One must remember the 7 most important words of a retiree: "every year everything I buy costs more". So the enemy really is inflation. Since 1934 the Labor Dept. tells us CPI has averaged 3.4% annually. So when I follow the simple rule of 4% +3% we know why 3% was chosen. Now from 1973-1981 we had lots of inflation and it easily exceeded 3% annually. We also know that in 1962 (one born then can retire now at reduced SS) the S&P closed at 63 and 2024 at 4,770 or a factor of 76X. Dividends from the index in cash $2.15 and 2024 it was $70.30, or a factor of 33X. CPI at the end of '62 was 30---recently 307--a factor of 10 X If equities are not a major % of your retirement portfolio then good luck trying to keep up with inflation. Of course the brown underwear years of 2000 (-9/1%)---2001 (-11.9%)---- 2008 (-37%)---covid collapse (-33%)---and 2022 (-18.1%) can ruin many a retiree. As previously stated my value fund (90%-95% equities) with an emphasis on dividends worked nicely beginning in year 2000 with $300,000 and withdrawing 4% + 3% every year through 3/31/25. Withdrew almost $444,000 and as of March 31 the value exceeded $740,000. Remember, the 4 bear markets above during this 25-year period. The index ran out of $ many months ago--beginning with two bad years and then 2007, 2008, early 2009 withdrawals hurt badly. Now the money is managed by the Capital Group--I paid nothing decades ago to invest because of portfolio size--and I know someone has their nose in the air because the expense ratio is north of 55 basis points. That's fine--same scenario with S&P 500 index shows me with close to 3/4 of a million dollars while anyone with the index has no money and little or no cost. Remember the old saying; there are people who know the cost of everything and the value of nothing. What if I took cash dividends? $311,000+through 3/31/25 and a value north of $1.2 million. Index? $192,000 and $1.1 million ending value. Now, it's obvious that one can pick from Vanguard, Dodge & Cox, Fidelity, and many other fine fund families who have managed funds that in the withdrawal mode can do what folks want--many will do better than I have and have done better. Remember, my fund is basically 100% invested in equities--a few bonds and cash for withdrawal purposes no doubt. I think I have, with my investments, beaten back the enemy which is inflation. Let's see what happens going forward. Herbert Stein: " everything works until it doesn't."
thanks--but my question is simple--how does indexing work on the withdrawal phase--I used he S&P 500 which in 2000 was by far the index of choice--how would the total market index have done-- it seems to me that everyone knows the accumulation situation but what about phase 2 for most folks? When you have numerous bear markets beginning in 2000 and you could easily live another 25-years how did whatever index you use do? do folks use index funds as part of their withdrawal portfolio?
thanks--I think the question is how well, whatever indexes used, did they (it) perform from 2000 to 2024 or 03/31/25 during withdrawal--all I hear about is accumulation. For a decade or more all the action has been in U.S. markets so an international index of equities most like trailed somewhat significantly until maybe this year. At some time one usually begins withdrawing and if so is the equity portion indexed and if so what were the results in a 25-year period (2000-2024) that had a number of major bear markets. If one decides to have a 60/40 portfolio are the equity vehicles indexes such as those used during accumulation?
yes, large cap value--yes, different time different results--but for many of us retired folks the year 2000 is, in my opinion, ideal, as is any period where you have major bear markets that make withdrawals very tricky--I want to see results for time periods that encompass the worst not the best. We are constantly told about beginning withdrawals in a down market cycle--well, this 25-year period is just that and is what constitutes a retirement period for maybe at least one spouse. So far I see in my readings here and other places accumulation is always the go to when index is discussed--when I watch NBA finals I see a game played on both sides of the court. In my humble opinion when setting up withdrawals from equity funds, volatility plays a major role. Ed Marsh below echoes my thoughts about spare time and complicated. In this house it has been very simple--4+3 and leave it alone. No green eye shades, no hours picking one index over another, no buckets --no nothing, don't even think about it. Now we have been investing for over 55-years using a few good funds and leaving things alone--adding monthly for those 55-years up to today. Buffett has the right idea when it comes to nervous energy and he is big on indexing to gain wealth--but what about withdrawal? Blue chip stocks--managed fund asset (in my case)--an emphasis on dividends which sure helps to moderate volatility. Works for me.
Ran a hypothetical using a value fund we have had for decades and a 4% + 3% annual withdrawal. Compared to S&P 500 Index--began with $300,000 in year 2000 through 2025--we had numerous bear markets like the one in 2000 and who can forget 2008 as well as covid crushing us with a 33% decline followed by 2024 when stocks and bonds struggled. As of 03/31/2025 withdrawal was almost $444,000 from our fund, while the amount from the index was $431,000+ as it ran out of $ in January of 2024. Our fund at end of 1st quarter this year had a value of almost $744,000. How many people use the index as the equity portion of their withdrawal portfolio? I always hear it described as a wealth builder but to me that is half the game.
They are blessed to have you and Connie in their life. No doubt you have been a significant influence in the struggles they have encountered. I suspect there are many stories like yours but I wonder how many have family members that make sacrifices to help, which no doubt you both have done.
Many years agoMoney magazine working with a group of forensics asked 7 or 8 folks what there 10-15 year average return was--they agreed to sit with a forensic once they submitted their % to be sure they were being accurate. As you can guess they had no real numbers to back up their very healthy return. Buying and selling was their downfall. One guy from Boca Raton met them at his front door and said he really had no firm idea of his average total return but he had assets to pay cash for their home--play golf daily--vacation just about anywhere--and basically do whatever they wanted. Like him I guess I give a rat's rear end whether I am "aligned" or not--do I care what the S&P did and whether I kept up or not--NO! After 55 years if investing I have financial control of our lives. Maybe twice a year I check the funds we have been investing with for decades, and still do, to see what the value is. Does brother Quinn actually check daily to see gain/loss? YIKES!!! I guess different strokes for different folks.
I think there is confusion between "risk" and "volatility"--volatility is the movements both up and down that can be severe. Of course when we look at volatility we probably attribute that to the downside, not the upside, and why not? . I have found that many investors when they mention risk are really talking volatility. To me risk is the chance the investment will be lost.
Comments
One must remember the 7 most important words of a retiree: "every year everything I buy costs more". So the enemy really is inflation. Since 1934 the Labor Dept. tells us CPI has averaged 3.4% annually. So when I follow the simple rule of 4% +3% we know why 3% was chosen. Now from 1973-1981 we had lots of inflation and it easily exceeded 3% annually. We also know that in 1962 (one born then can retire now at reduced SS) the S&P closed at 63 and 2024 at 4,770 or a factor of 76X. Dividends from the index in cash $2.15 and 2024 it was $70.30, or a factor of 33X. CPI at the end of '62 was 30---recently 307--a factor of 10 X If equities are not a major % of your retirement portfolio then good luck trying to keep up with inflation. Of course the brown underwear years of 2000 (-9/1%)---2001 (-11.9%)---- 2008 (-37%)---covid collapse (-33%)---and 2022 (-18.1%) can ruin many a retiree. As previously stated my value fund (90%-95% equities) with an emphasis on dividends worked nicely beginning in year 2000 with $300,000 and withdrawing 4% + 3% every year through 3/31/25. Withdrew almost $444,000 and as of March 31 the value exceeded $740,000. Remember, the 4 bear markets above during this 25-year period. The index ran out of $ many months ago--beginning with two bad years and then 2007, 2008, early 2009 withdrawals hurt badly. Now the money is managed by the Capital Group--I paid nothing decades ago to invest because of portfolio size--and I know someone has their nose in the air because the expense ratio is north of 55 basis points. That's fine--same scenario with S&P 500 index shows me with close to 3/4 of a million dollars while anyone with the index has no money and little or no cost. Remember the old saying; there are people who know the cost of everything and the value of nothing. What if I took cash dividends? $311,000+through 3/31/25 and a value north of $1.2 million. Index? $192,000 and $1.1 million ending value. Now, it's obvious that one can pick from Vanguard, Dodge & Cox, Fidelity, and many other fine fund families who have managed funds that in the withdrawal mode can do what folks want--many will do better than I have and have done better. Remember, my fund is basically 100% invested in equities--a few bonds and cash for withdrawal purposes no doubt. I think I have, with my investments, beaten back the enemy which is inflation. Let's see what happens going forward. Herbert Stein: " everything works until it doesn't."
Post: How are you dealing with or plan to deal with inflation in retirement?
Link to comment from June 20, 2025
sounds good--was there a withdrawal program and if so how well did it work?
Post: If I Didn’t Index
Link to comment from June 15, 2025
thanks--but my question is simple--how does indexing work on the withdrawal phase--I used he S&P 500 which in 2000 was by far the index of choice--how would the total market index have done-- it seems to me that everyone knows the accumulation situation but what about phase 2 for most folks? When you have numerous bear markets beginning in 2000 and you could easily live another 25-years how did whatever index you use do? do folks use index funds as part of their withdrawal portfolio?
Post: If I Didn’t Index
Link to comment from June 15, 2025
thanks--I think the question is how well, whatever indexes used, did they (it) perform from 2000 to 2024 or 03/31/25 during withdrawal--all I hear about is accumulation. For a decade or more all the action has been in U.S. markets so an international index of equities most like trailed somewhat significantly until maybe this year. At some time one usually begins withdrawing and if so is the equity portion indexed and if so what were the results in a 25-year period (2000-2024) that had a number of major bear markets. If one decides to have a 60/40 portfolio are the equity vehicles indexes such as those used during accumulation?
Post: If I Didn’t Index
Link to comment from June 15, 2025
yes, large cap value--yes, different time different results--but for many of us retired folks the year 2000 is, in my opinion, ideal, as is any period where you have major bear markets that make withdrawals very tricky--I want to see results for time periods that encompass the worst not the best. We are constantly told about beginning withdrawals in a down market cycle--well, this 25-year period is just that and is what constitutes a retirement period for maybe at least one spouse. So far I see in my readings here and other places accumulation is always the go to when index is discussed--when I watch NBA finals I see a game played on both sides of the court. In my humble opinion when setting up withdrawals from equity funds, volatility plays a major role. Ed Marsh below echoes my thoughts about spare time and complicated. In this house it has been very simple--4+3 and leave it alone. No green eye shades, no hours picking one index over another, no buckets --no nothing, don't even think about it. Now we have been investing for over 55-years using a few good funds and leaving things alone--adding monthly for those 55-years up to today. Buffett has the right idea when it comes to nervous energy and he is big on indexing to gain wealth--but what about withdrawal? Blue chip stocks--managed fund asset (in my case)--an emphasis on dividends which sure helps to moderate volatility. Works for me.
Post: If I Didn’t Index
Link to comment from June 14, 2025
Ran a hypothetical using a value fund we have had for decades and a 4% + 3% annual withdrawal. Compared to S&P 500 Index--began with $300,000 in year 2000 through 2025--we had numerous bear markets like the one in 2000 and who can forget 2008 as well as covid crushing us with a 33% decline followed by 2024 when stocks and bonds struggled. As of 03/31/2025 withdrawal was almost $444,000 from our fund, while the amount from the index was $431,000+ as it ran out of $ in January of 2024. Our fund at end of 1st quarter this year had a value of almost $744,000. How many people use the index as the equity portion of their withdrawal portfolio? I always hear it described as a wealth builder but to me that is half the game.
Post: If I Didn’t Index
Link to comment from June 14, 2025
They are blessed to have you and Connie in their life. No doubt you have been a significant influence in the struggles they have encountered. I suspect there are many stories like yours but I wonder how many have family members that make sacrifices to help, which no doubt you both have done.
Post: One family, two very different life experiences
Link to comment from December 15, 2024
Many years ago Money magazine working with a group of forensics asked 7 or 8 folks what there 10-15 year average return was--they agreed to sit with a forensic once they submitted their % to be sure they were being accurate. As you can guess they had no real numbers to back up their very healthy return. Buying and selling was their downfall. One guy from Boca Raton met them at his front door and said he really had no firm idea of his average total return but he had assets to pay cash for their home--play golf daily--vacation just about anywhere--and basically do whatever they wanted. Like him I guess I give a rat's rear end whether I am "aligned" or not--do I care what the S&P did and whether I kept up or not--NO! After 55 years if investing I have financial control of our lives. Maybe twice a year I check the funds we have been investing with for decades, and still do, to see what the value is. Does brother Quinn actually check daily to see gain/loss? YIKES!!! I guess different strokes for different folks.
Post: Dart board investing. What, me worry? Quinn may not be a good example
Link to comment from September 3, 2024
I think there is confusion between "risk" and "volatility"--volatility is the movements both up and down that can be severe. Of course when we look at volatility we probably attribute that to the downside, not the upside, and why not? . I have found that many investors when they mention risk are really talking volatility. To me risk is the chance the investment will be lost.
Post: Almost True
Link to comment from April 17, 2024
I don't do tenants and toilets just dividends. I admire your hard work and family values.
Post: Handing Over the Keys
Link to comment from April 6, 2024