Look back variable SWR

Research on Safe Withdrawal Rates

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unclemick
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Look back variable SWR

Post by unclemick »

I know that Gummy and Bernstein have done studies on variable SWR. My chickenheart is still take the div/interest from a balanced index portfolio and let the principle ride.

But - that said - given the valuation studies done here - are there any thoughts on variable take technique (higher than SEC yield) that might add a new wrinkle?
Mike
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Posts: 278
Joined: Sun Jul 06, 2003 4:00 am

Post by Mike »

The dividends on a balanced fund would grow to keep up with inflation in an uneven fashion, but the interest portion would not. It seems to me that living off of the entire dividend/interest payout from a balanced fund would slowly erode purchasing power over time.

My limited understanding of the switching model is that in the past it would have increased safe withdrawals a bit over the dividend yield, but there is no way to know how it will perform in the future.

The multiple expansion that began in the early 1980s is unprecedented in magnitude. There is no historical period to directly compare it to, but the trend is a bit ominious. Take your best guess.
JWR1945
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Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

unclemick
But - that said - given the valuation studies done here - are there any thoughts on variable take technique (higher than SEC yield) that might add a new wrinkle?
I have more or less volunteered to make a calculator modification to do whatever you want.

Calculator Wish List dated Mon, May 17, 2004.
http://nofeeboards.com/boards/viewtopic.php?t=2501

Right now, we can do the following (all at the same time):

We can withdraw any combination of a percentage of a portfolio's current balance [with no separate adjustment for inflation] and a percentage of a portfolio's initial balance plus inflation. We can withdraw any percentage of the dividends (i.e., of the amounts). In a very narrow sense, we can withdraw any fraction of capital gains. [It has to be taken in accordance with the JanSz algorithm.]

Start wishing and I'll start calculating.

Have fun.

John R.
unclemick
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Posts: 231
Joined: Sat Jun 12, 2004 4:00 am
Location: LA till Katrina, now MO

Post by unclemick »

O.k. John

Can we test some of the 'old saws' I heard during my savings years - namely 10% long term return on stocks and dividends contributing almost 40% of the return. SWAG - ? 6% cap gain and ? 4% div return.

Probably a myth I know - but can we construct a data set that takes 2/3 of the mythical 6% cap gain or 4% at the start, reinvests all divs and run say a 30 yr span. Then take one of your old runs and see if anything interesting pops out.

So - prejudging - I expect to see take out vary widely, some starvation years and the falling div trend ?recency) to eat the portfolio. Note that I'm dividend prejudiced, so I may need help seeing what others see. Note that I'm 'assuming' inflation is baked into the cap gains cake and not asking for inflation adjustment.

So start at 4% (high or low P/E 10 year, your pick) - 30 yr span. 2/3 of cap gain of prior yr, reinvest div., use your standard portfolios. Compare with some of your previous runs and see if any insight can be gleaned from the data.
JWR1945
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Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

For unclemick:

I would have considerable difficulty handling capital gains properly. [The JanSz algorithm is not adequate to answer your question.] However, in terms of dividend yields and annualized stock returns, the existing calculators are up to the task. The following information is immediately available using the JanSz-Chips Deluxe 1.0B Calculator that you can download from the NFB Exclusive! SWR Research section.
http://www.nofeeboards.com/jwr/jwr.html

You can read the dividend yields directly from row 2560. You can read the total return (capital gains plus dividends) directly from row 2560. Years are on row 2551. The total yield of a portfolio (dividends plus interest) is listed on row 2562. The interest (of commercial paper) is listed on row 2563.

To read these numbers, press special key F5 (the Go To command) and type in a2550 or A2550. To return to the beginning of a spreadsheet (or calculator), press CTRL+Home at the same time.

To read the nominal return of a portfolio that includes both stocks and commercial paper, press F5 and type in a2800. To read the (real) return of a portfolio that includes both stocks and commercial paper, press F5 and type in a3400. Read the annualized total returns from column C. The years are listed in column A.

[Set the portfolio allocation as desired. Set the withdrawal rate to zero and set the expenses (my default level is 0.2%).]

You can set the dividend reinvestment percentage in location B22 (i.e., in $B$22).

I have tabulated the real annualized returns for HDBR50 (with 50% stocks, 50% commercial paper and 0.20% in annual expenses) without withdrawals at one year and at twenty years assuming that all (100%) dividends are reinvested and assuming that half (50%) of the dividends are reinvested. They are in the first set of tables below.

I have done the same thing for HDBR80 (with 80% stocks, 20% commercial paper and 0.20% in annual expenses) without withdrawals. They are in the second set of tables.

I realize that I have not answered your questions yet. The tables below may give you some ideas of what to request. [Again, changing the capital gains treatment is the most difficult modification to make.] You may want to see something related to real balances when a specified percentage of the dividends are withdrawn. [Doing that never brings about a zero balance.] Perhaps those balances times the current dividend yield (time the percentage withdrawn) may interest you. I am sure that there are lots of easy combinations of interest.

Of course, these are only the first steps on our way toward making survival rate calculations. [I am doing the easiest things first.]

Have fun.

John R.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

For HDBR50, which consists of 50% stocks and 50% commercial paper and 0.2% expenses, the annualized real total return with all (100%) dividends reinvested from 1871-2000 are, as tabulated:
1871-1900

Code: Select all

9.45
7.07
7.09
12.37
11.38
(4.62)
19.66
22.11
4.13
21.84
(4.75)
6.28
8.65
7.51
19.64
8.49
(2.42)
8.60
11.17
(2.40)
17.86
(0.64)
7.01
7.46
3.62
6.09
8.06
13.77
(10.99)
14.78
1901-1920

Code: Select all

8.85
(2.78)
(1.62)
14.17
12.75
(1.00)
(6.50)
16.11
(0.37)
7.56
4.82
(1.04)
(2.04)
(1.86)
12.96
(5.62)
(20.45)
(6.15)
(3.69)
(1.12)
1921-1950

Code: Select all

19.84
16.77
1.56
14.23
10.27
9.94
21.09
26.86
(2.22)
(2.28)
(8.53)
7.24
23.79
(6.30)
24.34
13.73
(14.68)
8.91
2.54
(5.21)
(13.44)
1.77
8.24
7.00
16.17
(19.70)
(7.41)
4.13
11.11
8.39
1951-1980

Code: Select all

6.31
7.47
1.04
23.66
14.84
2.03
(4.95)
19.17
4.62
2.58
10.03
(1.03)
10.26
8.74
6.11
(3.80)
6.78
4.39
(5.47)
0.72
5.38
8.42
(10.71)
(16.21)
13.62
2.63
(6.61)
3.42
(0.24)
8.09
1981-2000

Code: Select all

(4.02)
14.11
10.49
4.05
11.65
16.28
(1.27)
8.06
9.49
(2.52)
14.14
1.92
4.98
0.79
16.58
12.56
14.39
15.86
7.67
(3.79)
More to follow.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

For HDBR50, which consists of 50% stocks and 50% commercial paper and 0.2% expenses, the annualized real total return with half (50%) of the dividends reinvested from 1871-2000 are, as tabulated:
1871-1900

Code: Select all

8.12
5.63
5.24
10.43
9.60
(6.65)
17.94
20.70
3.30
20.70
(6.00)
4.88
6.94
5.52
18.45
7.49
(3.54)
7.45
10.10
(3.51)
16.79
(1.64)
5.37
6.18
2.53
5.00
7.15
12.96
(11.75)
13.68
1901-1920

Code: Select all

7.89
(3.67)
(2.97)
13.27
11.90
(2.01)
(8.12)
15.04
(1.36)
6.20
3.52
(2.24)
(3.43)
(3.25)
11.82
(6.94)
(22.42)
(7.68)
(4.96)
(2.92)
1921-1950

Code: Select all

18.05
15.33
0.10
12.93
9.11
8.61
19.97
25.98
(3.34)
(3.90)
(11.18)
5.31
22.77
(7.48)
23.48
12.71
(16.42)
7.87
1.27
(6.78)
(15.20)
0.41
6.99
5.84
15.27
(20.69)
(8.70)
2.61
9.38
6.77
1951-1980

Code: Select all

4.92
6.14
(0.37)
22.57
13.90
1.11
(5.99)
18.39
3.83
1.78
9.30
(1.84)
9.53
8.02
5.39
(4.62)
6.04
3.66
(6.29)
(0.07)
4.66
7.78
(11.52)
(17.33)
12.73
1.69
(7.83)
2.25
(1.36)
7.05
1981-2000

Code: Select all

(5.33)
12.96
9.46
2.99
10.74
15.51
(2.11)
7.24
8.71
(3.40)
13.42
1.23
4.33
0.10
16.03
12.09
13.99
15.54
7.39
(4.09)
Twenty-year returns to follow.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

For HDBR50, which consists of 50% stocks and 50% commercial paper and 0.2% expenses, the annualized real total return after 20 years with all (100%) dividends reinvested from 1871-1980 are, as tabulated:
1871-1900

Code: Select all


8.27
8.67
8.27
8.26
8.02
7.63
8.21
7.66
7.26
6.44
6.12
6.83
6.36
5.83
6.15
5.83
5.35
5.13
5.48
4.90
5.41
4.80
4.78
4.31
3.84
4.29
3.68
2.11
1.13
1.53
1901-1920

Code: Select all


0.77
1.26
2.19
2.35
2.36
2.24
2.78
4.12
4.58
4.46
3.98
3.28
3.69
4.91
4.67
5.17
6.14
6.53
7.33
7.66
1921-1950

Code: Select all


7.44
5.70
4.98
5.31
4.97
5.24
3.60
2.22
1.22
1.87
2.40
3.17
3.18
2.14
3.57
3.16
2.60
3.15
3.62
3.72
4.13
5.39
5.24
5.34
5.43
4.95
5.90
6.66
6.67
5.81
1951-1980

Code: Select all


5.43
5.38
5.43
4.78
2.76
2.70
2.73
2.64
1.92
1.67
1.94
1.25
1.97
1.98
1.75
2.01
2.99
2.58
2.76
3.52
3.35
3.76
3.44
4.28
5.25
5.38
5.87
6.95
7.56
7.97
More twenty-year data to follow.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

For HDBR50, which consists of 50% stocks and 50% commercial paper and 0.2% expenses, the annualized real total return after 20 years with half (50%) of the dividends reinvested from 1871-1980 are, as tabulated:
1871-1900

Code: Select all


6.85
7.26
6.88
6.88
6.67
6.32
6.95
6.43
6.07
5.25
4.94
5.66
5.21
4.70
5.07
4.78
4.29
4.04
4.39
3.82
4.32
3.69
3.66
3.21
2.73
3.18
2.56
0.91
(0.10)
0.27
1901-1920

Code: Select all


(0.52)
(0.07)
0.84
0.99
0.98
0.85
1.37
2.73
3.20
3.08
2.58
1.80
2.18
3.41
3.18
3.69
4.67
5.08
5.90
6.24
1921-1950

Code: Select all


6.03
4.29
3.57
3.91
3.57
3.86
2.24
0.85
(0.18)
0.44
0.97
1.82
1.86
0.80
2.23
1.82
1.26
1.86
2.34
2.46
2.91
4.23
4.11
4.23
4.34
3.87
4.84
5.62
5.68
4.86
1951-1980

Code: Select all


4.52
4.50
4.58
3.97
1.94
1.89
1.92
1.81
1.07
0.81
1.07
0.34
1.05
1.05
0.81
1.06
2.03
1.62
1.79
2.55
2.38
2.79
2.47
3.32
4.31
4.46
4.97
6.09
6.74
7.20
This completes the HDBR50 (50% stocks) data set.

Have fun.

John R.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

This begins the HDBR80 (80% stocks) data set.

For HDBR80, which consists of 80% stocks and 20% commercial paper and 0.2% expenses, the annualized real total return with all (100%) dividends reinvested from 1871-2000 are, as tabulated:
1871-1900

Code: Select all


11.53
7.87
4.40
12.27
11.26
(9.74)
16.99
25.77
14.46
28.39
(5.92)
5.77
5.36
2.44
26.76
10.04
(3.90)
8.09
11.59
(5.75)
22.31
(1.31)
(0.10)
7.52
3.37
5.99
12.65
21.01
(11.18)
19.64
1901-1920

Code: Select all


12.96
(2.07)
(7.94)
21.70
17.25
(2.48)
(14.85)
25.70
2.44
5.32
4.58
(0.62)
(4.67)
(4.43)
20.47
(4.48)
(25.76)
(3.48)
(0.83)
(7.14)
1921-1950

Code: Select all


21.34
23.61
1.82
20.58
16.08
12.04
30.36
38.75
(5.92)
(9.61)
(22.47)
4.23
38.96
(8.63)
39.48
22.84
(23.47)
13.19
3.42
(7.69)
(15.62)
6.81
14.61
12.23
26.87
(22.72)
(6.91)
6.54
15.82
16.85
1951-1980

Code: Select all


11.34
10.77
1.39
36.44
22.18
2.87
(7.17)
29.41
5.59
3.54
14.55
(2.81)
15.10
12.03
7.83
(7.17)
9.51
5.04
(10.28)
1.07
7.95
11.13
(17.91)
(23.38)
22.48
4.29
(10.99)
4.72
1.07
9.95
1981-2000

Code: Select all


(9.75)
19.42
12.93
3.82
16.79
23.34
(3.97)
10.37
13.46
(4.64)
21.98
3.08
7.02
(0.74)
24.93
18.63
20.83
23.46
10.33
(6.41)
More to follow.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

For HDBR80, which consists of 80% stocks and 20% commercial paper and 0.2% expenses, the annualized real total return with half (50%) of the dividends reinvested from 1871-2000 are, as tabulated:
1871-1900

Code: Select all


9.40
5.56
1.44
9.17
8.41
(12.98)
14.24
23.51
13.13
26.57
(7.92)
3.52
2.62
(0.75)
24.86
8.45
(5.69)
6.26
9.88
(7.52)
20.60
(2.90)
(2.72)
5.47
1.62
4.23
11.21
19.71
(12.39)
17.90
1901-1920

Code: Select all


11.43
(3.50)
(10.11)
20.26
15.89
(4.09)
(17.45)
23.98
0.86
3.15
2.49
(2.54)
(6.89)
(6.65)
18.64
(6.59)
(28.91)
(5.92)
(2.87)
(10.03)
1921-1950

Code: Select all


18.48
21.30
(0.52)
18.49
14.23
9.92
28.57
37.35
(7.70)
(12.21)
(26.71)
1.14
37.33
(10.52)
38.11
21.22
(26.25)
11.52
1.38
(10.20)
(18.44)
4.64
12.61
10.37
25.42
(24.30)
(8.97)
4.11
13.04
14.26
1951-1980

Code: Select all


9.10
8.62
(0.87)
34.70
20.67
1.38
(8.84)
28.17
4.32
2.26
13.39
(4.10)
13.92
10.88
6.68
(8.49)
8.32
3.89
(11.60)
(0.20)
6.80
10.10
(19.20)
(25.16)
21.06
2.79
(12.94)
2.84
(0.73)
8.29
1981-2000

Code: Select all


(11.84)
17.59
11.29
2.12
15.33
22.11
(5.32)
9.06
12.22
(6.04)
20.83
1.98
5.98
(1.84)
24.05
17.87
20.19
22.95
9.87
(6.89)
Twenty year HDBR80 data set to follow.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

This begins the HDBR80 twenty-year data set.

For HDBR80, which consists of 80% stocks and 20% commercial paper and 0.2% expenses, the annualized real total return after 20 years with all (100%) dividends reinvested from 1871-1980 are, as tabulated:
1871-1900

Code: Select all


8.39
8.89
8.41
8.17
7.94
7.54
8.41
8.20
7.98
6.63
6.26
7.24
6.82
6.10
7.02
6.61
5.96
5.33
6.12
5.67
6.26
5.43
5.47
5.22
4.60
5.41
4.86
2.70
1.54
2.10
1901-1920

Code: Select all


0.82
1.18
2.36
2.88
2.83
2.78
3.50
5.72
6.25
5.77
4.99
3.43
3.68
5.65
5.41
6.19
7.51
7.70
8.56
8.78
1921-1950

Code: Select all


8.75
6.79
6.02
6.65
6.27
6.74
4.77
3.03
1.67
2.74
4.06
5.96
6.29
4.62
6.74
6.04
5.10
6.12
6.83
6.95
7.56
9.22
8.70
8.73
8.72
7.84
8.83
9.72
9.64
8.25
1951-1980

Code: Select all


7.47
7.30
7.32
6.19
3.17
3.18
3.25
3.04
1.95
1.73
2.04
0.83
1.87
1.77
1.39
1.79
3.25
2.57
2.83
4.04
3.74
4.38
3.98
5.37
6.75
6.85
7.54
9.20
10.10
10.58
More HDBR80 twenty-year data to follow.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

For HDBR80, which consists of 80% stocks and 20% commercial paper and 0.2% expenses, the annualized real total return after 20 years with half (50%) of the dividends reinvested from 1871-1980 are, as tabulated:
1871-1900

Code: Select all


6.09
6.61
6.17
5.94
5.76
5.42
6.38
6.23
6.06
4.72
4.35
5.35
4.98
4.29
5.29
4.90
4.26
3.57
4.37
3.92
4.49
3.64
3.66
3.44
2.81
3.61
3.04
0.76
(0.45)
0.07
1901-1920

Code: Select all


(1.28)
(0.97)
0.17
0.68
0.60
0.53
1.22
3.48
4.02
3.54
2.72
1.02
1.20
3.19
2.97
3.76
5.10
5.31
6.21
6.44
1921-1950

Code: Select all


6.43
4.46
3.69
4.33
3.96
4.45
2.52
0.77
(0.62)
0.39
1.72
3.77
4.14
2.46
4.57
3.87
2.94
4.04
4.77
4.92
5.60
7.36
6.89
6.95
6.98
6.11
7.12
8.06
8.05
6.73
1951-1980

Code: Select all


6.01
5.90
5.97
4.89
1.85
1.87
1.94
1.70
0.59
0.34
0.63
(0.63)
0.39
0.27
(0.14)
0.25
1.71
1.02
1.27
2.48
2.18
2.81
2.42
3.81
5.23
5.36
6.08
7.81
8.78
9.33
This completes the HDBR80 twenty-year data set.

This completes both data sets (HDBR50 and HDBR80).

Have fun.

John R.
unclemick
*** Veteran
Posts: 231
Joined: Sat Jun 12, 2004 4:00 am
Location: LA till Katrina, now MO

Post by unclemick »

Thanks John

I'm on clunky webtv so I can't down load anything. But, but I may wrangel some time on my step daughter's computer this weekend. Meanwhile I'll poke thru your posted data. Thanks again for the data strings.
JWR1945
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Location: Crestview, Florida

Post by JWR1945 »

For unclemick:

These posts may or may not look better on webtv. When I put everything into a single column, it is easier for you to copy the numbers and put them into a table or a spreadsheet. But they can be a lot more difficult to interpret if you don't copy them.

Here are some tables that may be more viewable. They are difficult to copy. They are also more comprehensive than what I posted. Combined, they cover all conditions except those with only half (50%) of the dividends reinvested.

Here are three posts related to Annualized Real Total Returns with 50%, 80% and 100% stocks with all dividends reinvested.
http://nofeeboards.com/boards/viewtopic.php?t=2231
http://nofeeboards.com/boards/viewtopic.php?t=2226
http://nofeeboards.com/boards/viewtopic.php?t=2229
Here is a similar post with 100% commercial paper.
http://nofeeboards.com/boards/viewtopic.php?t=2232

Here is what happens if you strip off all (100%) dividends with 50% stocks and with 80% stocks.
Price-Only Historical Database Rates dated Sat, Dec 27, 2003.
http://nofeeboards.com/boards/viewtopic.php?t=1914

Here is a write up of what happens using the JanSz algorithm (of removing a fraction of all capital gains [using the portfolio's total balances] compared to six years earlier but not doing so when there is a loss).
More about JanSz's Approach dated Sun, Jan 25, 2004.
http://nofeeboards.com/boards/viewtopic.php?t=2020

Here is what I found out before I had been able to modify the calculator.
SWR Sensible Switching dated Fri, Oct 17, 2003.
http://nofeeboards.com/boards/viewtopic.php?t=1558

Let me know if I can help by putting tables, etc., into a different (and better) format.

Have fun.

John R.
JWR1945
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Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

Here is something else to think about. With not too great an effort, I can enhance our data summaries.

For example, I have made special tables that show the portfolio balances for each year into retirement (with separate rows for different start years). I do not display summaries of the stock and bond (or commercial paper) balances separately. [If you rebalance, you need to make an initial withdrawal and then multiply by the proper allocations. You cannot ignore the withdrawal.]

It might make sense to get into some of the inner workings of the individual portfolios. If you withdraw a fraction of the dividends, it might be nice to have a summary of each year's total withdrawal amount. After all, dividend amounts and yields vary. Knowing the total income stream is helpful. Not every condition worth investigating maintains a constant percentage of the initial balance (plus inflation).

Have fun.

John R.
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