Author Topic: William Bernstein - The worst retirement investing mistake  (Read 27519 times)


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Re: William Bernstein - The worst retirement investing mistake
« Reply #50 on: May 05, 2014, 08:23:52 PM »
Well it isn't the 70s anymore so you can protect your bonds from inflation with TIPs. The problem of course is the real returns on bonds is about 1-2% range pre tax normally unless you get capital gains from dropping rates. That isn't going to support a 4% SWR. You need some stock performance.  When you have  17 year period  ~0% real stock market return (1965-1981), your in trouble.  Stocks might an inflation hedge long term but during times of inflation, they tend to perform poorly in real terms.

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.


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Re: William Bernstein - The worst retirement investing mistake
« Reply #51 on: May 06, 2014, 03:40:03 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.)

Actually - the data is there.
Not in cFIREsim, it isn't. We were talking about cFIREsim. Also, you don't have to invest in the Japanese stock market just because you live in Japan.