Comments on: Looking for the Perfect Retirement Formula? http://7million7years.com/2008/12/13/looking-for-the-perfect-retirement-formula/ How to make 7 million in 7 years ... Thu, 24 May 2012 09:20:05 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Adrian http://7million7years.com/2008/12/13/looking-for-the-perfect-retirement-formula/comment-page-1/#comment-2082 Adrian Mon, 15 Dec 2008 19:39:40 +0000 http://7million7years.wordpress.com/?p=904#comment-2082 @ Jeff - 4% or $100k (inflation adjusted) whichever is the lesser? Not sure, because I don't intend to do any of these ... I am going with my MM301 suggestion of buying RE and living off the income, whatever it happens to be (after allowances/costs); keeping a big enough buffer against contingencies should provide all the required 'smoothing'. @ Jeff – 4% or $100k (inflation adjusted) whichever is the lesser? Not sure, because I don’t intend to do any of these … I am going with my MM301 suggestion of buying RE and living off the income, whatever it happens to be (after allowances/costs); keeping a big enough buffer against contingencies should provide all the required ‘smoothing’.

]]> By: Jeff http://7million7years.com/2008/12/13/looking-for-the-perfect-retirement-formula/comment-page-1/#comment-2081 Jeff Mon, 15 Dec 2008 17:47:06 +0000 http://7million7years.wordpress.com/?p=904#comment-2081 AJC - Great post, as always. Thanks for the T Rowe link. I use a Monte Carlo analysis tool with Fidelity at the end of each year to assess my long range plans to see if I'm still on track. It will be interesting this year to try T Rowe's as well to compare the results. Back to the topic of the post. I see a potential third alternative to the set $ amount or set % amount withdrawal plan that may have merit. Why not a combination of the two? You would still do all the "number required to enable the life purpose, while living the desired lifestyle" number crunching that we did with you on 7M7Y. You would also select a 2.5% - 5% withdrawal rate number as well. I haven't thought through all the logic yet to determine what would be the best answer although I'm gonna swag it at 4% because I think your investments could easily outperform that MOST (not all) years. In application (lets assume a 4% or $100K annual requirement) it would go something like.... Good years = Investment income producing more than $100K...you withdraw your dollar amount adjusted for inflations. Bad years = Investment income producing less than $100K...you apply your 4% withdrawal rate. To me that would seem to smooth things out a bit so that in boom years you would live below your means (allowing the principle to actually grow) while in bust years you weren't overly reducing your principle but still able to make ends meet without too much concern. Thoughts? Jeff AJC – Great post, as always. Thanks for the T Rowe link. I use a Monte Carlo analysis tool with Fidelity at the end of each year to assess my long range plans to see if I’m still on track. It will be interesting this year to try T Rowe’s as well to compare the results.

Back to the topic of the post. I see a potential third alternative to the set $ amount or set % amount withdrawal plan that may have merit.

Why not a combination of the two?

You would still do all the “number required to enable the life purpose, while living the desired lifestyle” number crunching that we did with you on 7M7Y. You would also select a 2.5% – 5% withdrawal rate number as well. I haven’t thought through all the logic yet to determine what would be the best answer although I’m gonna swag it at 4% because I think your investments could easily outperform that MOST (not all) years.

In application (lets assume a 4% or $100K annual requirement) it would go something like….

Good years = Investment income producing more than $100K…you withdraw your dollar amount adjusted for inflations.

Bad years = Investment income producing less than $100K…you apply your 4% withdrawal rate.

To me that would seem to smooth things out a bit so that in boom years you would live below your means (allowing the principle to actually grow) while in bust years you weren’t overly reducing your principle but still able to make ends meet without too much concern.

Thoughts?
Jeff

]]> By: Scott http://7million7years.com/2008/12/13/looking-for-the-perfect-retirement-formula/comment-page-1/#comment-2080 Scott Sun, 14 Dec 2008 01:21:18 +0000 http://7million7years.wordpress.com/?p=904#comment-2080 Yeah this strategy is more of what I was learning when I started out reading and studying money a couple of years ago. Most of the books I was reading where the Kyosaki and T. Harv Eker books, which all say to purchase income producing assets and hold forever and live off their passive income streams and never let go! Yeah this strategy is more of what I was learning when I started out reading and studying money a couple of years ago. Most of the books I was reading where the Kyosaki and T. Harv Eker books, which all say to purchase income producing assets and hold forever and live off their passive income streams and never let go!

]]> By: Adrian http://7million7years.com/2008/12/13/looking-for-the-perfect-retirement-formula/comment-page-1/#comment-2079 Adrian Sat, 13 Dec 2008 22:17:29 +0000 http://7million7years.wordpress.com/?p=904#comment-2079 @ Josh - Thanks for the 'hot tip' ... I'll look at KMP through the 'Rule # 1 Investing" lens. One thing to watch for, this is purely a MM301 'play' because you actually aren't terribly interested in the capital appreciation portion - after all, it's going to your children/charity ... YOU don't get to enjoy it ;) @ Josh – Thanks for the ‘hot tip’ … I’ll look at KMP through the ‘Rule # 1 Investing” lens.

One thing to watch for, this is purely a MM301 ‘play’ because you actually aren’t terribly interested in the capital appreciation portion – after all, it’s going to your children/charity … YOU don’t get to enjoy it ;)

]]> By: Josh http://7million7years.com/2008/12/13/looking-for-the-perfect-retirement-formula/comment-page-1/#comment-2078 Josh Sat, 13 Dec 2008 21:08:03 +0000 http://7million7years.wordpress.com/?p=904#comment-2078 I like the dividend idea, which is probably what I will end up doing. Picking maybe 5 or 6 companies which have strong underlying businesses, like soap or drugs. Wish I was ready right now, there's plenty of strong companies with a 8+ % dividend, one I enjoy watching is KMP, if this company isn't a toll bridge, I don't know what is. I like the dividend idea, which is probably what I will end up doing. Picking maybe 5 or 6 companies which have strong underlying businesses, like soap or drugs. Wish I was ready right now, there’s plenty of strong companies with a 8+ % dividend, one I enjoy watching is KMP, if this company isn’t a toll bridge, I don’t know what is.

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