect people to be able to do it on their own.

On one hand he's advocating what appears to be a very simple (and conservative) strategy; one you could implement with a series of "If/Then" rules. 
OTOH he's an 'investment advisor for a handful of high-net wealth clients' who's saying that managing your own money is  harder than being a pilot or a doctor for kids who can't walk.

Too bad it's focus seems to be on people retiring in their 60s with only 20ish years left to live.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #31 on: April 22, 2014, 09:47:46 AM »
This is a nice summation of how the same set of facts can induce two completely-opposite responses, both entirely rational. That's why I find it weird that someone as experienced as Bernstein would come down so strongly on one side. It seems like a very "first-order" level of thinking to ignore the "if you've already won, keep playing since you don't need that money anyway" aspect. I think the very unsettleability of this issue hints at why asset-allocation/risk-tolerance will always be a very personal issue, and that despite all the math and research we can do to optimize various aspects of investing across the population, this is one area where there will always be multiple, divergent answers.

However, math and research can still help. Even someone who comes down on Bernstein's side and decides to "stop playing" can fuck themselves over.

Using your example, according to cFIRESim, a 2% withdrawal from a 100% bond portfolio results in 20% failure over 50 years, while a 4% withdrawal from a 100% stock portfolio results in only a 13% failure. Anything less than 20% stocks is more risky than a higher stock-allocation over that timeframe.

Or in another comparison, at an equal 2% withdrawal rate, a 100% stock portfolio and a 70/30% portfolio both have 0 failures over 50 years. But the 100% stock portfolio has a "lowest ending portfolio" value larger than the mixed portfolio, indicating it's actually the less-risky of the two un-risky choices.

I think the corrosive effects of inflation over long timeframes make the actual details of how to "stop playing" significantly less obvious for early-retirees than they may be for the too-rich old people that Bernstein is advising.

I agree.  Inflation is the retirees #1 enemy.  10x so for the early retiree.  TIPs helps with this, somewhat.  And I wouldn't ever have 0% equities, personally.  But articles like this make me consider playing it safer than I would otherwise (90/10).

You're right in that both are valid.
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Re: William Bernstein - The worst retirement investing mistake
« Reply #32 on: April 22, 2014, 09:54:55 AM »
Yeah, I didn't find any withdrawal rates where a majority-bond allocation performed more reliably than majority-stock. That said, the data available just isn't anywhere near a large enough sample to represent the extremely rare events which would ruin a <1% withdrawal rate, for example.

(Also, I think it makes more sense to measure risk using the lowest portfolio values reached, rather than lowest ending values.)

Tyler

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Re: William Bernstein - The worst retirement investing mistake
« Reply #33 on: April 22, 2014, 10:15:18 AM »
I like his idea of "when you've won the game, stop playing."

I've often thought of this when people discuss investing in stocks using mortgage leverage in retirement.  At some point enough is enough, and you can actively start focusing on minimizing risk rather than maximizing returns. 

skyrefuge

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Re: William Bernstein - The worst retirement investing mistake
« Reply #34 on: April 22, 2014, 10:25:31 AM »
(Also, I think it makes more sense to measure risk using the lowest portfolio values reached, rather than lowest ending values.)

Agreed, I took the shortcut because cFIREsim doesn't easily provide the former. Some mouse-hovering suggests that the 100%-stock portfolio had one year in one case where it dipped lower than the 70/30% portfolio, but they were largely in the same ballpark.

That gets a bit into what I believe is the main (only?) reason to hold bonds in a portfolio for an early retiree: to give you something positive in your portfolio to mentally cling to in order to keep you from selling your stocks at a loss during a crash.

If you can keep yourself from bailing out of stocks during a crash (and if we assume the future is no worse than any year in the US past), the 100% stock portfolio is less risky over the long-term, even if it has lower intermediate values (as long as those intermediate values never drop below $0), particularly since those low points tend to occur quite early in the cycles. As time goes on, the stock component builds a larger and larger cushion for you.

But, holding 100% stocks makes it less likely that you'll be able to stick to that allocation in a crash, thus likely making it more risky in real-world applications where human emotions are involved. That's why I like something like an 80/20% portfolio. It doesn't perform much worse than an idealized, robotically-controlled 100/0% portfolio, but it probably performs a lot better than a real-world, human-controlled 100/0% portfolio.

brooklynguy

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Re: William Bernstein - The worst retirement investing mistake
« Reply #35 on: April 22, 2014, 10:32:26 AM »
I've often thought of this when people discuss investing in stocks using mortgage leverage in retirement.  At some point enough is enough, and you can actively start focusing on minimizing risk rather than maximizing returns.

I was thinking about this in the context of mortgage leverage too.  I suppose it depends on where you are in the game, since low-rate mortgage leverage can actually substantially reduce your chances of portfolio failure.  How to know when you've won is the real problem, as explained so articulately above.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #36 on: April 22, 2014, 10:46:50 AM »
But, holding 100% stocks makes it less likely that you'll be able to stick to that allocation in a crash, thus likely making it more risky in real-world applications where human emotions are involved. That's why I like something like an 80/20% portfolio. It doesn't perform much worse than an idealized, robotically-controlled 100/0% portfolio, but it probably performs a lot better than a real-world, human-controlled 100/0% portfolio.

It's more than a matter of emotional discipline.  A true 100% stock allocation (with no cash cushion) could force you to sell during a crash, not because your emotions get the better of you but because you have no other source of funds to buy necessities.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #37 on: April 22, 2014, 11:07:34 AM »
It's more than a matter of emotional discipline.  A true 100% stock allocation (with no cash cushion) could force you to sell during a crash, not because your emotions get the better of you but because you have no other source of funds to buy necessities.

No, if we stick with the "success rate based on historical simulations" metric that I was using, those results include "selling during a crash". I'm not sure exactly how cFIREsim implements it, but I believe the original Trinity study did something like "move X inflation-adjusted dollars from portfolio to cash on Jan 1 of each year", completely ignoring whether the market was crashing or not.

It other words, if you believe the future will be no worse than the past, you don't have to worry about selling during a crash, you'll still be fine even if you have to. And if you don't have to, you'll be even better than fine.

(unless you're considering that Jan. 1 stock sale a "cash cushion", but in that case there could never be such a thing as a "100% stock portfolio", unless they start letting us buy groceries with fractional shares at the checkout line).

brooklynguy

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Re: William Bernstein - The worst retirement investing mistake
« Reply #38 on: April 22, 2014, 11:36:40 AM »
It's more than a matter of emotional discipline.  A true 100% stock allocation (with no cash cushion) could force you to sell during a crash, not because your emotions get the better of you but because you have no other source of funds to buy necessities.

No, if we stick with the "success rate based on historical simulations" metric that I was using, those results include "selling during a crash". I'm not sure exactly how cFIREsim implements it, but I believe the original Trinity study did something like "move X inflation-adjusted dollars from portfolio to cash on Jan 1 of each year", completely ignoring whether the market was crashing or not.

It other words, if you believe the future will be no worse than the past, you don't have to worry about selling during a crash, you'll still be fine even if you have to. And if you don't have to, you'll be even better than fine.

(unless you're considering that Jan. 1 stock sale a "cash cushion", but in that case there could never be such a thing as a "100% stock portfolio", unless they start letting us buy groceries with fractional shares at the checkout line).

Fair enough.  But it's still not the case that the only reason to hold non-stock assets is to have an emotional security blanket.  The non-stock assets also serve as a cushion to avoid the need to sell stock during a crash.  If you choose a WR with a historical 95% success rate and find yourself in a scenario like one of the 5% failures, you can avoid the need to sell stocks during the crash in the early years of your retirement by tapping the cushion.

Tyler

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Re: William Bernstein - The worst retirement investing mistake
« Reply #39 on: April 22, 2014, 12:38:52 PM »
However, math and research can still help. Even someone who comes down on Bernstein's side and decides to "stop playing" can fuck themselves over.

Using your example, according to cFIRESim, a 2% withdrawal from a 100% bond portfolio results in 20% failure over 50 years, while a 4% withdrawal from a 100% stock portfolio results in only a 13% failure. Anything less than 20% stocks is more risky than a higher stock-allocation over that timeframe.

Or in another comparison, at an equal 2% withdrawal rate, a 100% stock portfolio and a 70/30% portfolio both have 0 failures over 50 years. But the 100% stock portfolio has a "lowest ending portfolio" value larger than the mixed portfolio, indicating it's actually the less-risky of the two un-risky choices.

FWIW, Bernstein has also written about the flawed logic of overly depending on Monte Carlo simulations for retirement planning.  "Any estimate of long-term financial success greater than about 80% is meaningless."  http://www.efficientfrontier.com/ef/901/hell3.htm 

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Re: William Bernstein - The worst retirement investing mistake
« Reply #40 on: April 22, 2014, 02:50:17 PM »
Some mentioned that high end people are conservative with their money. They aren't. They invest to grow it rather than just survive.

I have no idea what that that real estate is. If I had to guess most of it was in duplex/apartment buildings, not real estate in their backyard.



Cherry picking one piece of data and refuting my point with it is a bit silly. I should have said generally tracks inflation. You even mention it's unique later in your post. I understand local markets may have individual performance but we're talking about high net worth individuals. I'm not sure they suffer from the same risk of that happening as their neighborhoods may have other high net worth people and it can create a buffer of rich folks. Property values probably didn't impact them as much.

Again we're talking about high net worth people. The general rule of thumb for bonds your age is for the average person. These people are not it. That's the point of my original comment. If you've got way more than you need to live on; AKA >1million in net worth, then the rules of thumb are a bit silly and 40% of your AA in safe assets is huge. Their cash position alone is massive.

I'm not certain what this discussion is even about anymore. It seems like you're just disagreeing with me to disagree. Everything you've said I'd agree with if we weren't talking about high net worth people.

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Re: William Bernstein - The worst retirement investing mistake
« Reply #41 on: April 26, 2014, 09:45:39 PM »
Makes total sense. When you actually have enough so that even very conservative investments return enough, you really don't gain much from increased exposure to stocks. But you can stand to lose a lot. Thus, you should *rationally* be very, very risk averse.
I'm not saying I will do this for sure, but it does interest me to some extent. Nords mentioned something in another thread recently about Hawaii having some tax credits for Angel investors and it was intriguing to me. It would be fun to finance some startups, research projects, etc. and help others once you've helped yourself adequately.
It's fun.  It's fascinating.  When you see what your funding creates, you feel good about entrepreneurs and capitalism.

However it's also hard work when done right.  Long periods of boredom (and boring research) sprinkled with short periods of intense frustration.  For every good guy (or woman) you meet, there are at least 10 who are... not so good.  Your best investment idea will be obliterated by a random lightning strike that nobody would have predicted, while another will go bankrupt just six months before the market obstacles are removed.  A couple of years can make you skeptical, even cynical, and then something will come along to restore your faith in humanity.

If you're really lucky then you'll end up on a startup board of directors, then you'll have to fire a founder, and then you'll get sued/subpoenad.  But the business case seemed like such a good idea at the time!

I've learned more from a year of angel investing that I've learned from a decade of analyzing stocks.  Of course it's also been an amazingly painful tutorial at times.  I'm done investing in startups (and this time I really mean it) but I still enjoy the process and the meetings while I track my existing ("surviving"?) investments.

One clear conclusion is that you can't do this on your own.  You have to join a group that will help you ask better questions and avoid (most of) the pitfalls.  If you haven't already done so, look up a local group at the Angel Capital Association website ("local" as in "I drive 40-50 miles round trip for the meetings & lunches").  Talk to a local university (particularly one with an MBA program) about their angel group (if they work with one).  You can also read through AngelList and VentureHacks for free as well as Scott Shane's "Fool's Gold" and Rob Robinson's venerable "Angel Investing". 

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Re: William Bernstein - The worst retirement investing mistake
« Reply #42 on: April 27, 2014, 10:07:39 PM »
Arebelspy, I understand the logic of what you are saying, but at the same time it seems counterintuitive to dial back risk once you become better positioned to handle it.  If you are comfortable enough with a given level of risk to declare FIRE, why would you no longer be comfortable with that level of risk once it has become clear that you are on a good glide path and your risk of portfolio failure, needing to cut back, etc., has now exponentially decreased?
Larger 'staches are more likely to fail due to crashes, whereas smaller 'staches are more likely to fail due to low long-term growth. Bonds are "safer" than stocks, but only in the sense that they have a lower volatility. At 25x expenses, 100% stocks is much safer than 100% bonds!

With a big enough 'stache, the more reliable (but lower) growth of bonds is enough to cover your expenses. It's not that you are no longer comfortable with the safety of your earlier asset allocation, it's more that you have new, safer option that wasn't available before.

Smartest post on this thread. The biggest quote mark around SAFE should go to cash/MM. Least safe place I can think of. You're guaranteed a loss every year.

arebelspy

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Re: William Bernstein - The worst retirement investing mistake
« Reply #43 on: April 27, 2014, 10:16:28 PM »
The biggest quote mark around SAFE should go to cash/MM. Least safe place I can think of. You're guaranteed a loss every year.

It depends on what safe means - volatility or long term portfolio survivability.  It's much more safe to keep your house down payment that you'll need in 6 months in a short term CD/money market account than in 100% equities.  It's much more risky to keep your ER portfolio in those.

One must define the terms, and not use generic terms like "cash is safe" or cash is the "least safe place I can think of."

There are nuances, and blanket statements tend to be wrong.
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Re: William Bernstein - The worst retirement investing mistake
« Reply #44 on: April 28, 2014, 09:12:56 PM »
The biggest quote mark around SAFE should go to cash/MM. Least safe place I can think of. You're guaranteed a loss every year.

It depends on what safe means - volatility or long term portfolio survivability.  It's much more safe to keep your house down payment that you'll need in 6 months in a short term CD/money market account than in 100% equities.  It's much more risky to keep your ER portfolio in those.

One must define the terms, and not use generic terms like "cash is safe" or cash is the "least safe place I can think of."

There are nuances, and blanket statements tend to be wrong.

True dat. I'm thinking long term only. And I had a very different philosophy about cash, pre-house down payment.
« Last Edit: April 28, 2014, 09:14:53 PM by RapmasterD »

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Re: William Bernstein - The worst retirement investing mistake
« Reply #45 on: May 04, 2014, 11:32:55 PM »
Yeah, I didn't find any withdrawal rates where a majority-bond allocation performed more reliably than majority-stock. That said, the data available just isn't anywhere near a large enough sample to represent the extremely rare events which would ruin a <1% withdrawal rate, for example.

(Also, I think it makes more sense to measure risk using the lowest portfolio values reached, rather than lowest ending values.)

Actually - the data is there.  Much of the world's population live in countries where 1% would have failed at some point - e.g China in 1949,  Japan in 1945, or South Vietnam in 1975.  The US (and commonwealth, UK/ Canada/ NZ/ OZ/ SA) stockmarkets are the exceptional cases.  Most became valueless at some point in the last 120 years

Of course, these events would ruin just about any withdrawal rate - but I disagree that they are rare.  ISTR Bernstein reckoning that 80-85% success rate is about the best you can do.  Heck in my own family:

 - Grandparents lost everything in Shanghai, 1941, had to start over in UK in 1945
 - Parents lost all possessions (but not savings) in Uganda, 1972
 - Parents-in-law were very badly hit by Asian Financial Crisis (1998)  Lost about 70% of net worth

« Last Edit: May 05, 2014, 12:14:28 AM by okonumiyaki »

RapmasterD

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Re: William Bernstein - The worst retirement investing mistake
« Reply #46 on: May 05, 2014, 01:03:52 AM »
And in today's NYT: http://www.nytimes.com/2014/05/04/your-money/a-path-to-retirement-for-those-far-from-it.html?_r=0

"...his simple prescriptions include using three index funds, held in equal proportions: an international stock fund, a domestic stock fund and a bond fund. The portfolio should be rebalanced — restored to a proportion of one-third each — once a year. That’s it, in a nutshell...

steveo

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Re: William Bernstein - The worst retirement investing mistake
« Reply #47 on: May 05, 2014, 04:29:51 PM »
At 25x expenses, 100% stocks is much safer than 100% bonds!

This is the main point that I don't like about that comment. If you intend to retire early at a 4% WR than you would be better off with a more stock orientated portfolio. I have no issues with dropping the stock allocation down if your WR drops to 2 or 3%.

foobar

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Re: William Bernstein - The worst retirement investing mistake
« Reply #48 on: May 05, 2014, 07:18:50 PM »
Bernstein has nothing to do with retiring early. If you wanted to retire at 40, he would expect you to have ~50 years of savings in fixed income. When you start talking about 2% SWR you can do whatever you want. Your odds of going broke are extremely low.  When you have a 20-25 year span (i.e you retire around 65-70) then reducing market risk makes some sense (even though I think he is being way too conservative. 40/60 gets you through pretty much anything and more bonds really doesn't help). When you have a 50+ year time span, you need the growth that stocks provide. Wether you go 80/20 or 40/60 (much outside those ranges your being too aggressive or too conservative ) is hard to say. With the current bond yields I would bet on the 80/20 but one big market correction early can make the 40/60 like genius when your buying all those stocks at low prices.

At 25x expenses, 100% stocks is much safer than 100% bonds!

This is the main point that I don't like about that comment. If you intend to retire early at a 4% WR than you would be better off with a more stock orientated portfolio. I have no issues with dropping the stock allocation down if your WR drops to 2 or 3%.

bobmarley9993

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Re: William Bernstein - The worst retirement investing mistake
« Reply #49 on: May 05, 2014, 07:26:32 PM »
Bernstein has nothing to do with retiring early. If you wanted to retire at 40, he would expect you to have ~50 years of savings in fixed income. When you start talking about 2% SWR you can do whatever you want. Your odds of going broke are extremely low.  When you have a 20-25 year span (i.e you retire around 65-70) then reducing market risk makes some sense (even though I think he is being way too conservative. 40/60 gets you through pretty much anything and more bonds really doesn't help). When you have a 50+ year time span, you need the growth that stocks provide. Wether you go 80/20 or 40/60 (much outside those ranges your being too aggressive or too conservative ) is hard to say. With the current bond yields I would bet on the 80/20 but one big market correction early can make the 40/60 like genius when your buying all those stocks at low prices.

At 25x expenses, 100% stocks is much safer than 100% bonds!

This is the main point that I don't like about that comment. If you intend to retire early at a 4% WR than you would be better off with a more stock orientated portfolio. I have no issues with dropping the stock allocation down if your WR drops to 2 or 3%.

I second this.   There is always a risk with bonds of inflation destroying your portfolio.  I legitimately believe it's safer to have a portion of your money in equities than all fixed income.