Possible FIRE FAQ

Financial Independence/Retire Early -- Learn How!
Post Reply
User avatar
ataloss
**** Heavy Hitter
Posts: 559
Joined: Mon Nov 25, 2002 3:00 am

Possible FIRE FAQ

Post by ataloss »

FIRE FAQ


Q: Fire?

A: Financial independence/ retire early. Originated by Wanderer.

Q: SWR?

A: Safe withdrawal rate. The answer to bylo's question "How much of my
savings can I withdraw in each year of my retirement without incurring an
undue risk of depleting my assets?"
http://www.bylo.org/saferetr.html

Gummy:
1. A number, expressed as a percentage (like 4%), called the SWR
... that's the Rate word.
2. This Rate determines (in some prescribed manner) how much to withdraw
from some portfolio value
... that's the Withdrawal word.
3. The result of withdrawing at this Rate will be that your portfolio will
last until you drop dead (or for 30 or 40 years or whatever)
... that's the Safe wordhttp://home.golden.net/~pjponzo/Safe-Withdrawals.htm


and:

When people talk about Safe Withdrawal Rates (see Bylo's list) they usually
assume certain Rules like

* rebalancing your portfolio at fixed intervals (annually, for example)
* maintaining some fixed allocation of assets (like 80% stocks + 20%
bonds, for example)
* withdrawing a certain percentage of your portfolio each year (like 5%,
for example)
* increasing withdrawal amounts with inflation (at 3%, perhaps)
http://home.golden.net/~pjponzo/sensibl ... rawals.htm

Some people seem to have unusually strongly held preferences on how to estimate or calculate a SWR. Sometimes they like to define their favorite as the only correct SWR.

Of course one can consider withdrawals as a constant percentage of the portfolio:
http://www.efficientfrontier.com/ef/998/hell.htm

Or consider "the other swr,"￾ sensible withdrawal rates:
http://home.golden.net/~pjponzo/sensibl ... rawals.htm[/quote]





What web sites have FIRE related information?:

Index fund FAQ at NFB
http://nofeeboards.com/docs/faq.html

Gummy Stuff:
http://home.golden.net/~pjponzo/gummy_stuff.htm


Efficient Frontier
http://www.efficientfrontier.com/


Bylo:
http://www.bylo.org/saferetr.html

Raddr

When to rebalance
Enhanced Monte Carlo simulation
Alterations in returns sequence
Mean Reversion
Gordon Equation
Life Expectancy and retirement withdrawals
And more: http://raddr.freehostingpro.com/

FIRE calculators

Cap'n Bill's FIREcalc
http://www.capn-bill.com/fire/
Chips: with an implicit strong recommendation from JohnR, I think, in his frequent use of it.

http://www.i-orp.com/
Chips: This calculator uses a powerful mathematical optimization technique, linear programming, in deriving its answers. Some retirement calculators that are over-simplified.

Retire Early Home Page
http://www.retireearlyhomepage.com/
(see footnote)

Vicki and Paul Terhorst Travel, Early Retirement, and Contemplation Page
http://www.geocities.com/TheTropics/Shores/5315/



Trinity Study at AAII:
http://www.aaii.com/promo/mstar/feature.shtml
(see footnote)

footnote:
The Trinity Study and REHP study are based on a time with high real stock returns (in the 6-7% range) There is a significant probability of lower future market returns and lower "safe" withdrawal rates (at least for investors using an S&P 500 or total stock market based approach)

AAII:
www.aaii.com
(some information restricted to members)

IRA information:
http://www.irs.gov/formspubs/page/0,,id=12598,00.html
IRA distributions can be taken early if you follow certain rules.

You can receive distributions from your traditional IRA that are part of a series of substantially equal payments over your life (or your life expectancy), or over the lives (or the joint life expectancies) of you and your beneficiary, without having to pay the 10% additional tax, even if you receive such distributions before you are age 59½. You must use an IRS-approved distribution method and you must take at least one distribution annually for this exception to apply. The required minimum distribution method, when used for this purpose, results in the exact amount required to be distributed, not the minimum amount.

http://www.fincalc.com/
chips: Calculators there offer quick (but possibly over-simplified) answers to questions like these:

How will retirement impact my cost of living? (not written yet)
How much will I need to save for retirement?
What retirement can I afford on my current course? (not written yet)
Social Security retirement income estimator
What is the impact of inflation on retirement spending? (not written yet)
I'm retired, how long will my money last? (not written yet)
I'm retired, what is my life expectancy? (not written yet)
Should I try to convert discretionary funds to savings?
Becoming a millionaire
Income generated by a savings plan.
How long will it take to double my money?
How long until my savings reach my goal?
Save now vs. save later calculator
How much should I save to reach my goal?
What will my current savings grow to?
What is the rate of return on an investment?
How do taxes and inflation impact my return?
What is my effective annual yield

Internet Acronyms
http://www.gaarde.org/acronyms/
http://emoticonuniverse.com/slang/

Interesting NFB Threads

Wanderer's practical fire analysis
http://nofeeboards.com/boards/viewtopic ... ight=#p521


JWR Fire Thresholds
http://nofeeboards.com/boards/viewtopic.php?t=129

Raddr on the unlucky Y2K retiree
http://nofeeboards.com/boards/viewtopic.php?p=770#p770


Raddr on the importance of the sequence of returns
http://nofeeboards.com/boards/viewtopic.php?t=119

Bensolar and valuation effect on swr
http://nofeeboards.com/boards/viewtopic ... 1046#p1046
and
http://nofeeboards.com/boards/viewtopic ... 3005#p3005

andrew61 and Terhorsts
http://nofeeboards.com/boards/viewtopic ... 3253#p3253

life expectancy and swr
http://nofeeboards.com/boards/viewtopic ... 5860#p5860

JWR and market timing
http://nofeeboards.com/boards/viewtopic ... 5071#p5071

FMO Gary Eldred and Real Estate
http://nofeeboards.com/boards/viewtopic.php?t=1185

Gordon Eq and future returns by raddr
http://www.nofeeboards.com/boards/viewt ... 8629#p8629

Therealchips the utility of money and personal life expectancy
http://www.nofeeboards.com/boards/viewt ... 7126#p7126



FIRE Books

Cashing in on the American Dream: How to Retire at 35
Paul Terhorst
http://www.amazon.com/exec/obidos/tg/de ... 553052896/

YMOYL by Dominguez and Robbins
(aka Your Money or Your Life: Transforming Your Relationship With Money and Achieving Financial Independence )
http://www.amazon.com/exec/obidos/ASIN/0140286780/
Hyperborea points out that the investing advice in the book is highly questionable. I think people mostly like the other parts.


How to Retire Early and Live Well with Less than a Million Dollars
Gillette Edmunds

Dual: A lot of practical advice both for saving for retirement and investing afterwards from someone who has actually done it. Short on justification for the advice other than the author's personal experience. There is a dark tone to the discussion on the personal side with talk of Edmunds' divorce and more than one reference to suicide if your investments go against you. Ends on an upbeat note giving positive advice for handling market downturns.
http://www.amazon.com/exec/obidos/tg/de ... 580622011/

The Millionaire Next Door, The Surprising Secrets of America's Wealthy by Thomas J. Stanley and William D. Danko.
Reviews located by Chips:
http://www.washingtonpost.com/wp-srv/st ... xtdoor.htm and
http://www.bookbrowse.com/dyn_/title/titleID/242.htm
http://www.dealtime.com/xMPR-~PD-486536 ... ~RI-985455

Clutter's Last Stand by Don Aslett
http://www.amazon.com/exec/obidos/tg/de ... 898791375/

Not for Packrats Only by Don Aslett
http://www.amazon.com/exec/obidos/tg/de ... 452265932/

The Joy of Not Working by Ernie Zelinski
Karma: is good for getting you in the right frame of mind. Looks like he is issuing another edition this month.
http://www.amazon.com/exec/obidos/ASIN/1580085520/

Get a Life: You Don't Need a Million to Retire Well by Ralph Warner
Dual: The author goes a little bit overboard for my taste, but the emotional/social part of retirement is as important as the financial IMO. The author has a good discussion about how to do volunteering so you don't end up stuffing envelopes and answering phones (unless you want to).


The Intelligent Asset Allocator by Wm. Bernstein
Tuffy88: His first book, about the best index asset allocation book I have read

Common Sense on Mutual Funds by Bogle

Four Pillars by Bernstein

Financial Peace Revisited by Dave Ramsey

Financial Peace Workbook by Dave Ramsey

Smart Couples Finish Rich by David Bach

The Finish Rich Workbook by David Bach

How to get out of debt, stay out of debt & live prosperously
by Jerrold Mundis

Peteyperson: key book to help people clear debt
to start on the path to FIRE - many people cut back to pay off
debt, realise they have spare cash having done that for 2 years
and want to know where to put it. So books on personal finance
lay the groundwork.)

The Richest Man in Babylon
WiseNlucky: "￾had profound impact on me."￾

A Modest Home Study Course from William Bernstein:
http://www.efficientfrontier.com/reading.htm

Investing in Real Estate By andrew Mclean and Gary Eldred
(nice comparison of stock investments vs real estate in the 4th Ed based on current relative dividends/rents)

Make Money with Condominiums and Townhouses
Gary Eldred
Last edited by ataloss on Tue Oct 07, 2003 2:20 pm, edited 1 time in total.
Have fun.

Ataloss
User avatar
BenSolar
*** Veteran
Posts: 242
Joined: Mon Nov 25, 2002 5:46 am
Location: Western NC

re: FIRE FAQ

Post by BenSolar »

Excellent work, ataloss!!

A couple of suggestions:

The fine print is, er, maybe, too fine. Especially the italicized fine print is very difficult for me to read.

On SWRs you wrote:
People seem to have different preferences on how to estimate a SWR (or calculate it with absolute precision in one case.) Some like to define their favorite method as the only correct SWR.


You treat this with a relatively light hand, which I like, but I wonder if we can finesse the issue even a bit more.

Something like:
<<
People seem to have different preferences on how to estimate or calculate a SWR. This has generated heated discussions at times. The SWR Research Group board attempts to extend the precision and utility of SWR calculations and uses a definition of the phrase 'Safe Withdrawal Rate' (and sometimes other words) that can put them at odds with other's thoughts or work on the subject.
>>

I don't know, though. Maybe simply:
<<
People seem to have different preferences on how to estimate or calculate a SWR. This has generated heated discussions at times.
>>
"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things only hoped for." - Epicurus
User avatar
ElSupremo
Admin Board Member
Posts: 343
Joined: Thu Nov 21, 2002 12:53 pm
Location: Cincinnati, Ohio

Post by ElSupremo »

Greetings Ben :)
The fine print is, er, maybe, too fine. Especially the italicized fine print is very difficult for me to read.

The document will be converted to HTML for our FAQ's page. That should clear things up.
"The best things in life are FREE!"

www.nofeeboards.com
Dual
* Rookie
Posts: 9
Joined: Sat Aug 02, 2003 3:00 am
Location: California

Short review of Gillette Edmunds book

Post by Dual »

I decided to re-read the book. I think it makes a good contribution and here is a short summary/review.

How to Retire Early and Live Well with Less than a Million Dollars
Gillette Edmunds

A lot of practical advice both for saving for retirement and investing afterwards from someone who has actually done it. Short on justification for the advice other than the author's personal experience. There is a dark tone to the discussion on the personal side with talk of Edmunds' divorce and more than one reference to suicide if your investments go against you. Ends on an upbeat note giving positive advice for handling market downturns.

Dual[/b]
User avatar
ataloss
**** Heavy Hitter
Posts: 559
Joined: Mon Nov 25, 2002 3:00 am

Post by ataloss »

Dual, Thanks, I added the Gillette Edmunds review.

Bensolar: I modified the swr disclaimer statement. There really isn't any chance of making either jwr or hocus happy, so I am simply trying to be fair. Hocus really hasn't shown much interest in listening to anyone (although jwr is bringing him around slowly on some points) and basically takes the shortcut of defining himself as right. I think that should at least be hinted at in the FAQ. As for the "swr research group" extending the precision or utility of swr, I am still waiting. I don't think that there is a methodology or a number. Lots of requests for people to thank hocus.

ES, I increased the size of some of the "small" type so that it is larger. I guess you can fix it in the conversion to html :wink:

I know I missed a lot of good nfb threads but it is time consuming to look for them (and I got tired of looking)
Last edited by ataloss on Wed Oct 08, 2003 2:52 pm, edited 1 time in total.
Have fun.

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

Post by JWR1945 »

BenSolar
Something like:
<<
People seem to have different preferences on how to estimate or calculate a SWR. This has generated heated discussions at times. The SWR Research Group board attempts to extend the precision and utility of SWR calculations and uses a definition of the phrase 'Safe Withdrawal Rate' (and sometimes other words) that can put them at odds with other's thoughts or work on the subject.
>>

This is a reasonable statement. I found the original wording highly offensive.

Have fun.

John Russell
User avatar
BenSolar
*** Veteran
Posts: 242
Joined: Mon Nov 25, 2002 5:46 am
Location: Western NC

Post by BenSolar »

ataloss wrote: As for the "swr research group" extending the precision or utility of swr, I am still waiting. I don't think that there is a methodology or a number. Lots of requests for people to thank hocus.

Hocus's behavior aside, JWR has put up most of the posts over there and they include looking at the behavior of the stock market valuations and historical withdrawal rates in more detail than I have seen elsewhere. While some of it can be tough to digest and requires a couple of readings, there is some interesting material in there for those intrigued by the SWR problem.

I know you tend to reject the concept that the SWR may go up when valuations are very low, but there is evidence that it may be reasonble to pursue such an approach, and it could reduce the time to FIRE by years if you found yourself in such a time. Thus I think it is fair to say that they (he) is working to extend the utility and precision of SWR analysis. That is the stated goal of the board. I think that we shouldn't discourage John from continuing his investigations, and in fact, we should encourage him.

Hocus's demands for thanks and defining himself as right ... well I see them as unpleasantries of the past. I would tend to leave references to those squirmishes out of the FAQ, which is the FIRE board's public face. You have your FRHs to refer to if the need arises.

My opinions ...
"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things only hoped for." - Epicurus
hocus
Moderator
Posts: 435
Joined: Mon Dec 02, 2002 12:56 am

Post by hocus »

I think that we shouldn't discourage John from continuing his investigations, and in fact, we should encourage him.

I agree, BenSolar.

You have some sort of personal issue with me that keeps you from participating at the SWR board where JWR1945 is doing this wonderful work. I ask that you reflect on who it is you think you are punishing by your unwillingness to particpate there. You are punishing JWR1945 by not giving him the feedback he needs to do his best work. And you are punishing the FIRE community that would benefit from the back and forth that the two of you could engage in on the threads. I don't think it is your aim to punish JWR1945 or the community, So why continue with this?

If you are concerned that posting there will in some way be viewed as an endorsement of my views, I have two responses. One, no reasonable person would view things that way. It is common practice for people who disagree with the moderator of a board to post at that board. I disagree with intercst on SWRs. I didn't let that stop me from posting at "his" board, did I? Neither should you allow your differences with me stop you from participating in any threads started by JWR1945 at the SWR board.

Two, if for some reason you are still concerned that your participation will be misinterpreted, you could put up a disclaimer at the top of your posts. You could say "I don't agree with hocus that the conventional methodology is invalid" or "I don't think that hocus deserves any thanks from the FIRE community for his posting on SWRs" or whatever it is you want people to be clear on.

You and me do not agree on several critical aspects of the SWR question, BenSolar. That's clear. But there is no rule of the universe that says we must agree on every single issue in order to be able to participate at the same discussion board.

When you see something in which you have an interest appear at that board, put together your thoughts, pro or con or in the middle, and post!

That's how learning together happens. That's what it's all about.
User avatar
ataloss
**** Heavy Hitter
Posts: 559
Joined: Mon Nov 25, 2002 3:00 am

Post by ataloss »

You have some sort of personal issue with me that keeps you from participating at the SWR board where JWR1945 is doing this wonderful work. I ask that you reflect on who it is you think you are punishing by your unwillingness to particpate there. You are punishing JWR1945 by not giving him the feedback he needs to do his best work. And you are punishing the FIRE community that would benefit from the back and forth that the two of you could engage in on the threads. I don't think it is your aim to punish JWR1945 or the community, So why continue with this?

who is jwr punishing?
Have fun.

Ataloss
User avatar
ataloss
**** Heavy Hitter
Posts: 559
Joined: Mon Nov 25, 2002 3:00 am

Post by ataloss »

I know you tend to reject the concept that the SWR may go up when valuations are very low, but there is evidence that it may be reasonble to pursue such an approach, and it could reduce the time to FIRE by years if you found yourself in such a time.

Clearly returns will be higher when initial valuations are lower but I think that it is going to be difficult to be very convincing about some data mined market timing approach to increased swr. I will be interested to see if hocus/jwr develop an actual methodology or number. I think that largely the hocus board is dedicated to the glorification of all things hocus although I don't think that would be an appropriate statement to make in a faq.

Hocus's demands for thanks and defining himself as right ... well I see them as unpleasantries of the past. I would tend to leave references to those squirmishes out of the FAQ, which is the FIRE board's public face. You have your FRHs to refer to if the need arises.

I addressed these issues as subtly as I could without ignoring them. Hocus is still himself and if his behavior ar TMF is any indication will continuously return with the same illogical nonsense. (or "insights" if you prefer) Obviously I am tired of hocus' word game posts and jwr's excuses and explanations. I thought I was exercising restraint by not following wanderer's advice

also, please make sure there is a link to your posts, around the time preceding Ed Easterling's visit, citing evidence that hocus definitely didn't 'know it all' from the beginning.

Your clarification of matters caused hocus great mortification, but I considered it a public service (rather than the entire community being embarassed by his inaccurate pronouncements).

Oh, before hocus cries 'smear: his confusing real return with SWR, hocus' confusion over what William Bernstein was asserting with mathematical certitude, hocus' assertion that he was the first to marry SWRs and valuation, and his assertion that thread disruption only came from the anti-valuation crowd have been demonstrated to be objectively false (or 'invalid', if anyone prefers).

does hocus realize his bizarre approach to building a case now has me actually defending the rehp approach? Good lord!
Have fun.

Ataloss
hocus
Moderator
Posts: 435
Joined: Mon Dec 02, 2002 12:56 am

Post by hocus »

Ataloss:I thought I was exercising restraint by not following wanderer's advice

Quote from Wanderer: also, please make sure there is a link to your posts, around the time preceding Ed Easterling's visit, citing evidence that hocus definitely didn't 'know it all' from the beginning.

If disparaging comments re the work being done at the SWR board are going to be included in the FIRE board's FAQ, I think it makes sense for the board to follow Wanderer's advice and include the link suggested. That way, readers of the FAQ are made aware of the basis for the claims made in the FAQ and have a means available to them to assess their merit.

Also, I think it is better to make specific claims rather than vaguely stated ones. The current language from Ataloss states: "Some people seem to have unusually strongly held preferences on how to estimate or calculate a SWR. Sometimes they like to define their favorite as the only correct SWR. " My sense from the recent discussions at this board is that the reference to "some people" is a reference to me and perhaps to JWR1945. But the words themselves apply more to intercst than to either me or JWR1945. I have endorsed the "let a thousand flowers bloom" viewpoint, saying that all valid methodologies should be considered for the light they shed on the issues. Intercst, in stark contrast, has said that calculation of the SWR is a matter of "third-grade arithmetic" and that anyone who gives consideration to the data showing that the number is not always 4 is "loony" and "irrational." If the reference to "some people" is a reference to intercst and not to hocus or JWR1945, it would be a plus to spell this out. Given the recent discussions here, I do not think it would be unreasonabe for some readers to draw alternate conclusions from reading the langauge proposed.
User avatar
ataloss
**** Heavy Hitter
Posts: 559
Joined: Mon Nov 25, 2002 3:00 am

Post by ataloss »


Have fun.

Ataloss
Post Reply