having read this ERN article (and lots of others) his critique of the BTSQ paper is a few points:
it uses a synthsized group of data which would include items like Italian bond and equities (and even others (like Iceland or Norway) much less include pre-war Spain, Germany, and Japan... and France, Belgium, etc) and the paper equates these to US and UK. He disagrees and says that he only used MSCI back to '70 since that's all the data he could reliably get for diversified international; he also limits US to 1926 as it's been shown in other papers that prior estimates are flawed by actual survivor bias.
He notes that the BTSQ paper considers its approach "optimal" but only considers it against a flawed other seven approaches, not more appropriate methods. He examines the conditions of supposed improvement of the BTSQ 50/50 domestic/international and showed that it was actually only valid for a specific period, largely due to US currency decline, and that the strategy fails miserably when examined in other timeframes.
He notes that, while 100% equities would allow for the highest accumulation value, retirees would clearly be better off with a lower equity level (either 60% or 75%) for a better chance of sustaining their desired funding levels. He personally seems to believe 100% equities until retirement and then dropping, with best approach being a "bond tent" approach whereby dropping equities before and ramping up some time after. (see comments of article)
Note that his audience is generally much younger and so is much more likely to be in a period of SORR than "typical" retirees.
We didn't feel comfortable at 100% equities and had gone down to 45% equities in retirement, along with a five year CD ladder (that actually lasted six years), so we would disagree with his approach. If SORR hits just before retirement, with 100% equities one must put off retirement for some time before getting back to the same condition. Slowly dropping equities, say five to seven years prior, doesn't cost that much in return for the better likelyhood of retirement "on time" (of course, that presumes one is somewhat in control of the "when").
it uses a synthsized group of data which would include items like Italian bond and equities (and even others (like Iceland or Norway) much less include pre-war Spain, Germany, and Japan... and France, Belgium, etc) and the paper equates these to US and UK. He disagrees and says that he only used MSCI back to '70 since that's all the data he could reliably get for diversified international; he also limits US to 1926 as it's been shown in other papers that prior estimates are flawed by actual survivor bias.
He notes that the BTSQ paper considers its approach "optimal" but only considers it against a flawed other seven approaches, not more appropriate methods. He examines the conditions of supposed improvement of the BTSQ 50/50 domestic/international and showed that it was actually only valid for a specific period, largely due to US currency decline, and that the strategy fails miserably when examined in other timeframes.
He notes that, while 100% equities would allow for the highest accumulation value, retirees would clearly be better off with a lower equity level (either 60% or 75%) for a better chance of sustaining their desired funding levels. He personally seems to believe 100% equities until retirement and then dropping, with best approach being a "bond tent" approach whereby dropping equities before and ramping up some time after. (see comments of article)
Note that his audience is generally much younger and so is much more likely to be in a period of SORR than "typical" retirees.
We didn't feel comfortable at 100% equities and had gone down to 45% equities in retirement, along with a five year CD ladder (that actually lasted six years), so we would disagree with his approach. If SORR hits just before retirement, with 100% equities one must put off retirement for some time before getting back to the same condition. Slowly dropping equities, say five to seven years prior, doesn't cost that much in return for the better likelyhood of retirement "on time" (of course, that presumes one is somewhat in control of the "when").
Statistics: Posted by Nestegg_User — Fri Feb 16, 2024 1:54 pm — Replies 40 — Views 5012