Early-retirement wannabe

Thrugelmir

westv wrote: »

One of the ways to see how your portfolio withdrawals mighy cope with market volatility is to use historic data.

Historic data has no correlation to the financial engineering undertaken by the worlds central banks since 2006. No one knows what coming out the other side is going to be like. Thinking that everything has been resolved and all is hunky dory. Is little more than wishful thinking. Japan sits as a timely reminder.

k6chris

weenie15 wrote: »

The Finance Zombie has been running a 4% SWR experiment for the past 2.5 years. The notional 'everything in Vanguard LS 100%' is over £100k up from its original portfolio value, despite the 4% withdrawals.

http://www.thefinancezombie.com/2017/07/safe-withdrawal-rate-experiment-month-31-july-2017.html

...which will continue to be the case until it is not.....

weenie15

k6chris wrote: »

...which will continue to be the case until it is not.....

True but since he's unlikely to be running the experiment for 30 years to show that it works (or not), we'll never know.

Will be interesting to see what happens when the markets tank.

westv

westv wrote: »

One of the ways to see how your portfolio withdrawals mighy cope with market volatility is to use historic data.

Thrugelmir wrote: »

Historic data has no correlation to the financial engineering undertaken by the worlds central banks since 2006. No one knows what coming out the other side is going to be like. Thinking that everything has been resolved and all is hunky dory. Is little more than wishful thinking. Japan sits as a timely reminder.

Who said everything was hunky dory?

jamesd

weenie15 wrote: »

The Finance Zombie has been running a 4% SWR experiment for the past 2.5 years. The notional 'everything in Vanguard LS 100%' is over £100k up from its original portfolio value, despite the 4% withdrawals.

http://www.thefinancezombie.com/2017/07/safe-withdrawal-rate-experiment-month-31-july-2017.html

Nobody should be surprised that a 100% equity portfolio has been doing well in an equity bull market. It's not a wise position in current market conditions, which favour lower equity holdings than usual.

Given market conditions when the exercise started, both the portfolio being used and Lifestrategy 100 should succeed.

jamesd

Marine_life wrote: »

I don't agree.
The SWR depends on achieving a certain rate of return.
If I need to opt for more volatile investments (e,g, equities) AND the return on those investments is reducing then then my relative risk has increased.

Close enough to mislead, but wrong.

The investments you use get a SWR, the highest one that would have worked for all of the historic starting points (each historic starting point has its own SWR from 4% to over 10%, with 6.5% the SWR for average results).

Figure 2 here shows the range of historic SWRs with the asset allocation producing the highest worst case SWR circled. Table 3 describes that allocation and others that produce results almost as good.

If you change to more risky investments you get a new SWR that's calculated for those investments. The original SWR doesn't change at all, it's for different investments.

A SWR is usually calculated for historic returns but one can also be calculated for assumed future returns. If you calculate that SWR the other two SWRs haven't changed, this is another new one.

If you change the assumed future results you get a new SWR. The previous three SWRs haven't changed just because you calculated a new one with lower or higher projected returns. Doing this to adjust for current market conditions is sensible and described here. Do this current market conditions calculation for all of the historic cases and pick the lowest and you get the original historic SWR, if you use that one's asset allocation.

If you use current market conditions, that affects the SWRs. Usually they will be higher than the historic worst case SWR but you might find yourself in worse than historic starting conditions.

Whether you need to opt for more risky investments depends on whether the SWR for the investments you initially picked meets your desired income or not. You can either use the SWR for the investments you chose or change to different investments to get the new SWR which they have. If you pick a mixture with more volatility you get that higher volatility. It isn't the SWRs changing, it's the one you need to hit your income target.

Marine_life

jamesd wrote: »

Close enough to mislead, but wrong.

We'll just have to agree to differ then

chucknorris

fatbeetle wrote: »

When I emigrated I kept my house on, and rented it out. So we now have a mortgage free home, in one of the most beautiful parts of the UK (Sennen, Cornwall,) to return to

That was a shrewd move, did you always suspect that you might come back, or was it just a case of keeping your options open?

It has saved you stamp duty, estate agent, solicitor (twice) and quite a few miscellaneous fees (that can add up), not to mention the rental profit and avoiding having to rent prior to buying back over here.

atush

fatbeetle wrote: »

I've been getting more and more homesick over the past 5 years, or feeling the "hiraeth" as us Welsh would say. I had a few, very significant, bereavements last year, and they made me realise how much I wanted to spend time with friends.

I promised my (now late,) mother that I would return every two years for a holiday when I emigrated, and I kept to that, so I don't think there's any big shocks awaiting me. My last holiday in the UK was in the winter of 2015 for 2 months.

When I emigrated I kept my house on, and rented it out. So we now have a mortgage free home, in one of the most beautiful parts of the UK (Sennen, Cornwall,) to return to, and are in the position of retiring early, (me 59, wife 54,) due to money we have earned and saved over here.

So a mix of emotional, lifestyle, and financial reasons really.

What will you do if your OH doesnt take to life in colder/wetter britain?

fatbeetle

atush wrote: »

What will you do if your OH doesnt take to life in colder/wetter britain?

That's a bridge we'll cross when we come to it. At present she's relishing the prospect.

All bar one of the 8 holidays (2 months long each) we've spent in the UK over the past 16 years, have been UK winter / Aus summer, so she's an inkling of what to expect.

As we'll be living on the furthest extremity of Kernow, the weather there is mild.