Reminds me a little of a paper Wade Pfau wrote in 2011 called "Can We Predict the Sustainable Withdrawal Rate for New Retirees?" He used regression analysis with three factors: 1) 10 Year Average Earnings Yield (1/CAPE); 2) 10 Year Average Dividend Yield (of S&P500); and 3) Interest Rate of 10 year Treasury. Using these factors for June 2022 data I calculated a safe withdrawal rate of 1.4%. I hope I messed up somewhere or today's retirees will be struggling 15-20 years from now.
@2023Red
2 жыл бұрын
I get confused. Since the stock market such as SPY averages 9% annually over the past 90 years, why are so concerned about the atypical bad year at al? It would seem an annual withdrawal of 4% every year would be a safe bet under any reasonable scenario.
@jessicatornare5624
Жыл бұрын
Excellent topic!!! Just one question: what is exactly the multiplicator coefficient? Is it the coefficient of your variable/fixed expenses (or said differently your capacity to adjust your budget if necessary)?
@PH-dm8ew
Жыл бұрын
Thanks for this video. I have been asking everyone i know and every online blogger if this is feasible and have gotten no answers. I was thinking that at the higher capes all my stock funds are higher therefore a lower rate when stocks are riskier gives a safer rate and still keeps a solid income. At lower cape higher return with greater future potential gains. i was just looking at using 1/shiller as the draw down rate. not as complicated as what you show. So today at 29.3 its around 3.4 %. Adding in a boundary like 3% and 5 % seems to work. Dont forget in years like 1999 where cape is high and gives a low % draw is when your accounts are at their maximum value. So the draw is not impacted as much as we would think. Again thanks for this episode. Great info.
@mikesurel5040
2 жыл бұрын
Sounds like CAPE with some guardrails might help with some of the fluctuations when the withdrawal rates are near your initial 4% rate?
@NextLevelLife
2 жыл бұрын
Maybe! Would be an interesting combination to look into, for sure :)
@Blaidd101
2 жыл бұрын
Love that videos. How would you calculate the Cape or Caey on a portfolio? While searching im only finding how to calculate the Cape on a companies value.
@NextLevelLife
2 жыл бұрын
Robert Shiller tracks the Cape ratio for the markets on his Yale website, so you can use his spreadsheet to reverse engineer calculating the Cape. The Caey is simply 1/Cape. If you wanted to calculate the Cape on a portfolio that doesn't follow the markets themselves then you'd have to manually calculate the inflation-adjusted share price/the average inflation-adjusted earnings for each investment over the trailing 10 years (likely weighted depending on how much you allocate to each investment). Or whatever time period you'd like to use when looking back at trailing earnings... Shiller uses 10 years for Cape so that's what I put. Thanks for asking!
@Liberte43
2 жыл бұрын
Personally, i use CAPE to allocate my bonds portion of my portfolio. If CAPE = 30, my bonds is set to 30%. Later, if CAPE go down to 5, my portfolio will have 95% of stock in it. I don't use it to manage withdrawals. In fact, I'm more subtle than that. I use half half strategy. If CAPE is 30, 15% is bonds and 15% is bonds.
@daltonhunter4800
2 жыл бұрын
Great info, NLL!
@NextLevelLife
2 жыл бұрын
Glad you think so!
@joshuagarner1654
2 жыл бұрын
Will retirement be a thing in 25 years, I'm starting to wonder
@pensacola321
2 жыл бұрын
As a 15 year retiree I can tell you that virtually no retiree does anything like this ( or the 4% rule). Retirees want to retire, not prepare for Yale Business School. Nice academic discussion, but not real life ..
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