TIPS Switching Surveys
Moderator: hocus2004
TIPS Switching Surveys
These are the optimized results for switching allocations with stocks and TIPS with a 2% (real) interest rate.
I used the TIPS version of my latest modified Retire Early Safe Withdrawal Calculator, JanSz-Chips Deluxe V2.0B TIPS. It allows you to set four P/E10 thresholds and to adjust three out of five stock allocations. When P/E10 falls below the lowest threshold, the stock allocation is always 100%. When P/E10 is above the highest threshold (as it is today), the stock allocation is 0%. Earlier investigations had shown this result always to be true.
Optimization turned out to be much more difficult than I had anticipated and my progress was awkward. I am satisfied that I have come reasonably close to the true optimal values. I am satisfied that the highest Historical Database Rate of 5.2% is a consistent ceiling using simple P/E10 thresholds. I am satisfied that the best reason for using additional thresholds and allocations is to reduce the sensitivity of results to minor differences from the optimal values. That is, I expect that the optimal values in the future will be similar to those extracted from historical data, but not identical. My goal is to reduce the effects of errors because we are depending upon historical data.
Conditions
All results are for retirement periods starting in 1921-1980. All portfolios consisted of stocks as represented by the S&P500 index (with all dividends reinvested) and 2% TIPS. Expenses were 0.20%. Portfolios were re-balanced annually at zero cost.
The Historical Database Rates reported here are the highest withdrawal rate:
1) that would have produced a positive balance for an entire 30-year period,
2) but which would have had a negative or zero balance in at least one historical sequence (beginning in 1921-1980) when the withdrawal rate was increased by 0.1%.
Withdrawal rates are in terms of the portfolio's initial balance. All withdrawal rates are in increments of 0.1%. Withdrawal amounts were adjusted to match inflation. The interest from TIPS also matched inflation and they decreased during times of deflation. TIPS were treated as trading vehicles without any capital gains or losses and there was never any adjustment back to par at maturity. Inflation was measured according to the Consumer Price Index for Urban workers (CPI-U).
P/E10 is the current (real) price of the S&P500 index divided by the average of the previous ten years of (real) earnings. This indicator of valuation (P/E10) was developed and is reported by Professor Shiller of Yale.
Summary
The best Historical Database Rate was 5.2% in all cases. It was never possible to reach 5.3% without several failures.
The simplest approach uses two thresholds and one adjustable stock allocation (for a total of three). The best choices are P/E10 thresholds of 11 and 24 and stock allocations of 100%-30%-0%, respectively.
When there is more than one, the most important thresholds are the lowest thresholds.
The best choice with three thresholds and two adjustable allocations (for a total of four) is to use P/E10 thresholds of 9-13-24 with stock allocations of 100%-50%-30%-0%, respectively. [Results with 100%-60%-30%-0% allocations and P/E10 thresholds of 9-13-24 are almost identical. Using P/E10 thresholds of 9-12-24 is another a good choice.]
The best choice with four thresholds and three adjustable stock allocations (for a total of five) are 9-12-21-24 or 9-13-21-24 (with no preference) with 100%-50%-30%-20%-0%, respectively. There is relatively little sensitivity to changing the lowest adjustable allocation or the lower middle P/E10 threshold.
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
INITIAL SURVEY
Withdrawal Rate = 5.2%.
Thresholds = 8, 12, 16 and 20.
Allocations: 100%-75%-50%-25%-0%.
The allocation percentages of the adjustable thresholds were varied. The thresholds were 8-12-16-20.
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Low Threshold Medium High Failures
75% 50% 25% 10
75% 50% 0% 13
75% 50% 10% 12
75% 50% 20% 11
75% 50% 30% 10
75% 50% 40% 10
75% 50% 50% 12
75% 50% 60% 13
75% 50% 70% 12
75% 50% 80% 12
75% 50% 90% 12
75% 50% 100% 12
75% 50% 25% 10
75% 0% 25% 15
75% 10% 25% 14
75% 20% 25% 12
75% 30% 25% 11
75% 40% 25% 11
75% 50% 25% 10
75% 60% 25% 11
75% 70% 25% 14
75% 80% 25% 15
75% 90% 25% 15
75% 100% 25% 15
75% 50% 25% 10
0% 50% 25% 44
10% 50% 25% 34
20% 50% 25% 28
30% 50% 25% 20
40% 50% 25% 16
50% 50% 25% 15
60% 50% 25% 15
70% 50% 25% 10
80% 50% 25% 10
90% 50% 25% 9
100% 50% 25% 9
90% 50% 30% 9
100% 50% 30% 9
90% 50% 40% 10
100% 50% 40% 9
SECOND SURVEY
This was a repeat of the initial survey but with thresholds at 9-13-17-21.
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Low Threshold Medium High Failures
75% 50% 25% 7
75% 50% 0% 9
75% 50% 10% 9
75% 50% 20% 7
75% 50% 30% 7
75% 50% 40% 3
75% 50% 50% 3
75% 50% 60% 2
75% 50% 70% 3
75% 50% 80% 3
75% 50% 90% 5
75% 50% 100% 8
75% 50% 25% 7
75% 0% 25% 5
75% 10% 25% 6
75% 20% 25% 6
75% 30% 25% 6
75% 40% 25% 7
75% 50% 25% 7
75% 60% 25% 7
75% 70% 25% 8
75% 80% 25% 9
75% 90% 25% 11
75% 100% 25% 13
75% 50% 25% 7
0% 50% 25% 27
10% 50% 25% 22
20% 50% 25% 15
30% 50% 25% 11
40% 50% 25% 7
50% 50% 25% 7
60% 50% 25% 7
70% 50% 25% 7
80% 50% 25% 7
90% 50% 25% 7
100% 50% 25% 7
40% 0% 40% 1
40% 0% 60% 0
40% 0% 80% 1
40% 30% 40% 1
40% 30% 60% 1
40% 30% 80% 2
80% 0% 40% 2
80% 0% 60% 1
80% 0% 80% 1
80% 30% 40% 2
80% 30% 60% 2
80% 30% 80% 2
The best allocation at the middle threshold was 0%. Performance degraded slowly as allocations were increased.
There was sensitivity at the highest thresholds. The best allocations ranged from 40% to 80%.
THIRD SURVEY
This was a repeat of the initial survey but with thresholds at 10-14-18-22.
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Low Threshold Medium High Failures
75% 50% 25% 10
75% 50% 0% 8
75% 50% 10% 8
75% 50% 20% 10
75% 50% 30% 11
75% 50% 40% 11
75% 50% 50% 12
75% 50% 60% 14
75% 50% 70% 12
75% 50% 80% 13
75% 50% 90% 12
75% 50% 100% 12
75% 50% 25% 10
75% 0% 25% 14
75% 10% 25% 14
75% 20% 25% 11
75% 30% 25% 11
75% 40% 25% 11
75% 50% 25% 10
75% 60% 25% 10
75% 70% 25% 8
75% 80% 25% 8
75% 90% 25% 7
75% 100% 25% 6
75% 50% 25% 10
0% 50% 25% 26
10% 50% 25% 17
20% 50% 25% 10
30% 50% 25% 4
40% 50% 25% 5
50% 50% 25% 6
60% 50% 25% 8
70% 50% 25% 10
80% 50% 25% 11
90% 50% 25% 12
100% 50% 25% 15
30% 90% 0% 14
30% 100% 0% 14
30% 90% 10% 11
30% 100% 10% 12
The greatest sensitivities are associated with the lower two adjustable thresholds. They seem to interact. For example, 100%-30%-90%-10%-0% is inferior to 100%-30%-50%-25%-0% and 100%-75%-100%-25%-0%.
The best single condition so far is 100%-30%-50%-25%-0%. An alternative region of interest is about the condition 100%-75%-100%-25%-0%.
FOURTH SURVEY
This was a repeat of the initial survey but with thresholds at 11-15-19-23.
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Low Threshold Medium High Failures
75% 50% 25% 14
75% 50% 0% 15
75% 50% 10% 15
75% 50% 20% 15
75% 50% 30% 13
75% 50% 40% 12
75% 50% 50% 12
75% 50% 60% 11
75% 50% 70% 8
75% 50% 80% 7
75% 50% 90% 7
75% 50% 100% 8
75% 50% 25% 14
75% 0% 25% 12
75% 10% 25% 11
75% 20% 25% 11
75% 30% 25% 11
75% 40% 25% 12
75% 50% 25% 14
75% 60% 25% 15
75% 70% 25% 15
75% 80% 25% 15
75% 90% 25% 15
75% 100% 25% 14
75% 50% 25% 14
0% 50% 25% 4
10% 50% 25% 1
20% 50% 25% 1
30% 50% 25% 3
40% 50% 25% 5
50% 50% 25% 10
60% 50% 25% 11
70% 50% 25% 11
80% 50% 25% 15
90% 50% 25% 15
100% 50% 25% 15
10% 10% 80% 6
10% 10% 90% 9
10% 20% 80% 6
10% 20% 90% 8
10% 30% 80% 6
10% 30% 90% 8
20% 10% 80% 5
20% 10% 90% 7
20% 20% 80% 4
20% 20% 90% 6
20% 30% 80% 5
20% 30% 90% 6
There was very little sensitivity to the middle adjustable threshold among those conditions examined in detail. Among those conditions examined in detail, an 80% allocation was consistently better than a 90% allocation.
There was a qualitative change in the behavior at the highest adjustable threshold. Both of the first two cases favored using a low stock allocation. The third favored a very high stock allocation.
REMARKS ABOUT THESE INITIAL SURVEYS
There was a consistent sensitivity associated with the lowest adjustable threshold. The behavior changed as it was increased. It is as if each of the lowest threshold levels carries with it a minimal allocation. Above that minimal level, the stock allocation should drop, sometimes dramatically.
Because of the dramatic results seen in the second survey, I have fixed the lowest adjustable threshold at 9 with allocations ranging from 40% to 100%.
From the third and fourth survey, it is clear that very small allocations at thresholds of 10 and 11 are of interest.
Allocations still vary greatly as the highest adjustable threshold is increased to 23. In fact, at that threshold, the data favor a high allocation (80% in the fourth survey). Because of this and because there were very few years with a P/E10 of 24 or higher before the bubble, I have selected 24 as the highest adjustable threshold. I advise caution in regard to this setting. It can show the sensitivity related to specific years as opposed to more general effects.
These surveys would have been efficient if the thresholds and allocations did not interact, but they did. Some of the interactions are likely to be associated with specific years. We have to tread carefully since we cannot make general statements based on general trends. The sole exception is that it is a good idea to load up on stocks when they fall to bargain level prices (i.e., when the P/E10 is 8 or lower).
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
Starting conditions:
Withdrawal Rate = 5.2%.
Thresholds = 9, 12, 21 and 24.
Allocations: 100%-Low%-Middle%-High%-0%.
SURVEY FIVE
The allocation percentages of the adjustable thresholds were varied. The thresholds were 9-12-21-24.
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Low Threshold Middle High Failures
100% 100% 0% 12
100% 100% 10% 12
100% 100% 20% 12
100% 100% 30% 11
100% 100% 40% 11
100% 100% 50% 11
100% 100% 60% 12
100% 100% 70% 13
100% 100% 80% 13
100% 100% 90% 14
100% 100% 100% 15
100% 0% 40% 12
100% 10% 40% 11
100% 20% 40% 8
100% 30% 40% 4
100% 40% 40% 5
100% 50% 40% 7
100% 60% 40% 7
100% 70% 40% 9
100% 80% 40% 11
100% 90% 40% 11
100% 100% 40% 11
30% 30% 40% 3
40% 30% 40% 1
50% 30% 40% 1
60% 30% 40% 1
70% 30% 40% 2
80% 30% 40% 4
90% 30% 40% 4
100% 30% 40% 4
SURVEY SIX
The allocation percentages of the adjustable thresholds were varied. The thresholds were 9-12-21-24.
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Low Threshold Middle High Failures
40% 30% 0% 3
40% 30% 10% 2
40% 30% 20% 0
40% 30% 30% 1
40% 30% 40% 1
40% 30% 50% 3
40% 30% 60% 5
40% 30% 70% 7
40% 30% 80% 10
40% 30% 90% 11
40% 30% 100% 13
50% 0% 40% 14
50% 10% 40% 12
50% 20% 40% 4
50% 30% 40% 1
50% 40% 40% 3
50% 50% 40% 5
50% 60% 40% 7
50% 70% 40% 9
50% 80% 40% 14
50% 90% 40% 16
50% 100% 40% 17
60% 0% 40% 12
60% 10% 40% 11
60% 20% 40% 5
60% 30% 40% 1
60% 40% 40% 2
60% 50% 40% 4
60% 60% 40% 6
60% 70% 40% 8
60% 80% 40% 12
60% 90% 40% 15
60% 100% 40% 15
SURVEY SEVEN
The allocation percentages of the adjustable thresholds were varied. The thresholds were 9-12-21-24.
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Low Threshold Middle High Failures
40% 30% 0% 3
40% 30% 10% 2
40% 30% 20% 0
40% 30% 30% 1
40% 30% 40% 1
40% 30% 50% 3
40% 30% 60% 5
40% 30% 70% 7
40% 30% 80% 10
40% 30% 90% 11
40% 30% 100% 13
50% 30% 0% 3
50% 30% 10% 3
50% 30% 20% 0
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 3
50% 30% 60% 3
50% 30% 70% 6
50% 30% 80% 8
50% 30% 90% 9
50% 30% 100% 10
60% 30% 0% 3
60% 30% 10% 3
60% 30% 20% 3
60% 30% 30% 0
60% 30% 40% 1
60% 30% 50% 2
60% 30% 60% 3
60% 30% 70% 5
60% 30% 80% 7
60% 30% 90% 8
60% 30% 100% 9
The withdrawal rates were varied. The thresholds were 9-12-21-24.
With a 5.2% withdrawal rate:
Code: Select all
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
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40% 30% 20% 6
50% 30% 20% 6
50% 30% 30% 6
60% 30% 30% 7
40%-30%-20%: 1937, 1959-1960, 1962 and 1964-1965.
50%-30%-20%: 1959-1962 and 1964-1965.
50%-30%-30%: 1959-1960, 1962 and 1964-1966.
60%-30%-30%: 1959-1962 and 1964-1966.
REMARKS ABOUT THE PART TWO SURVEYS
The level of optimization is sufficient for the moment. It is now appropriate to examine alternatives to the thresholds of 12. That is, it is time to examine thresholds of 9-varies-21-24.
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
Starting point:
Withdrawal Rate = 5.2%.
Thresholds = 9, varies, 21 and 24.
Allocations: 100%-Low%-Middle%-High%-0%.
SURVEY NINE
When the withdrawal rate is 5.2% and the thresholds are 9-12-21-24, the number of failures is zero under the following conditions:
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Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 2
50% 30% 20% 2
50% 30% 30% 3
60% 30% 30% 3
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 2
50% 30% 20% 2
50% 30% 30% 3
60% 30% 30% 3
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 1
50% 30% 20% 0
50% 30% 30% 1
60% 30% 30% 0
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
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Low Threshold Medium High Failures
40% 30% 20% 4
50% 30% 20% 7
50% 30% 30% 8
60% 30% 30% 11
SURVEY TEN
When the withdrawal rate is 5.2% and the thresholds are 9-12-21-24, the number of failures is zero under the following conditions. Here, the withdrawal rate is 5.3%.
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Low Threshold Medium High Failures
40% 30% 20% 6
50% 30% 20% 6
50% 30% 30% 6
60% 30% 30% 7
Code: Select all
40% 30% 20% 5
50% 30% 20% 5
50% 30% 30% 5
60% 30% 30% 5
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40% 30% 20% 5
50% 30% 20% 6
50% 30% 30% 6
60% 30% 30% 7
When the withdrawal rate is 5.2% and the thresholds are 9-12-21-24, the number of failures is zero under the following conditions:
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Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
The adjustable thresholds are 10-12-21-24 and the withdrawal rate is 5.2%.
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Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 3
50% 30% 30% 0
60% 30% 30% 2
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 3
50% 30% 30% 0
60% 30% 30% 2
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 3
50% 30% 30% 0
60% 30% 30% 2
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 3
50% 30% 30% 0
60% 30% 30% 2
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 5
50% 30% 20% 5
50% 30% 30% 4
60% 30% 30% 4
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
Starting point:
Both 9-12-21-24 and 9-13-21-04, produce these results at a withdrawal rate of 5.2%. Both have many failures at a 5.3% withdrawal Rate.
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Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
Withdrawal Rate = 5.2%.
Thresholds = 9, 12 or 13, varies and 24.
Allocations: 100%-Low-30%-High%-0%.
SURVEY TWELVE
Withdrawal Rate = 5.2%.
Thresholds = 9, 12, 23 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 4
50% 30% 10% 4
50% 30% 20% 3
50% 30% 30% 0
50% 30% 40% 0
50% 30% 50% 0
50% 30% 60% 0
50% 30% 70% 0
50% 30% 80% 0
50% 30% 90% 0
50% 30% 100% 0
Thresholds = 9, 12, 22 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 4
50% 30% 10% 4
50% 30% 20% 3
50% 30% 30% 0
50% 30% 40% 0
50% 30% 50% 0
50% 30% 60% 0
50% 30% 70% 0
50% 30% 80% 0
50% 30% 90% 0
50% 30% 100% 0
Thresholds = 9, 12, 21 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 3
50% 30% 10% 3
50% 30% 20% 0
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 3
50% 30% 60% 3
50% 30% 70% 6
50% 30% 80% 8
50% 30% 90% 9
50% 30% 100% 10
Thresholds = 9, 12, 20 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 7
50% 30% 10% 4
50% 30% 20% 4
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 1
50% 30% 60% 1
50% 30% 70% 3
50% 30% 80% 5
50% 30% 90% 6
50% 30% 100% 7
Thresholds = 9, 12, 19 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 9
50% 30% 10% 8
50% 30% 20% 6
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 1
50% 30% 60% 1
50% 30% 70% 2
50% 30% 80% 5
50% 30% 90% 6
50% 30% 100% 7
Thresholds = 9, 12, 18 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 8
50% 30% 10% 5
50% 30% 20% 4
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 4
50% 30% 60% 6
50% 30% 70% 7
50% 30% 80% 8
50% 30% 90% 9
50% 30% 100% 13
Thresholds = 9, 12, 17 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 10
50% 30% 10% 9
50% 30% 20% 5
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 4
50% 30% 60% 5
50% 30% 70% 6
50% 30% 80% 6
50% 30% 90% 6
50% 30% 100% 7
Thresholds = 9, 12, 16 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 11
50% 30% 10% 7
50% 30% 20% 5
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 1
50% 30% 60% 4
50% 30% 70% 6
50% 30% 80% 9
50% 30% 90% 10
50% 30% 100% 10
Thresholds = 9, 12, 15 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 11
50% 30% 10% 9
50% 30% 20% 5
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 1
50% 30% 60% 2
50% 30% 70% 7
50% 30% 80% 8
50% 30% 90% 8
50% 30% 100% 11
Thresholds = 9, 12, 14 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 11
50% 30% 10% 9
50% 30% 20% 5
50% 30% 30% 0
50% 30% 40% 1
50% 30% 50% 1
50% 30% 60% 3
50% 30% 70% 8
50% 30% 80% 8
50% 30% 90% 9
50% 30% 100% 12
Thresholds = 9, 12, 13 and 24.
Allocations: 100%-50%-30%-High%-0%.
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Low Threshold Medium High Failures
50% 30% 0% 12
50% 30% 10% 8
50% 30% 20% 5
50% 30% 30% 0
50% 30% 40% 3
50% 30% 50% 6
50% 30% 60% 9
50% 30% 70% 13
50% 30% 80% 17
50% 30% 90% 18
50% 30% 100% 21
Withdrawal Rate = 5.2%.
Thresholds = 9, 12, 23 and 24.
Allocations: 100%-50%-40%-High%-0%.
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Low Threshold Medium High Failures
50% 40% 0% 5
50% 40% 10% 5
50% 40% 20% 5
50% 40% 30% 3
50% 40% 40% 3
50% 40% 50% 3
50% 40% 60% 2
50% 40% 70% 2
50% 40% 80% 2
50% 40% 90% 2
50% 40% 100% 2
Thresholds = 9, 12, 22 and 24.
Allocations: 100%-50%-40%-High%-0%.
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Low Threshold Medium High Failures
50% 40% 0% 5
50% 40% 10% 5
50% 40% 20% 5
50% 40% 30% 3
50% 40% 40% 3
50% 40% 50% 3
50% 40% 60% 2
50% 40% 70% 2
50% 40% 80% 2
50% 40% 90% 2
50% 40% 100% 3
Thresholds = 9, 12, 21 and 24.
Allocations: 100%-50%-40%-High%-0%.
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Low Threshold Medium High Failures
50% 40% 0% 3
50% 40% 10% 2
50% 40% 20% 2
50% 40% 30% 2
50% 40% 40% 3
50% 40% 50% 4
50% 40% 60% 6
50% 40% 70% 8
50% 40% 80% 9
50% 40% 90% 9
50% 40% 100% 10
Thresholds = 9, 12, 20 and 24.
Allocations: 100%-50%-40%-High%-0%.
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Low Threshold Medium High Failures
50% 40% 0% 6
50% 40% 10% 4
50% 40% 20% 4
50% 40% 30% 4
50% 40% 40% 3
50% 40% 50% 4
50% 40% 60% 4
50% 40% 70% 6
50% 40% 80% 7
50% 40% 90% 7
50% 40% 100% 8
Thresholds = 9, 12, 19 and 24.
Allocations: 100%-50%-40%-High%-0%.
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Low Threshold Medium High Failures
50% 40% 0% 9
50% 40% 10% 8
50% 40% 20% 8
50% 40% 30% 4
50% 40% 40% 3
50% 40% 50% 4
50% 40% 60% 4
50% 40% 70% 6
50% 40% 80% 7
50% 40% 90% 7
50% 40% 100% 8
Thresholds = 9, 12, 18 and 24.
Allocations: 100%-50%-40%-High%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 40% 0% 8
50% 40% 10% 5
50% 40% 20% 4
50% 40% 30% 2
50% 40% 40% 3
50% 40% 50% 6
50% 40% 60% 6
50% 40% 70% 8
50% 40% 80% 9
50% 40% 90% 12
50% 40% 100% 14
Thresholds = 9, 12, 17 and 24.
Allocations: 100%-50%-40%-High%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 40% 0% 9
50% 40% 10% 8
50% 40% 20% 6
50% 40% 30% 3
50% 40% 40% 3
50% 40% 50% 4
50% 40% 60% 6
50% 40% 70% 6
50% 40% 80% 7
50% 40% 90% 7
50% 40% 100% 9
Thresholds = 9, 12, 16 and 24.
Allocations: 100%-50%-40%-High%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 40% 0% 10
50% 40% 10% 8
50% 40% 20% 6
50% 40% 30% 4
50% 40% 40% 3
50% 40% 50% 4
50% 40% 60% 6
50% 40% 70% 8
50% 40% 80% 9
50% 40% 90% 10
50% 40% 100% 11
Thresholds = 9, 12, 15 and 24.
Allocations: 100%-50%-40%-High%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 40% 0% 11
50% 40% 10% 9
50% 40% 20% 7
50% 40% 30% 5
50% 40% 40% 3
50% 40% 50% 4
50% 40% 60% 6
50% 40% 70% 8
50% 40% 80% 10
50% 40% 90% 10
50% 40% 100% 11
Thresholds = 9, 12, 14 and 24.
Allocations: 100%-50%-40%-High%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 40% 0% 11
50% 40% 10% 9
50% 40% 20% 6
50% 40% 30% 5
50% 40% 40% 3
50% 40% 50% 4
50% 40% 60% 6
50% 40% 70% 9
50% 40% 80% 10
50% 40% 90% 10
50% 40% 100% 11
Thresholds = 9, 12, 13 and 24.
Allocations: 100%-50%-40%-High%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 40% 0% 11
50% 40% 10% 8
50% 40% 20% 5
50% 40% 30% 0
50% 40% 40% 3
50% 40% 50% 6
50% 40% 60% 9
50% 40% 70% 13
50% 40% 80% 16
50% 40% 90% 18
50% 40% 100% 21
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
Starting point:
Both 9-12-21-24 and 9-13-21-04, produce these results at a withdrawal rate of 5.2%. Both have many failures at a 5.3% withdrawal Rate.
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
Withdrawal Rate = 5.2%.
Thresholds = 9, 12 or 13, varies and 24.
Allocations: 100%-low-30%-High%-0%.
Examination of 9-12-varies-24 thresholds with 100%-50%-[30% or 40%]-varies-0% conditions suggested that one of the thresholds should be eliminated. In most circumstances, 100%-50%-30%-30%-0% was the best condition examined.
I now proceed to optimize three threshold and two adjustable stock allocations (for a total of four allocations). In what follows, the highest P/E10 threshold (at 30) is a dummy threshold because the allocation just below it is 0% and the allocation above it is 0% as well.
SURVEY FOURTEEN
Withdrawal Rate = 5.2%.
Thresholds = 9, 12, 24 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 11
50% 20% 0% 5
50% 30% 0% 0
50% 40% 0% 3
50% 50% 0% 6
50% 60% 0% 9
50% 70% 0% 12
50% 80% 0% 15
50% 90% 0% 16
50% 100% 0% 20
Thresholds = 9, 12, 23 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 11
50% 20% 0% 8
50% 30% 0% 4
50% 40% 0% 5
50% 50% 0% 8
50% 60% 0% 10
50% 70% 0% 13
50% 80% 0% 16
50% 90% 0% 17
50% 100% 0% 20
Thresholds = 9, 12, 22 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 11
50% 20% 0% 8
50% 30% 0% 4
50% 40% 0% 5
50% 50% 0% 8
50% 60% 0% 8
50% 70% 0% 12
50% 80% 0% 16
50% 90% 0% 17
50% 100% 0% 19
Thresholds = 9, 12, 21 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 11
50% 20% 0% 7
50% 30% 0% 3
50% 40% 0% 3
50% 50% 0% 3
50% 60% 0% 3
50% 70% 0% 5
50% 80% 0% 11
50% 90% 0% 12
50% 100% 0% 16
Thresholds = 9, 12, 20 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 13
50% 20% 0% 9
50% 30% 0% 7
50% 40% 0% 6
50% 50% 0% 6
50% 60% 0% 7
50% 70% 0% 10
50% 80% 0% 12
50% 90% 0% 13
50% 100% 0% 16
Thresholds = 9, 12, 19 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 13
50% 20% 0% 10
50% 30% 0% 9
50% 40% 0% 9
50% 50% 0% 9
50% 60% 0% 10
50% 70% 0% 13
50% 80% 0% 15
50% 90% 0% 16
50% 100% 0% 19
Thresholds = 9, 12, 18 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 12
50% 20% 0% 12
50% 30% 0% 8
50% 40% 0% 8
50% 50% 0% 7
50% 60% 0% 6
50% 70% 0% 6
50% 80% 0% 8
50% 90% 0% 9
50% 100% 0% 12
Thresholds = 9, 12, 17 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 13
50% 20% 0% 13
50% 30% 0% 10
50% 40% 0% 9
50% 50% 0% 9
50% 60% 0% 9
50% 70% 0% 10
50% 80% 0% 15
50% 90% 0% 17
50% 100% 0% 18
Thresholds = 9, 12, 16 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 13
50% 20% 0% 13
50% 30% 0% 11
50% 40% 0% 10
50% 50% 0% 9
50% 60% 0% 8
50% 70% 0% 9
50% 80% 0% 10
50% 90% 0% 11
50% 100% 0% 13
Thresholds = 9, 12, 15 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 14
50% 20% 0% 13
50% 30% 0% 11
50% 40% 0% 11
50% 50% 0% 10
50% 60% 0% 10
50% 70% 0% 11
50% 80% 0% 15
50% 90% 0% 15
50% 100% 0% 15
Thresholds = 9, 12, 14 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 14
50% 20% 0% 13
50% 30% 0% 11
50% 40% 0% 11
50% 50% 0% 10
50% 60% 0% 10
50% 70% 0% 11
50% 80% 0% 13
50% 90% 0% 15
50% 100% 0% 14
Thresholds = 9, 12, 13 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 13
50% 10% 0% 13
50% 20% 0% 12
50% 30% 0% 12
50% 40% 0% 11
50% 50% 0% 9
50% 60% 0% 9
50% 70% 0% 9
50% 80% 0% 9
50% 90% 0% 9
50% 100% 0% 9
Withdrawal Rate = 5.2%.
Thresholds = 9, 13, 24 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 8
50% 20% 0% 5
50% 30% 0% 0
50% 40% 0% 2
50% 50% 0% 6
50% 60% 0% 9
50% 70% 0% 12
50% 80% 0% 16
50% 90% 0% 18
50% 100% 0% 20
Thresholds = 9, 13, 23 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 8
50% 20% 0% 8
50% 30% 0% 4
50% 40% 0% 4
50% 50% 0% 8
50% 60% 0% 10
50% 70% 0% 13
50% 80% 0% 17
50% 90% 0% 19
50% 100% 0% 20
Thresholds = 9, 13, 22 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 8
50% 20% 0% 8
50% 30% 0% 4
50% 40% 0% 4
50% 50% 0% 8
50% 60% 0% 8
50% 70% 0% 12
50% 80% 0% 17
50% 90% 0% 19
50% 100% 0% 19
Thresholds = 9, 13, 21 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 8
50% 20% 0% 7
50% 30% 0% 3
50% 40% 0% 3
50% 50% 0% 3
50% 60% 0% 3
50% 70% 0% 5
50% 80% 0% 12
50% 90% 0% 14
50% 100% 0% 17
Thresholds = 9, 13, 20 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 10
50% 20% 0% 9
50% 30% 0% 7
50% 40% 0% 6
50% 50% 0% 6
50% 60% 0% 7
50% 70% 0% 10
50% 80% 0% 13
50% 90% 0% 15
50% 100% 0% 17
Thresholds = 9, 13, 19 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 10
50% 20% 0% 10
50% 30% 0% 9
50% 40% 0% 9
50% 50% 0% 9
50% 60% 0% 10
50% 70% 0% 13
50% 80% 0% 16
50% 90% 0% 18
50% 100% 0% 22
Thresholds = 9, 13, 18 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 9
50% 20% 0% 9
50% 30% 0% 8
50% 40% 0% 8
50% 50% 0% 7
50% 60% 0% 6
50% 70% 0% 7
50% 80% 0% 9
50% 90% 0% 10
50% 100% 0% 15
Thresholds = 9, 13, 17 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 9
50% 20% 0% 10
50% 30% 0% 10
50% 40% 0% 9
50% 50% 0% 9
50% 60% 0% 9
50% 70% 0% 12
50% 80% 0% 16
50% 90% 0% 17
50% 100% 0% 21
Thresholds = 9, 13, 16 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 10
50% 20% 0% 10
50% 30% 0% 11
50% 40% 0% 10
50% 50% 0% 9
50% 60% 0% 8
50% 70% 0% 9
50% 80% 0% 10
50% 90% 0% 11
50% 100% 0% 14
Thresholds = 9, 13, 15 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 10
50% 20% 0% 10
50% 30% 0% 11
50% 40% 0% 11
50% 50% 0% 10
50% 60% 0% 10
50% 70% 0% 11
50% 80% 0% 15
50% 90% 0% 15
50% 100% 0% 15
Thresholds = 9, 13, 14 and 30.
Allocations: 100%-50%-varies-0%-0%.
Code: Select all
Low Threshold Medium High Failures
50% 0% 0% 9
50% 10% 0% 10
50% 20% 0% 10
50% 30% 0% 11
50% 40% 0% 11
50% 50% 0% 10
50% 60% 0% 10
50% 70% 0% 11
50% 80% 0% 13
50% 90% 0% 15
50% 100% 0% 14
The only allocation that produced zero failures was 100%-50%-30%-0%-0%. It did so when the thresholds were 9-12-24-30 and 9-13-24-30. [In this case the P/E10 threshold of 30 is meaningless since the allocation above it and the allocation just below are both 0%].
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
Starting point:
Both 9-12-21-24 and 9-13-21-24, produce these results at a withdrawal rate of 5.2%. Both have many failures at a 5.3% withdrawal Rate.
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
Withdrawal Rate = 5.2%.
Thresholds = 9, 12 or 13, varies and 24.
Allocations: 100%-low-30%-High%-0%.
Examination of 9-12-varies-24 thresholds with 100%-50%-[30% or 40%]-varies-0% conditions suggested that one of the thresholds should be eliminated. In most circumstances, 100%-50%-30%-30%-0% was the best condition examined.
The only allocation that produced zero failures was 100%-50%-30%-0%-0%. It did so when the thresholds were 9-12-24-30 and 9-13-24-30. [In this case the P/E10 threshold of 30 is meaningless since the allocation above it and the allocation just below are both 0%.]
SURVEY SIXTEEN
These surveys look at thresholds of 9-12-24-30 and allocations of 100%-varies-varies-0%-0%. In effect, there are only three thresholds (9-12-24) and two adjustable allocations.
Code: Select all
Low Threshold Medium High Failures
30% 0% 0% 16
30% 10% 0% 12
30% 20% 0% 4
30% 30% 0% 3
30% 40% 0% 6
30% 50% 0% 12
40% 0% 0% 14
40% 10% 0% 11
40% 20% 0% 5
40% 30% 0% 1
40% 40% 0% 3
40% 50% 0% 7
50% 0% 0% 13
50% 10% 0% 11
50% 20% 0% 5
50% 30% 0% 0
50% 40% 0% 3
50% 50% 0% 6
60% 0% 0% 13
60% 10% 0% 11
60% 20% 0% 6
60% 30% 0% 0
60% 40% 0% 2
60% 50% 0% 6
SURVEY SEVENTEEN
These surveys look at thresholds of 9-13-24-30 and allocations of 100%-varies-varies-0%-0%. In effect, there are only three thresholds (9-13-24) and two adjustable allocations.
Code: Select all
Low Threshold Medium High Failures
30% 0% 0% 11
30% 10% 0% 8
30% 20% 0% 4
30% 30% 0% 3
30% 40% 0% 8
30% 50% 0% 14
40% 0% 0% 11
40% 10% 0% 8
40% 20% 0% 5
40% 30% 0% 1
40% 40% 0% 3
40% 50% 0% 7
50% 0% 0% 9
50% 10% 0% 8
50% 20% 0% 5
50% 30% 0% 0
50% 40% 0% 2
50% 50% 0% 6
60% 0% 0% 9
60% 10% 0% 8
60% 20% 0% 6
60% 30% 0% 0
60% 40% 0% 2
60% 50% 0% 6
These results favor a medium stock allocation of 30%. They favor a 50% or 60% allocation just above the low threshold.
SURVEY EIGHTEEN
Both 9-12-24-30 and 9-13-24-30, produce these results at a withdrawal rate of 5.2%.
Code: Select all
Low Threshold Medium High Failures
50% 30% 0% 0
60% 30% 0% 0
Code: Select all
Low Threshold Medium High Failures
50% 30% 0% 6
60% 30% 0% 7
Code: Select all
Low Threshold Medium High Failures
50% 30% 0% 6
60% 30% 0% 7
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
Starting point:
Both 9-12-24-30 and 9-13-24-30, produce these results at a withdrawal rate of 5.2%. Both have many failures at a 5.3% withdrawal Rate.
Code: Select all
Low Threshold Medium High Failures
50% 30% 0% 0
60% 30% 0% 0
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
SURVEY NINETEEN
All of these results are for allocations of 100%-30%-0% with P/E10 thresholds of 11 and 24. The withdrawal rate is 5.2%.
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 30% 3
11 30% 0
12 30% 4
13 30% 4
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 20% 11
11 20% 5
12 20% 8
13 20% 8
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 40% 3
11 40% 2
12 40% 5
13 40% 5
All of these results are for allocations of 100%-30%-0% with a lower P/E10 threshold that varies and a higher threshold of 24. The withdrawal rate is 5.1%.
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 30% 1
11 30% 0
12 30% 0
13 30% 0
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 20% 5
11 20% 0
12 20% 5
13 20% 5
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 40% 1
11 40% 0
12 40% 2
13 40% 2
All of these results are for allocations of 100%-30%-0% with a lower P/E10 threshold that varies and a higher threshold of 24. The withdrawal rate is 5.0%.
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 30% 1
11 30% 0
12 30% 0
13 30% 0
14 30% 15
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 20% 4
11 20% 0
12 20% 0
13 20% 0
14 20% 14
Code: Select all
P/E10 Threshold Middle Allocation Failures
10 40% 1
11 40% 0
12 40% 0
13 40% 0
14 40% 15
All of these results are for allocations of 100%-varies-30%-0%-0% and P/E10 thresholds of 9-varies-24-30. [That is, with 100%-varies-30%-0% and 9-varies-24.] The withdrawal rate is 5.1%.
Code: Select all
P/E10 Threshold Lower Allocation Higher Allocation Failures
10 40% 30% 1
11 40% 30% 1
12 40% 30% 1
13 40% 30% 0
14 40% 30% 0
Code: Select all
P/E10 Threshold Lower Allocation Higher Allocation Failures
10 50% 30% 1
11 50% 30% 0
12 50% 30% 0
13 50% 30% 0
14 50% 30% 4
Code: Select all
P/E10 Threshold Lower Allocation Higher Allocation Failures
10 60% 30% 1
11 60% 30% 0
12 60% 30% 0
13 60% 30% 0
14 60% 30% 9
All of these results are for allocations of 100%-varies-30%-0%-0% and P/E10 thresholds of 9-varies-24-30. [That is, with 100%-varies-30%-0% and 9-varies-24.] The withdrawal rate is 5.0%. Stocks should be purchased heavily whenever P/E10 is 11 or below. [A choice of 100% stocks is reasonable at these valuations.]
Code: Select all
P/E10 Threshold Lower Allocation Higher Allocation Failures
10 40% 30% 1
11 40% 30% 1
12 40% 30% 0
13 40% 30% 0
14 40% 30% 0
Code: Select all
P/E10 Threshold Lower Allocation Higher Allocation Failures
10 50% 30% 1
11 50% 30% 0
12 50% 30% 0
13 50% 30% 0
14 50% 30% 0
Code: Select all
P/E10 Threshold Lower Allocation Higher Allocation Failures
10 60% 30% 1
11 60% 30% 0
12 60% 30% 0
13 60% 30% 0
14 60% 30% 4
These results show some general sensitivities. The most important seems to be to cut allocations back to 30% above a P/E10 threshold of 13. [That is, use an allocation of 30% whenever P/E10 is between 13 and 24.]
There is some tolerance to having a 20% allocation or 40% allocation if there is a single adjustable threshold of 11. If using a single adjustable allocation, choose 100%-30%-0% with P/E10 thresholds of 11 and 24.
If using three thresholds and two adjustable allocations, the allocations should be 100%-low-30%-0% and the thresholds should be 9-low-24. The allocation just above the low threshold should be 50% or 60%, but 40% is tolerated reasonably well. The better choice is 50% because it has slightly more tolerance than 60%. The best choice for the low threshold is 13 because it has a little bit more tolerance than 12. The best results are the same at both low P/E10 thresholds (i.e., 12 and 13). Choosing any low P/E10 threshold from 11 to 13 is well tolerated.
The best choice with three thresholds and two adjustable thresholds is an allocation of 100%-50%-30%-0% with P/E10 thresholds of 9-13-24, respectively.
Have fun.
John R.
Baseline: 100%-30%-0% with P/E10 thresholds of 11 and 24 produces 0 failures at a withdrawal rate of 5.2% and 4 failures at 5.3%. The TIPS interest rate is set to 2.00%.
JanSz-Chips Deluxe V2.0B TIPS
Starting point:
Both 9-12-24-30 and 9-13-24-30, produce these results at a withdrawal rate of 5.2%. Both have many failures at a 5.3% withdrawal Rate.
Code: Select all
Low Threshold Medium High Failures
50% 30% 0% 0
60% 30% 0% 0
Code: Select all
Low Threshold Medium High Failures
40% 30% 20% 0
50% 30% 20% 0
50% 30% 30% 0
60% 30% 30% 0
These are the previous results:
1) If using a single adjustable allocation, choose 100%-30%-0% with P/E10 thresholds of 11 and 24.
2) The best choice with three thresholds and two adjustable thresholds is an allocation of 100%-50%-30%-0% with P/E10 thresholds of 9-13-24, respectively. [Results with 100%-60%-30%-0% allocations and P/E10 thresholds of 9-13-24 are almost identical. In addition, using P/E10 thresholds of 9-12-24 is also a good choice.]
3) In all cases examined, the best Historical Database Rate remains at 5.2%. There are multiple failures at 5.3%.
SURVEY TWENTY FOUR
All of these results are for allocations of 100%-varies-30%-20%-0% and P/E10 thresholds of 9-varies-21-24. The withdrawal rate is 5.2%.
Code: Select all
P/E10 Threshold Low Allocation Failures
10 30% 2
11 30% 2
12 30% 2
13 30% 2
14 30% 2
Code: Select all
P/E10 Threshold Low Allocation Failures
10 40% 2
11 40% 1
12 40% 0
13 40% 0
14 40% 4
Code: Select all
P/E10 Threshold Low Allocation Failures
10 50% 2
11 50% 0
12 50% 0
13 50% 0
14 50% 7
Code: Select all
P/E10 Threshold Low Allocation Failures
10 60% 2
11 60% 0
12 60% 3
13 60% 3
14 60% 10
All of these results are for allocations of 100%-varies-30%-20%-0% and P/E10 thresholds of 9-varies-21-24. The withdrawal rate is 5.3%.
Code: Select all
P/E10 Threshold Low Allocation Failures
10 40% 7
11 40% 5
12 40% 6
13 40% 5
14 40% 7
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P/E10 Threshold Low Allocation Failures
10 50% 7
11 50% 5
12 50% 6
13 50% 6
14 50% 10
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P/E10 Threshold Low Allocation Failures
10 60% 7
11 60% 4
12 60% 6
13 60% 6
14 60% 11
SURVEY TWENTY SIX
All of these results are for allocations of 100%-varies-30%-20%-0% and P/E10 thresholds of 9-varies-21-24. The withdrawal rate is 5.1%.
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P/E10 Threshold Low Allocation Failures
10 40% 1
11 40% 0
12 40% 0
13 40% 0
14 40% 0
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P/E10 Threshold Low Allocation Failures
10 50% 1
11 50% 0
12 50% 0
13 50% 0
14 50% 4
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P/E10 Threshold Low Allocation Failures
10 60% 1
11 60% 0
12 60% 0
13 60% 0
14 60% 7
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P/E10 Threshold Low Allocation Failures
10-14 (no effect up to 21) 30% 1
The full up condition shows very little sensitivity. The best allocation choice is 100%-50%-30%-20%-0%. Other choices are almost as good, especially 100%-40%-30%-20%-0% and 100%-60%-30%-20%-0%.
The P/E10 thresholds should be 9-12-21-24 or 9-13-21-24 (and 9-11-21-24 is almost as good). I was not able to identify a reasonable tie breaker.
OVERALL SUMMARY
The best Historical Database Rate was 5.2% in all cases. It was never possible to reach 5.3% without several failures.
From previous investigations I have found that the best stock allocation when P/E10 is below its lowest threshold is 100%. Above the highest P/E10 threshold, it is 0%. These values have been built into my latest versions of the (modified Retire Early Safe Withdrawal) Calculator.
The simplest approach uses two thresholds and one adjustable stock allocation (for a total of three). The best choices are P/E10 thresholds of 11 and 24 and stock allocations of 100%-30%-0%, respectively.
When there is more than one, the most important thresholds are the lowest thresholds.
The best choice with three thresholds and two adjustable allocations (for a total of four) is to use P/E10 thresholds of 9-13-24 with stock allocations of 100%-50%-30%-0%, respectively. [Results with 100%-60%-30%-0% allocations and P/E10 thresholds of 9-13-24 are almost identical. Using P/E10 thresholds of 9-12-24 is another a good choice.]
The best choice with four thresholds and three adjustable stock allocations (for a total of five) are 9-12-21-24 or 9-13-21-24 (with no preference) with 100%-50%-30%-20%-0%, respectively. There is relatively little sensitivity to changing the lowest adjustable allocation or the lower middle P/E10 threshold.
Have fun.
John R.
It is tempting to say that the best stock allocation during retirement is 30% to 40% (with TIPS and commercial paper, respectively) if you just add a touch of common sense. Those are the best allocations under typical circumstances, when P/E10 is 14 to 15. As for common sense, it makes sense to reduce or eliminate your stock holdings when valuations are sky high and to load up on stocks when they are at bargain prices.
Such an approach overlooks questions as to what constitutes a level of severe overvaluation and what is required for stocks to become bargains. The research on this board produces numbers and puts matters into their historical context.
Related research into cause and effect identifies those characteristics that result in portfolio failure. rkmacdonald summarized it very well in the early days of this site. You must avoid heavy selling when prices are low. That kind of insight leads you to look into the nature of your income stream and how you handle it. It expands your outlook far beyond the limitations imposed by data availability. It allows you to include additional asset classes, albeit imperfectly. It focuses your attention on such things as dividends and their stability. It causes you to reflect upon how much you are willing to allow your annual income to fluctuate in order to gain a higher degree of safety.
Have fun.
John R.