Author Topic: Race from $2M to $4M...and Beyond!  (Read 975545 times)

SwordGuy

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Re: Race from $2M to $4M...and Beyond!
« Reply #5900 on: February 05, 2022, 01:26:04 PM »

50% boring index, 50% Cash, some CDs.  Will start rolling CDs again after rates go up above 1%.  Stopped when yields went below 1% (what's the point).  As I stated before, the ringing of the bell for me was NFLX tanking 20% in a day.  Sold that day, until I was roughly 50/50.  Was fully invested before that. 
 

So, about 50% of your portfolio is losing value to inflation.    You'll make money if you correctly pick the bottom and buy back in, and you'll lose money if you really get it wrong.

I'm not selling my stock anytime soon, so I'm earning dividends which are higher than CD or savings account interest.   I won't make as much money as you would if you get it right and won't lose anything if I guess wrong about the bottom of the market. 

I'm already rich, I'm already retired, so I don't need extra risk.  I just need good enough returns over the long term. 

Here's what market news looks like, all on the same day:

"Yammer, yammer, yammer, which proves the market will go up!"

"Blah, blah, blah, which proves the market will go down!"

Since so very many people whose job it is to know what the market will do are wrong almost all the time, why would I think I could do better?   

The answer is, I don't.

You, apparently, think you can do better.  It will be interesting for the rest of us if you post what you do as you do it (not afterwards).   Then we can see how right you are.

arcturus

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Re: Race from $2M to $4M...and Beyond!
« Reply #5901 on: February 05, 2022, 07:05:05 PM »
Well, on a topic other than @DaTrill 's views of the market and retirement rules, I took the step today of updating my spreadsheet with the losses from January --- there is something psychological about that that actually makes me feel better to see the updated numbers in spreadsheet and have the sense that its less money but its the new foundation to start building on again.  Weird how somehow seeing it in pixels on a screen helps in a weird way!

I do have the sense that we're in for kind of a sideways year in 2022 and I'm sure there will be some bumps in the road ahead.  But I am a subscriber to the old adage that "time in the market" is more reliable that "timing the market."

I just find it a strangely healthy exercise and wonder if anyone else has a similar view.  I think many of us agree that 2021 seemed to get a bit ahead of itself by mid-year.

SwordGuy

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Re: Race from $2M to $4M...and Beyond!
« Reply #5902 on: February 05, 2022, 07:58:26 PM »
I think it's helpful too.

Not only that, but I've found that back-tracking to when the market reached that valuation is very helpful.

For example, when the market dropped in January, I realized that 6 months earlier I had been celebrating that market index as an all time high.   I mean, if I was breaking out champagne and shouting for joy six months ago, why feel down in the dumps today at the same market valuation?

rmorris50

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Re: Race from $2M to $4M...and Beyond!
« Reply #5903 on: February 05, 2022, 09:59:17 PM »
Met with the financial advisor today. For many years his update was ďstay the course, rebalance and keep same asset allocations and investmentsĒ. Today was the first time in many years he recommended a few no so immaterial changes.


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itchyfeet

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Re: Race from $2M to $4M...and Beyond!
« Reply #5904 on: February 06, 2022, 03:59:15 AM »
@DaTrill , just curious whether you considered the tax implications before selling out 50%

I considered it in my case.

As Iím still working and get taxed in the top marginal tax rate of around 50%, and given most of my holdings are worth much more than I bought in at, if I sell I will trigger a massive capital gains tax liability (Australia).

I concluded that the certainty of tax was worse than the uncertainty that markets may tank and Iíd get lucky with my market timing.

How much tax did you incur through your fire sale?

Much Fishing to Do

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Re: Race from $2M to $4M...and Beyond!
« Reply #5905 on: February 06, 2022, 06:00:37 AM »
I think it's helpful too.

Not only that, but I've found that back-tracking to when the market reached that valuation is very helpful.

For example, when the market dropped in January, I realized that 6 months earlier I had been celebrating that market index as an all time high.   I mean, if I was breaking out champagne and shouting for joy six months ago, why feel down in the dumps today at the same market valuation?

+1

Plus what really helps me put any drop in perspective is considering the frequency.  Over the last hundred years we've had a correction every 1.5 years and a 20% drop every 4 years.  So its a come to Jesus moment when asking oneself are you really gonna freak out 27 times over a 40 year retirement (or 10 times for a bear market), or am I just gonna accept this is expected and why I'm using a 4% SWR instead of 6 or 7%.

arcturus

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Re: Race from $2M to $4M...and Beyond!
« Reply #5906 on: February 06, 2022, 06:47:16 AM »
I think it's helpful too.

Not only that, but I've found that back-tracking to when the market reached that valuation is very helpful.

For example, when the market dropped in January, I realized that 6 months earlier I had been celebrating that market index as an all time high.   I mean, if I was breaking out champagne and shouting for joy six months ago, why feel down in the dumps today at the same market valuation?

Exactly....

jrhampt

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Re: Race from $2M to $4M...and Beyond!
« Reply #5907 on: February 07, 2022, 08:56:28 AM »
I remember in March 2020 when the market tanked.  I calculated my monthly net worth as usual and realized I was ok with the drop, and it actually wasn't quite as bad as I thought it would be (I was about 80/20 stock/bonds+cash).  Just that relatively low percentage in bonds/cash helped cushion the drop and made me ok with doing nothing (even though in retrospect I should have doubled down on my automated investments).  And it rebounded very nicely from that low.  Following this correction, I updated my net worth calculations as usual this month and went, eh, I'm still a millionaire.  And I invested some extra cash. 

ysette9

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Re: Race from $2M to $4M...and Beyond!
« Reply #5908 on: February 07, 2022, 03:21:15 PM »
Iím late to the @DaTrill race-to-the-bottom conversation but I canít help but five in. Michael Kitces is a voice I respect a lot in the retirement analysis and advisor space for his nerdy and deep work. Here is an excerpt from an old podcast interview with the Mad Fientist.

ďMichael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesnít seem to get any worse than about 4%.
Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.
But thatís horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time periodóthe combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if youíre a retiree. It means, bad news, the market went down; the good news, you donít need as much for your portfolio anyways because everything got cheaper (because thatís what happens with deflation, the stock gets cheaper).
And so, this 4% initial withdrawal rate worked.Ē

https://www.madfientist.com/michael-kitces-interview/

He goes on and has talked about this same thing on many other podcast with other people. I could listen to him talk about safe withdrawal rates for ever because I am that dorky. In any case he has looked into this deeply and I appreciate his optimism about the robustness of a withdrawal rate around 4%.
He notes that for a FIREee something more like 3.5% is appropriate for really long retirement periods.

ysette9

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Re: Race from $2M to $4M...and Beyond!
« Reply #5909 on: February 07, 2022, 03:26:03 PM »
I was listening to a podcast last night doing dishes that walked through the detailed mechanics of how to tax loss harvest in a Vanguard account. That gave me a kick in the butt to look into it further. Iím still kicking myself for not having had the brain bandwidth to do it in March 2020. I knew it was a perfect time to do it but I hadnít done it before and with a newborn and school and daycare closed and Covid I was just barely hanging on. Now that we are both not working I am not sure it makes a ton of sense. I still have some reading to do there.

jeroly

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Re: Race from $2M to $4M...and Beyond!
« Reply #5910 on: February 08, 2022, 02:33:33 PM »
I could see in a worst-case scenario wanting to take DaTrill's 1% WR approach, but only if I were a Trill with multiple life spans (DS9 reference).  Even if my life expectancy were 50 years (which it unfortunately isn't at this point), I could always just put everything into TIPS and pull out 2% each year.  Of course that depends on the US Gov't continuing to pay out its debt etc., but if you don't envision this happening, I'm not sure that 1% WR is going to work out any better than 2 or 3.5 or 4 or...

BeanCounter

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Re: Race from $2M to $4M...and Beyond!
« Reply #5911 on: February 08, 2022, 03:54:32 PM »
I could see in a worst-case scenario wanting to take DaTrill's 1% WR approach, but only if I were a Trill with multiple life spans (DS9 reference).  Even if my life expectancy were 50 years (which it unfortunately isn't at this point), I could always just put everything into TIPS and pull out 2% each year.  Of course that depends on the US Gov't continuing to pay out its debt etc., but if you don't envision this happening, I'm not sure that 1% WR is going to work out any better than 2 or 3.5 or 4 or...

If that happens I'm going to convert my dollars to potatoes so at least we'll eat.

BeanCounter

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Re: Race from $2M to $4M...and Beyond!
« Reply #5912 on: February 08, 2022, 03:55:31 PM »
Iím late to the @DaTrill race-to-the-bottom conversation but I canít help but five in. Michael Kitces is a voice I respect a lot in the retirement analysis and advisor space for his nerdy and deep work. Here is an excerpt from an old podcast interview with the Mad Fientist.

ďMichael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesnít seem to get any worse than about 4%.
Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.
But thatís horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time periodóthe combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if youíre a retiree. It means, bad news, the market went down; the good news, you donít need as much for your portfolio anyways because everything got cheaper (because thatís what happens with deflation, the stock gets cheaper).
And so, this 4% initial withdrawal rate worked.Ē

https://www.madfientist.com/michael-kitces-interview/

He goes on and has talked about this same thing on many other podcast with other people. I could listen to him talk about safe withdrawal rates for ever because I am that dorky. In any case he has looked into this deeply and I appreciate his optimism about the robustness of a withdrawal rate around 4%.
He notes that for a FIREee something more like 3.5% is appropriate for really long retirement periods.

I really enjoyed this. Thank you for posting it.

ixtap

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Re: Race from $2M to $4M...and Beyond!
« Reply #5913 on: February 08, 2022, 04:16:31 PM »
I could see in a worst-case scenario wanting to take DaTrill's 1% WR approach, but only if I were a Trill with multiple life spans (DS9 reference).  Even if my life expectancy were 50 years (which it unfortunately isn't at this point), I could always just put everything into TIPS and pull out 2% each year.  Of course that depends on the US Gov't continuing to pay out its debt etc., but if you don't envision this happening, I'm not sure that 1% WR is going to work out any better than 2 or 3.5 or 4 or...

If that happens I'm going to convert my dollars to potatoes so at least we'll eat.

I prefer nuts and berries, and only partly because DH can't eat potatoes.

ysette9

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Re: Race from $2M to $4M...and Beyond!
« Reply #5914 on: February 08, 2022, 04:54:46 PM »
There were countries for which historically a 1% withdrawal rate would have been required. Michael kitces usually points out that losing a world war has been very bad for stock market returns. So if you are invested solely in one country and that countryís infrastructure and manufacturing base get wiped out then yeah, you are going to need a really low withdrawal rate. Then again you may well have more pressing concerns than your portfolio return.

Personally Iím about 40% ex-US so hopefully this wonít be an issue going forward.

DaTrill

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Re: Race from $2M to $4M...and Beyond!
« Reply #5915 on: February 10, 2022, 01:49:14 PM »
@DaTrill , just curious whether you considered the tax implications before selling out 50%

I considered it in my case.

As Iím still working and get taxed in the top marginal tax rate of around 50%, and given most of my holdings are worth much more than I bought in at, if I sell I will trigger a massive capital gains tax liability (Australia).

I concluded that the certainty of tax was worse than the uncertainty that markets may tank and Iíd get lucky with my market timing.

How much tax did you incur through your fire sale?

Most of the sales were in an oversized IRA balance that may result in HUGE RMDs in the distant future.  Paying 15% LTCG is a very low cost compared to what occurred in the past and gladly pay this every time to reduce portfolio risk.  Was hoping market continued ripping until 2023 where planning to RE and could get 0% LTCG, but market conditions didn't follow my schedule. 

Try to manage LTCG over time, non-scientific tax gain harvesting.  Market is roughly flat over the past 6 months and one could sell all holdings bought over this time period and might even have some losses.       

DaTrill

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Re: Race from $2M to $4M...and Beyond!
« Reply #5916 on: February 10, 2022, 01:51:20 PM »
Well, on a topic other than @DaTrill 's views of the market and retirement rules, I took the step today of updating my spreadsheet with the losses from January --- there is something psychological about that that actually makes me feel better to see the updated numbers in spreadsheet and have the sense that its less money but its the new foundation to start building on again.  Weird how somehow seeing it in pixels on a screen helps in a weird way!

I do have the sense that we're in for kind of a sideways year in 2022 and I'm sure there will be some bumps in the road ahead.  But I am a subscriber to the old adage that "time in the market" is more reliable that "timing the market."

I just find it a strangely healthy exercise and wonder if anyone else has a similar view.  I think many of us agree that 2021 seemed to get a bit ahead of itself by mid-year.

Not trying to time the market, just made drastic change in risk profile.  Beta was probably 1.5 for the last two years, now probably around 0.5.   

DaTrill

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Re: Race from $2M to $4M...and Beyond!
« Reply #5917 on: February 10, 2022, 01:59:43 PM »
Iím late to the @DaTrill race-to-the-bottom conversation but I canít help but five in. Michael Kitces is a voice I respect a lot in the retirement analysis and advisor space for his nerdy and deep work. Here is an excerpt from an old podcast interview with the Mad Fientist.

ďMichael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesnít seem to get any worse than about 4%.
Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.
But thatís horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time periodóthe combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if youíre a retiree. It means, bad news, the market went down; the good news, you donít need as much for your portfolio anyways because everything got cheaper (because thatís what happens with deflation, the stock gets cheaper).
And so, this 4% initial withdrawal rate worked.Ē

https://www.madfientist.com/michael-kitces-interview/

He goes on and has talked about this same thing on many other podcast with other people. I could listen to him talk about safe withdrawal rates for ever because I am that dorky. In any case he has looked into this deeply and I appreciate his optimism about the robustness of a withdrawal rate around 4%.
He notes that for a FIREee something more like 3.5% is appropriate for really long retirement periods.

I really enjoyed this. Thank you for posting it.

Investigate Kitces background (more acting classes than Finance or stats classes).  Ask him what statistical assumptions underly the 4% rule.

Another estimate of 4% could be expressed as (10 yr yield/2) + (S&P 500 yield/2) = SWR.  For the sample period in the paper, this would roughly equal 4% where 10 yr yields were 7% and S&P 500 yields were 2.5%.  Today 10 yr is now around 2% (1%) and S&P 500 yield is around 1.5% (0.75%) for a 1.75% SWR. 

The simplest critique of the 4% rule is the current data falls outside the relevant range of the estimation data.  It doesn't mean the estimate won't hold but indicates that the past data does not support making these claims.     

scottish

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Re: Race from $2M to $4M...and Beyond!
« Reply #5918 on: February 10, 2022, 08:00:30 PM »
Extrapolations are always like that, aren't they?

Another source of the 4% rule is the backtesting in McClung's "Living off your money".    I found the details of his back testing weren't presented very clearly.   Does his 4% rule mean you take 4% of the initial value of your portfolio the first year, then adjust the first year amount for inflation and take that amount for the second year?   Or does his 4% rule mean you take 4% of the portfolio every year?    This should be spelled out very clearly in the book, but I can't find it.   (If someone has found it, please let me know!)

Having said that, using data from the past is as good as it gets.   

How was your formula developed?   1/2 of the 10 year yield + 1/2 of the S&P 500 yield?    It sounds a bit like you're assuming no capital appreciation after inflation...   

I'm fortunate that I'll have a very conservative withdrawal rate, so I don't worry about all this too much.   I do like McClung's "prime harvesting" though.

ysette9

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Re: Race from $2M to $4M...and Beyond!
« Reply #5919 on: February 10, 2022, 09:26:43 PM »
Extrapolations are always like that, aren't they?

Another source of the 4% rule is the backtesting in McClung's "Living off your money".    I found the details of his back testing weren't presented very clearly.   Does his 4% rule mean you take 4% of the initial value of your portfolio the first year, then adjust the first year amount for inflation and take that amount for the second year?   Or does his 4% rule mean you take 4% of the portfolio every year?    This should be spelled out very clearly in the book, but I can't find it.   (If someone has found it, please let me know!)

Having said that, using data from the past is as good as it gets.   

How was your formula developed?   1/2 of the 10 year yield + 1/2 of the S&P 500 yield?    It sounds a bit like you're assuming no capital appreciation after inflation...   

I'm fortunate that I'll have a very conservative withdrawal rate, so I don't worry about all this too much.   I do like McClung's "prime harvesting" though.
Everyone who researches and publishes on a safe withdrawal rate uses the same methodology: take a percentage of the initial portfolio (say, 4%) and then index that upwards for inflation each year. McClung presents some more complex methods based on a recent performance average that could give you more generous raises in good market times and also have you cutting back for safety in lean times. The original Trinity Study indexed for inflation and had no flexibility whatsoever in spending, which many argue goes contrary to our normal human nature.

If you only spent 4% of your portfolio balance at any given time you wouldnít run out of money but then you might also not be spending very much right after a market drop, which is why almost everyone pegs nominal spending at a percentage of the initial portfolio value and not at the value at any given point in time.

ysette9

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Race from $2M to $4M...and Beyond!
« Reply #5920 on: February 10, 2022, 09:29:08 PM »
Iím late to the @DaTrill race-to-the-bottom conversation but I canít help but five in. Michael Kitces is a voice I respect a lot in the retirement analysis and advisor space for his nerdy and deep work. Here is an excerpt from an old podcast interview with the Mad Fientist.

ďMichael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesnít seem to get any worse than about 4%.
Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.
But thatís horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time periodóthe combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if youíre a retiree. It means, bad news, the market went down; the good news, you donít need as much for your portfolio anyways because everything got cheaper (because thatís what happens with deflation, the stock gets cheaper).
And so, this 4% initial withdrawal rate worked.Ē

https://www.madfientist.com/michael-kitces-interview/

He goes on and has talked about this same thing on many other podcast with other people. I could listen to him talk about safe withdrawal rates for ever because I am that dorky. In any case he has looked into this deeply and I appreciate his optimism about the robustness of a withdrawal rate around 4%.
He notes that for a FIREee something more like 3.5% is appropriate for really long retirement periods.

I really enjoyed this. Thank you for posting it.

Investigate Kitces background (more acting classes than Finance or stats classes).  Ask him what statistical assumptions underly the 4% rule.

Another estimate of 4% could be expressed as (10 yr yield/2) + (S&P 500 yield/2) = SWR.  For the sample period in the paper, this would roughly equal 4% where 10 yr yields were 7% and S&P 500 yields were 2.5%.  Today 10 yr is now around 2% (1%) and S&P 500 yield is around 1.5% (0.75%) for a 1.75% SWR. 

The simplest critique of the 4% rule is the current data falls outside the relevant range of the estimation data.  It doesn't mean the estimate won't hold but indicates that the past data does not support making these claims.   
You didnít read up on him very much then. He holds just about every financial advisor designation out there. From Wikipedia:

ď He earned a Bachelor's in Psychology from Bates College in Maine[5] with a minor in theater,[6] and subsequently earned a Master's in Financial Planning from The American College (Pennsylvania) and a Master's in Taxation from the University of Tulsa.[7][failed verification] He also holds the CFP, CLU, ChFC, RHU, REBC, and CASL designations.Ē

Iím not going to try to summarize Kitcesí work on safe withdrawal rates. He has written dozens of articles and you can listen to him talk for hours on the subject on various podcasts. Here is an article with him interviewing Bengen, the godfather of the 4% rule on the details of you care to read. https://www.kitces.com/blog/bill-bengen-4-percent-rule-safe-withdrawal-rates-historical-returns-research-book/
« Last Edit: February 10, 2022, 09:32:45 PM by ysette9 »

tooqk4u22

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Re: Race from $2M to $4M...and Beyond!
« Reply #5921 on: February 11, 2022, 07:36:44 AM »
Iím late to the @DaTrill race-to-the-bottom conversation but I canít help but five in. Michael Kitces is a voice I respect a lot in the retirement analysis and advisor space for his nerdy and deep work. Here is an excerpt from an old podcast interview with the Mad Fientist.

ďMichael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesnít seem to get any worse than about 4%.
Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.
But thatís horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time periodóthe combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if youíre a retiree. It means, bad news, the market went down; the good news, you donít need as much for your portfolio anyways because everything got cheaper (because thatís what happens with deflation, the stock gets cheaper).
And so, this 4% initial withdrawal rate worked.Ē

https://www.madfientist.com/michael-kitces-interview/

He goes on and has talked about this same thing on many other podcast with other people. I could listen to him talk about safe withdrawal rates for ever because I am that dorky. In any case he has looked into this deeply and I appreciate his optimism about the robustness of a withdrawal rate around 4%.
He notes that for a FIREee something more like 3.5% is appropriate for really long retirement periods.

I really enjoyed this. Thank you for posting it.

Investigate Kitces background (more acting classes than Finance or stats classes).  Ask him what statistical assumptions underly the 4% rule.

Another estimate of 4% could be expressed as (10 yr yield/2) + (S&P 500 yield/2) = SWR.  For the sample period in the paper, this would roughly equal 4% where 10 yr yields were 7% and S&P 500 yields were 2.5%.  Today 10 yr is now around 2% (1%) and S&P 500 yield is around 1.5% (0.75%) for a 1.75% SWR. 

The simplest critique of the 4% rule is the current data falls outside the relevant range of the estimation data.  It doesn't mean the estimate won't hold but indicates that the past data does not support making these claims.   

Both of those are specific points in time and ignore variability over a 30 year period be it for inflation, capital appreciation, hanging rates, economic growth and so on so it's fairly useless. 

Also, you would use the the SP500 earnings yield and not the dividend yield as that is ultimately what drives income and value.   

Not to mention by just using dividend yield you are ignoring stock buybacks that have been significant bc it is more tax favorable than dividends (and helps management comp)

pecunia

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Re: Race from $2M to $4M...and Beyond!
« Reply #5922 on: February 11, 2022, 07:53:46 AM »
Much of this has been discussed under;

https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/

Things that work stay around.  Things that don't work disappear.  I've seen a lot of evidence for that in all the various diets that have been developed.  I was listening to an explanation regarding the English aristocracy a few years back.  It was stated that for these English lords to live on their estates that the value of their estates had to be 25X what they spent to live on each year.  That's four percent.  Was it just coincidence or how things work?

This guy still seems right:

https://jlcollinsnh.com/2012/12/07/stocks-part-xiii-withdrawal-rates-how-much-can-i-spend-anyway/

I'm glad it does. Unlike a lot of you,......money stuff is quite boring.

Car Jack

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Re: Race from $2M to $4M...and Beyond!
« Reply #5923 on: February 11, 2022, 08:14:35 AM »
Much of this has been discussed under;

https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/

Things that work stay around.  Things that don't work disappear.  I've seen a lot of evidence for that in all the various diets that have been developed.  I was listening to an explanation regarding the English aristocracy a few years back.  It was stated that for these English lords to live on their estates that the value of their estates had to be 25X what they spent to live on each year.  That's four percent.  Was it just coincidence or how things work?

This guy still seems right:

https://jlcollinsnh.com/2012/12/07/stocks-part-xiii-withdrawal-rates-how-much-can-i-spend-anyway/

I'm glad it does. Unlike a lot of you,......money stuff is quite boring.

Haha.  When you're doing it right, it's boring.

I always remember the Fidelity 401k study.  They analyzed the behavior and account performance of their 401k owners.  The absolute highest performers, by far were people who had one easy to see characteristic.  They were dead.

Dicey

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Re: Race from $2M to $4M...and Beyond!
« Reply #5924 on: February 11, 2022, 08:51:27 AM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

ixtap

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Re: Race from $2M to $4M...and Beyond!
« Reply #5925 on: February 11, 2022, 10:33:45 AM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

Between this and countertops over on the family thread, maybe we all just need to go outside and find something new to talk about?

Much Fishing to Do

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Re: Race from $2M to $4M...and Beyond!
« Reply #5926 on: February 11, 2022, 10:35:39 AM »
Yeah, I always thought the conclusion to the Bengen article was as boring as it gets.  The conclusion of his paper states someone 60-65 could do inflation adjusted withdraws of about 4 percent and never run out of money.  As someone who knows no one in my family that has ever lived to over 85, this was telling me that I could safely spend 1/25th of my money for 25 years.  Well no shit.  So basically if I invest my money I can count on it to grow at the rate of inflation and no more.   Biggest letdown ever.  I guess I should just put it all in TIPs or something so I didnt have to experince the volatility of the markets and couldn't spend any more than that anyway.

Now the math behind what he used to get to that conclusion...and all the later studies and tables with many more variables that started showing perpetual rates and stuff then made it interesting and I saw the point to investing in the market.
« Last Edit: February 11, 2022, 11:05:03 AM by Much Fishing to Do »

tooqk4u22

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Re: Race from $2M to $4M...and Beyond!
« Reply #5927 on: February 11, 2022, 12:18:56 PM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

I apologize....a week ago I said not to engage with DaTroll and here I am today having engaged to another stupid comment.. my bad.

Anyway, I was just having a convo with a friend that is in the
market for a new car in the $60k'ish range.  On one hand I thought that is a lotnfor a frigging car but on the other hand I thought it was crazy that being in this threads club that it really isn't that much (even at the low end $2mil). Not that I would or at $2mil you even could do it every year but it really wouldn't hurt that much to spend that much on a car or anything for that matter. (It would pain me dearly psychologically)

ixtap

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Re: Race from $2M to $4M...and Beyond!
« Reply #5928 on: February 11, 2022, 12:44:46 PM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

I apologize....a week ago I said not to engage with DaTroll and here I am today having engaged to another stupid comment.. my bad.

Anyway, I was just having a convo with a friend that is in the
market for a new car in the $60k'ish range.  On one hand I thought that is a lotnfor a frigging car but on the other hand I thought it was crazy that being in this threads club that it really isn't that much (even at the low end $2mil). Not that I would or at $2mil you even could do it every year but it really wouldn't hurt that much to spend that much on a car or anything for that matter. (It would pain me dearly psychologically)

We have a lot of "Hey, we could afford...!" moments, but it often comes back to, yeah, but is that really how we want to spend our money? Don't worry about us, we aren't misers, we just don't necessarily need a second car that is parked 9 months out of the year just to smooth things over a bit when we visit family.

G-dog

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Re: Race from $2M to $4M...and Beyond!
« Reply #5929 on: February 11, 2022, 02:56:17 PM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

I apologize....a week ago I said not to engage with DaTroll and here I am today having engaged to another stupid comment.. my bad.

Anyway, I was just having a convo with a friend that is in the
market for a new car in the $60k'ish range.  On one hand I thought that is a lotnfor a frigging car but on the other hand I thought it was crazy that being in this threads club that it really isn't that much (even at the low end $2mil). Not that I would or at $2mil you even could do it every year but it really wouldn't hurt that much to spend that much on a car or anything for that matter. (It would pain me dearly psychologically)

We have a lot of "Hey, we could afford...!" moments, but it often comes back to, yeah, but is that really how we want to spend our money? Don't worry about us, we aren't misers, we just don't necessarily need a second car that is parked 9 months out of the year just to smooth things over a bit when we visit family.

Yep, every once in awhile I realize I could go and buy a reasonably priced house for cash if I wanted.  Itís a very weird feeling.


Dicey

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Re: Race from $2M to $4M...and Beyond!
« Reply #5930 on: February 11, 2022, 03:02:55 PM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

I apologize....a week ago I said not to engage with DaTroll and here I am today having engaged to another stupid comment.. my bad.

Anyway, I was just having a convo with a friend that is in the
market for a new car in the $60k'ish range.  On one hand I thought that is a lotnfor a frigging car but on the other hand I thought it was crazy that being in this threads club that it really isn't that much (even at the low end $2mil). Not that I would or at $2mil you even could do it every year but it really wouldn't hurt that much to spend that much on a car or anything for that matter. (It would pain me dearly psychologically)

We have a lot of "Hey, we could afford...!" moments, but it often comes back to, yeah, but is that really how we want to spend our money? Don't worry about us, we aren't misers, we just don't necessarily need a second car that is parked 9 months out of the year just to smooth things over a bit when we visit family.

Yep, every once in awhile I realize I could go and buy a reasonably priced house for cash if I wanted.  Itís a very weird feeling.
Hahahaha ha. No such thing in the Bay Area.

G-dog

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Re: Race from $2M to $4M...and Beyond!
« Reply #5931 on: February 11, 2022, 03:13:51 PM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

I apologize....a week ago I said not to engage with DaTroll and here I am today having engaged to another stupid comment.. my bad.

Anyway, I was just having a convo with a friend that is in the
market for a new car in the $60k'ish range.  On one hand I thought that is a lotnfor a frigging car but on the other hand I thought it was crazy that being in this threads club that it really isn't that much (even at the low end $2mil). Not that I would or at $2mil you even could do it every year but it really wouldn't hurt that much to spend that much on a car or anything for that matter. (It would pain me dearly psychologically)

We have a lot of "Hey, we could afford...!" moments, but it often comes back to, yeah, but is that really how we want to spend our money? Don't worry about us, we aren't misers, we just don't necessarily need a second car that is parked 9 months out of the year just to smooth things over a bit when we visit family.

Yep, every once in awhile I realize I could go and buy a reasonably priced house for cash if I wanted.  Itís a very weird feeling.
Hahahaha ha. No such thing in the Bay Area.

I know!  But even though this is just theoretical, fortunately that isnít the case everywhere (yet).

Fomerly known as something

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Re: Race from $2M to $4M...and Beyond!
« Reply #5932 on: February 11, 2022, 08:41:17 PM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

Kind of boring but I just played some more rich people games.  With likely raising interest rates, Iím tax loss harvesting between the CA muni fund and the total bond market. 

ETA:  Iím very casually looking at houses here, but there arenít a lot that are in my price range where Iíd want to live.
« Last Edit: February 11, 2022, 08:43:10 PM by Fomerly known as something »

tooqk4u22

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Re: Race from $2M to $4M...and Beyond!
« Reply #5933 on: February 11, 2022, 09:11:26 PM »
Normally I love this thread, but this 4% bickering is boring. Any mustachian who is legitimately in this club is never going to run out of money. Can't we talk about something more interesting?

Kind of boring but I just played some more rich people games.  With likely raising interest rates, Iím tax loss harvesting between the CA muni fund and the total bond market. 

ETA:  Iím very casually looking at houses here, but there arenít a lot that are in my price range where Iíd want to live.

Ooh, I should look at that.   I have always focused on equities harvesting but have kind of overlooked opportunities to do it with bond allocation except for normal rebalancing

Thanks

DaTrill

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Re: Race from $2M to $4M...and Beyond!
« Reply #5934 on: February 17, 2022, 02:46:13 PM »
Extrapolations are always like that, aren't they?

Another source of the 4% rule is the backtesting in McClung's "Living off your money".    I found the details of his back testing weren't presented very clearly.   Does his 4% rule mean you take 4% of the initial value of your portfolio the first year, then adjust the first year amount for inflation and take that amount for the second year?   Or does his 4% rule mean you take 4% of the portfolio every year?    This should be spelled out very clearly in the book, but I can't find it.   (If someone has found it, please let me know!)

Having said that, using data from the past is as good as it gets.   

How was your formula developed?   1/2 of the 10 year yield + 1/2 of the S&P 500 yield?    It sounds a bit like you're assuming no capital appreciation after inflation...   

I'm fortunate that I'll have a very conservative withdrawal rate, so I don't worry about all this too much.   I do like McClung's "prime harvesting" though.

Just back of the envelope but framing the information differently.  Within this forum, I'd be curious how many are in the 3's and feel more confident that will see 4 before 2?  Or if anyone preciously in the 2's is now in the 1's.     

DaTrill

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Re: Race from $2M to $4M...and Beyond!
« Reply #5935 on: February 17, 2022, 02:49:19 PM »
Iím late to the @DaTrill race-to-the-bottom conversation but I canít help but five in. Michael Kitces is a voice I respect a lot in the retirement analysis and advisor space for his nerdy and deep work. Here is an excerpt from an old podcast interview with the Mad Fientist.

ďMichael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesnít seem to get any worse than about 4%.
Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.
But thatís horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time periodóthe combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if youíre a retiree. It means, bad news, the market went down; the good news, you donít need as much for your portfolio anyways because everything got cheaper (because thatís what happens with deflation, the stock gets cheaper).
And so, this 4% initial withdrawal rate worked.Ē

https://www.madfientist.com/michael-kitces-interview/

He goes on and has talked about this same thing on many other podcast with other people. I could listen to him talk about safe withdrawal rates for ever because I am that dorky. In any case he has looked into this deeply and I appreciate his optimism about the robustness of a withdrawal rate around 4%.
He notes that for a FIREee something more like 3.5% is appropriate for really long retirement periods.

I really enjoyed this. Thank you for posting it.

Investigate Kitces background (more acting classes than Finance or stats classes).  Ask him what statistical assumptions underly the 4% rule.

Another estimate of 4% could be expressed as (10 yr yield/2) + (S&P 500 yield/2) = SWR.  For the sample period in the paper, this would roughly equal 4% where 10 yr yields were 7% and S&P 500 yields were 2.5%.  Today 10 yr is now around 2% (1%) and S&P 500 yield is around 1.5% (0.75%) for a 1.75% SWR. 

The simplest critique of the 4% rule is the current data falls outside the relevant range of the estimation data.  It doesn't mean the estimate won't hold but indicates that the past data does not support making these claims.   
You didnít read up on him very much then. He holds just about every financial advisor designation out there. From Wikipedia:

ď He earned a Bachelor's in Psychology from Bates College in Maine[5] with a minor in theater,[6] and subsequently earned a Master's in Financial Planning from The American College (Pennsylvania) and a Master's in Taxation from the University of Tulsa.[7][failed verification] He also holds the CFP, CLU, ChFC, RHU, REBC, and CASL designations.Ē

Iím not going to try to summarize Kitcesí work on safe withdrawal rates. He has written dozens of articles and you can listen to him talk for hours on the subject on various podcasts. Here is an article with him interviewing Bengen, the godfather of the 4% rule on the details of you care to read. https://www.kitces.com/blog/bill-bengen-4-percent-rule-safe-withdrawal-rates-historical-returns-research-book/

He's an actor memorizing and reading lines.  Would you want a young Neil Patrick Harris to perform your surgery?   

SwordGuy

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Re: Race from $2M to $4M...and Beyond!
« Reply #5936 on: February 17, 2022, 02:57:48 PM »
Iím late to the @DaTrill race-to-the-bottom conversation but I canít help but five in. Michael Kitces is a voice I respect a lot in the retirement analysis and advisor space for his nerdy and deep work. Here is an excerpt from an old podcast interview with the Mad Fientist.

ďMichael Kitces: Yeah. You know, as bad as it can get when you get these bad sequences, what we still ultimately found is it still doesnít seem to get any worse than about 4%.
Even when we look at horrible time periods like if you retired in 1929 on the eve of the Great Depression, the market went down about 85% in the first three years. Fortunately, if you had a diversified portfolio with some bonds in there, you mitigated that a little bit.
But thatís horrific, truly horrific. It makes the financial crisis look mild by comparison. But the market really did go down about 85% from top to bottom from 1929 to 1932. Yet the 4% rule worked through that time periodóthe combination, the diversification, and keeping our spending modest, and frankly, the fact that the Great Depression had a lot of deflation which is really bad economically, but is technically good if youíre a retiree. It means, bad news, the market went down; the good news, you donít need as much for your portfolio anyways because everything got cheaper (because thatís what happens with deflation, the stock gets cheaper).
And so, this 4% initial withdrawal rate worked.Ē

https://www.madfientist.com/michael-kitces-interview/

He goes on and has talked about this same thing on many other podcast with other people. I could listen to him talk about safe withdrawal rates for ever because I am that dorky. In any case he has looked into this deeply and I appreciate his optimism about the robustness of a withdrawal rate around 4%.
He notes that for a FIREee something more like 3.5% is appropriate for really long retirement periods.

I really enjoyed this. Thank you for posting it.

Investigate Kitces background (more acting classes than Finance or stats classes).  Ask him what statistical assumptions underly the 4% rule.

Another estimate of 4% could be expressed as (10 yr yield/2) + (S&P 500 yield/2) = SWR.  For the sample period in the paper, this would roughly equal 4% where 10 yr yields were 7% and S&P 500 yields were 2.5%.  Today 10 yr is now around 2% (1%) and S&P 500 yield is around 1.5% (0.75%) for a 1.75% SWR. 

The simplest critique of the 4% rule is the current data falls outside the relevant range of the estimation data.  It doesn't mean the estimate won't hold but indicates that the past data does not support making these claims.   
You didnít read up on him very much then. He holds just about every financial advisor designation out there. From Wikipedia:

ď He earned a Bachelor's in Psychology from Bates College in Maine[5] with a minor in theater,[6] and subsequently earned a Master's in Financial Planning from The American College (Pennsylvania) and a Master's in Taxation from the University of Tulsa.[7][failed verification] He also holds the CFP, CLU, ChFC, RHU, REBC, and CASL designations.Ē

Iím not going to try to summarize Kitcesí work on safe withdrawal rates. He has written dozens of articles and you can listen to him talk for hours on the subject on various podcasts. Here is an article with him interviewing Bengen, the godfather of the 4% rule on the details of you care to read. https://www.kitces.com/blog/bill-bengen-4-percent-rule-safe-withdrawal-rates-historical-returns-research-book/

He's an actor memorizing and reading lines.  Would you want a young Neil Patrick Harris to perform your surgery?   

I would if he had gone and gotten a medical degree that included a surgery track and was properly licensed, which by analogy is what Kitces has done, given the education and certification listed for him.

That comment of yours has to be one of the worst arguments I've seen outside of politics for some time.   Seriously, your point is so flawed that judges in a formal debate and the audience would cringe in embarrassment for you.


Taran Wanderer

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Re: Race from $2M to $4M...and Beyond!
« Reply #5937 on: February 17, 2022, 03:21:43 PM »
This used to be my favorite thread on the forumÖ

scottish

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Re: Race from $2M to $4M...and Beyond!
« Reply #5938 on: February 17, 2022, 03:29:37 PM »
This used to be my favorite thread on the forumÖ

My bad, I didn't mean to extend the dialog in question.   Drawdown is on my mind a bit.   Sorry about that.

pecunia

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Re: Race from $2M to $4M...and Beyond!
« Reply #5939 on: February 17, 2022, 09:08:41 PM »
Stock Market tumbles.  They always have to have someone to blame.  They always give a single reason for it although there are millions and millions of investors with different lives and different goals.  There are also thousands of different situations affecting the companies.  This time they blame Putin.  I guess that's OK.

EscapeVelocity2020

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Re: Race from $2M to $4M...and Beyond!
« Reply #5940 on: February 18, 2022, 07:43:01 AM »
I'm not as concerned about the market gyrations (oh noes, ridiculously affluent people are losing money and might have to wait a bit longer to be richer).  I am worried about prolonged high inflation.  Torches and pitchforks are already coming out and we've only just begun to feel the affects of an inflationary trend that the Fed currently is doing very little to combat.  As the economy really starts to open up, people are going to use the Fed's generous borrowing terms to really set fire to inflationary trends.

Fingers are being pointed everywhere - politicians (but Trump will save us, LOL!), greedy CEOs (they could cut prices if they wanted, right?), crypto / NFTs / meme stonks (I don't get it, but I'm sure it has something to do with all the world's problems), and the wealthy / hedge funds / investors (they buy up all the homes and rent / AirBnB them!)...

The longer inflation goes on, the louder the displeasure of the masses will get. 

pecunia

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Re: Race from $2M to $4M...and Beyond!
« Reply #5941 on: February 18, 2022, 08:07:25 AM »
"The longer inflation goes on, the louder the displeasure of the masses will get. "

You gotta wonder what happens after that?  Things could go South like Argentina.

tooqk4u22

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Re: Race from $2M to $4M...and Beyond!
« Reply #5942 on: February 18, 2022, 11:07:08 AM »
"The longer inflation goes on, the louder the displeasure of the masses will get. "

You gotta wonder what happens after that?  Things could go South like Argentina.

Not saying it absolutely can't happen here but it is highly unlikely to happen as we have a real currency and economy. Not to mention FED will at some point get on it.

Besides this has been the way of Argentina for the last century......much like a person with a shopping addiction that only lives on social security and refuses to get a job.

EscapeVelocity2020

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Re: Race from $2M to $4M...and Beyond!
« Reply #5943 on: February 18, 2022, 12:26:39 PM »
I have no idea how bad inflation could get or how Americans will ultimately react to it - current earners are the generations (X, Y, Z) that have never experienced high inflation...  So far, people are just grumpily spending more, which leads me to believe no one is taking this very seriously, other than the main stream media which we are all desensitized to at this point.

secondcor521

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Re: Race from $2M to $4M...and Beyond!
« Reply #5944 on: February 18, 2022, 01:53:17 PM »
I have no idea how bad inflation could get or how Americans will ultimately react to it - current earners are the generations (X, Y, Z) that have never experienced high inflation...  So far, people are just grumpily spending more, which leads me to believe no one is taking this very seriously, other than the main stream media which we are all desensitized to at this point.

I'm not.  I'm grumpily not spending on stuff I otherwise would because I think the price being asked is "too much".  I can afford it, but I don't want to.  So my consumption is down, especially on the more discretionary items.

I'm not the only one either.  I know others who are holding off on purchases of various kinds.

Yes, if one "has to" have something, then one must "give in" and buy it at some point.  So some consumption may be delayed rather than disappearing.

However, I also think that there is an effect where if someone doesn't buy something - particularly a discretionary item - then they may realize or decide that they can and would prefer to do without it permanently.  And some time sensitive items are never "caught up" - I did not take my usual week vacation to sunnier climate this past winter, and while I'll probably go somewhere this winter, that Christmas 2020 trip will forever go untaken.

It does probably matter if one is still earning an income or not.  My son is a young worker, and his compensation has outpaced inflation so far.  I'm FIREd, and while my WR% is low enough, the presence of a big fat zero on line 1 of my Form 1040 does impact the way I see things.

I've no idea how it will all shake out over time.  I just wanted to point out that some people are already cutting back.

Exflyboy

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Re: Race from $2M to $4M...and Beyond!
« Reply #5945 on: February 18, 2022, 06:33:45 PM »
Ahh yes, this forum should be renamed "The big fat zero on Line 1"...:)

Except I went back to work so line 1 might not actually be wide enough next tax season...

secondcor521

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Re: Race from $2M to $4M...and Beyond!
« Reply #5946 on: February 18, 2022, 06:53:26 PM »
Ahh yes, this forum should be renamed "The big fat zero on Line 1"...:)

Except I went back to work so line 1 might not actually be wide enough next tax season...

Just use a smaller font. ;-)

Finntastic

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Re: Race from $2M to $4M...and Beyond!
« Reply #5947 on: February 18, 2022, 07:40:22 PM »
May 2021 - 2.65m$
June 2021 - 2.61m$
July 2021 - 2.62m$
August 2021 - 2.82m$
September 2021 - 2.79m$
October 2021 - 2.87m$
November 2021 - 2.89m$
December 2021 - 2.80m$
January 2022 - 2.76m$

so that was bad month with -40k$ due to everything going down, gold, stocks and cryptos... also first month after RE so no more salary income.

Car Jack

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Re: Race from $2M to $4M...and Beyond!
« Reply #5948 on: February 18, 2022, 08:56:34 PM »
May 2021 - 2.65m$
June 2021 - 2.61m$
July 2021 - 2.62m$
August 2021 - 2.82m$
September 2021 - 2.79m$
October 2021 - 2.87m$
November 2021 - 2.89m$
December 2021 - 2.80m$
January 2022 - 2.76m$

so that was bad month with -40k$ due to everything going down, gold, stocks and cryptos... also first month after RE so no more salary income.


Time to put on some Dire Straits - Money for Nothin' and when Mark is singing about Boy George ..... he's a millionaire, just sing with him "I'm a millionaire".

Not bad.  Lost a little over the last few months?  Ah..no biggy.  Still got enough to be a millionaire.

SwordGuy

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Re: Race from $2M to $4M...and Beyond!
« Reply #5949 on: February 18, 2022, 10:00:26 PM »
... Lost a little over the last few months?  Ah..no biggy.  Still got enough to be a millionaire.

That's such a soothing thought, isn't it?!

Our stocks are down about $60k since the year started.   Meh.   It's just normal market behavior.   

On the plus side:
  • rents are going up
  • rental property values are up
  • farm yields are up
  • we upped our shares on $199k of the Vanguard S&P 500 fund by 10% (sheer dumb luck)
  • we upped our shares on $96k of the Vanguard S&P 500 fund by 0.75% (mostly dumb luck)
  • a mortgage note we hold has payments starting to come due
  • our trucking company startup survived its first year and turned a profit
  • learning about NUA will save me a bunch of taxes in the future.

I'm in the process of closing out the slew of old 401Ks into 2 IRAs and a brokerage account.  So sometimes the positions in the 401K have to be liquidated and repurchased in the new IRA.  That's how I ended up with those extra S&P 500 shares.   So when prices go up again, we'll be even better off.

Company stock will be pulled out into the brokerage acct to take advantage of the NUA provision.   I'll take a small hit up front to pay a lower tax rate on a lot larger balance.

We have no debt.   Passive income is up.   We have lots of different income streams, many of which are uncorrelated with others.

Life is good.