Hi Haywool,
Corteva the spin off from Dupont is involved. And I see additional press releases. Makes me think there are real products out there. But will people buy them?
Maybe no one wants to be first. Let the other guy try it.
I hear fertilizer prices are up. Must be a good year to look for alternatives.
BTW - where do you live?: I live in Wildwood, on the western edge of St. Louis County.
Paul
Hi MarkR -
I’ve long felt the 4% rule was a better planning guide than a retirement spending guide. As in “a good target to save for is 25x the annual spending you need your portfolio to cover.”
The whole 50/50 stocks/bonds allocation piece and “only increase your withdrawal in line with inflation” piece seem more in line with the rule’s design around “worst case scenario” planning, rather than a guide on how to actually operate in ‘normal conditions’.
Heck, even the rule’s creator now thinks the number can be boosted to 4.5% or so and still hit the worst case scenario 30-year design criteria with a high enough success probability… On a $1,000,000 portfolio, that’s an extra $5,000 a year. Or said differently, in the original 4% rule, there was apparently already a 12.5% buffer built in…
The key is flexibility and cost control. In my original post, I mentioned that the $2,500 spend rate at the time would have kept us at a comparable lifestyle in a substantially cheaper area. If we were really forced to cut back, we could have gotten away with less. In addition, other than the lousy job market at the time, there was nothing keeping one or both of us from working. And even then, there were jobs available, just not the types of jobs where our training, skills, and experience would be valued sufficiently to command a large salary.
Regards,
-Chuck
Home Fool
OK, I’ll go.
Adverse childhood experiences, or ACEs, are potentially traumatic events that occur in childhood. The ACE Score is calculated from the number of “yes” responses to 10 items about: emotional, physical, and sexual abuse, emotional and physical neglect, witnessing domestic violence, growing up with mentally ill or substance abusing household members, loss of a parent, or having a household member incarcerated. Toxic stress from ACEs can change brain development and affect such things as attention, decision-making, learning, and response to stress. Children growing up with toxic stress often have difficulty forming healthy and stable relationships. They may also have unstable work histories as adults and struggle with finances, jobs, and depression throughout life (www.cdc.gov/aces).
More than half (52%) of all U.S. adults report at least one ACE, with 14% reporting three or more such events. An extensive body of research demonstrates powerful relationships between the ACE Score and a wide array of health and social problems throughout the lifespan. For example, 16% of adults with an ACE score of 4+ become alcoholics, as compared with 2% of adults with an ACE score of 0, and 6% of those with a score of 1. Nearly 60% of women and 35% of men with an ACE score of 4+ suffer from chronic depression, versus 18% of women and 11% of men with ACE scores of zero. Individuals with ACE scores of 4+ are twice as likely as ones with scores of zero to report having “serious job problems,” and individuals with ACE score of 5+ are 17 times more likely as ones with scores of zero to have attempted suicide.
My ACE score is 10 out of 10. Both of my parents were alcoholics who divorced when my (younger) brother and I were in grade school. We bounced through various living situations, including foster homes. I changed schools 13 times before graduating from high school. My brother was expelled in the 11th grade and never graduated, married, nor held a steady job. He died recently. He and I grew up in deep, violent poverty. It was common to have the utilities turned off for nonpayment, to have to collect enough empty bottles to return to the store to buy a can of beef stew for dinner, or to eat corn flakes with water on them for breakfast. I was 13 when I first saw a dentist. An aunt I was staying with took me to have an abscessed tooth removed.
I managed to escape, partly because I was determined to do so and partly from pure luck. After high school, I attended three different colleges but still managed to get my BA in 7 semesters while working part-time throughout. I graduated at age 20 and got married 3 weeks later. That lasted 8 years. I remarried, another 8 years. I married a third time, and we’ve been two peas in a pod for 34 years now.
I went on to complete my PhD at age 25. I spent the next 39 years as a professor in the top department in my field. The chairman who hired me told me to put the maximum (5%) deduction into my TIAA retirement account automatically every month, which the university would double-match. He said I’d thank him one day. I do. I also thank TMF, which I found as a folder in the old AOL. I learned how to invest, and I applied what I learned. I’m still learning. And I’m grateful for all of this and more, every day.
Correcting the CDC link: https://www.cdc.gov/violenceprevention/aces/fastfact.html
I’ve long felt the 4% rule was a better planning guide than a retirement spending guide. As in “a good target to save for is 25x the annual spending you need your portfolio to cover.”
Those are essentially one and the same. Just stated a different way.
The whole 50/50 stocks/bonds allocation piece and “only increase your withdrawal in line with inflation” piece seem more in line with the rule’s design around “worst case scenario” planning, rather than a guide on how to actually operate in ‘normal conditions’.
Yes, the very definition of the “Safe Withdrawal Rate” is one that can withstand the worst case scenario. That’s because you only get one try at it, if you go bust at age 79 due to withdrawing too much from your portfolio for ~15 years, you’re done, there is no recovery from that.
Hi MarkR,
Yeah, that 4% thing …
It is primarily a planning amount with the goal of an “average portfolio” to last 30 years with a 90% possibility of a positive outcome.
It is not a guarantee.
I had 2 friends that out-spent their funds. One was going to Oklahoma casinos on a regular basis. He wound up getting a job for a medical service making rush deliveries to hospitals and clinics. The other went back to riding a horse, chasing cattle, in every kind of horrible weather you can imagine.
Neither was a good outcome.
Both could have been avoided with some planning and understanding of what to expect from their savings.
I used the 4%/25X when planning our retirement but I haven’t really used it in retirement.
As you mentioned, lots of people are concerned about “how much” can they withdraw. I concentrate on “When.”
It is simple: I focus on when our portfolio is making new highs. In order to make a new all time high, our portfolio needs to grow enough to “replace” any withdrawals and to “recover” any value drop due to market conditions.
A key to this is maintaining an expense cash cushion outside of our portfolio. We target 3 years of our cash needs. I plus this up by about 10% to cover inflation.
Example:
Start portfolio value of $100K. I take a $5K distribution. Market forces take it down to $91K before the markets rise. At that point, our portfolio needs to gain $9,001 to set a new high.
Once it makes a new high, usually a series of the over a few days or weeks, I will consider refilling our expense cash cushion. I may sell stock or just take cash from dividends.
If our portfolio keeps marching along, I may flush some cash every month or two and keep the cushion topped off. At times like the current, out last ATH was Nov 9. I made cash in October and November and topped off our cushion. I left some excess cash in the portfolio because we are building a home. While I have sufficient cash outside of our portfolio, I like having the extra available.
This extra cash allows me to take a withdrawal if needed. Since our portfolio is -34.51% from our high, I would not sell stock to make cash.
The longest we have gone without selling stock to make cash is from late June 2007 through October 2010 without selling stock. Our portfolio was fully recovered and setting new highs in late June 2010.
We survived quite well on our cash cushion along with a little bit of dividend cash from our taxable account. (We were under 59.5 and did not want to mess with 72(t) distributions.)
Since then, the dividend production of our portfolio has increased greatly and can fully support us, actually 217% of our needed cash.
Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
Here are some photos of our project:
General photos of the land and maps:
https://photos.app.goo.gl/3NC9sbPMxjzUZBc76
Construction: From bare grass on October 17, 2021 to the latest step today.
https://photos.app.goo.gl/YdH6e5w4rwz5rknG9
Hey Gene,
Your new home looks great! I was surprised to see that your electric service is coming in on poles. When I saw the trench, I thought that would be used for all utilities including electricity. What is the reason for not burying the electrical service coming to the house? Local ordinances?
Thanks!
'38Packard
Nice piece of land you chose! Wide open views of land and sky… that’s great!
Rob
Rule Breaker Home Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.
It is primarily a planning amount with the goal of an “average portfolio” to last 30 years with a 90% possibility of a positive outcome.
This is not correct. It took that portfolio (I think 60/40 at the time) and ran it through every 30-year period on record. The “safe” level was determined by when it NEVER failed, not even once, a 100% positive outcome. Later there were studies with 100/0, 80/20, annual reset, etc portfolios, but they all have similar results with some slight variation.
It is not a guarantee.
There are no guarantees in real life. That’s why every safe withdrawal study clearly states that if there is a worse 30-year period in the future, and if you are unlucky enough to begin your withdrawals at the start of that worse 30-year period, you will run out of money (obviously if you continue spending it at the determined withdrawal rate).
A key to this is maintaining an expense cash cushion outside of our portfolio. We target 3 years of our cash needs.
This is generally a very good idea and advisable to most people. It enables you to not have to sell stocks if they have a sudden decline. And sudden declines are usually short-lived (not always, but usually). So if you have a few years of cash to tide you over, you can wait to sell some until they’ve recovered. This contributes to an overall reduction of risk, of course, with the penalty of all that cash earning zero-to-negative real returns when compared to the long-term index fund (or most equity investments) returns.
Hi 38Packard,
No ordinances. The three outfits just did not want to share a trench.
The fiber-optic for phone, internet & TV cost $185 for the hook-up. They bored from under my driveway then used a Vermeer trencher on a dozer to place the cable at 42" for about 1,600 feet. They will finish the last 100 ft at 24" near the house.
Water was about 1,900 ft at around 36" for about $13,500 including a road bore.
Electric coop power was about 200 ft on the other side of the road. Going above ground I paid about $3,500. Going underground was over to $18,000 and a couple more months out.
Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
The fiber-optic for phone, internet & TV cost $185 for the hook-up. They bored from under my driveway then used a Vermeer trencher on a dozer to place the cable at 42" for about 1,600 feet. They will finish the last 100 ft at 24" near the house.
That’s pretty deep. AT&T buried my fiber optic at about 2". It was been cut twice in the last three years by a lawn plug aerator.
PSU
Gene,
That’s amazing that the three outfits would not share a trench. Actually I think it’s ridiculous - but who am I to judge the BIG UTILITIES?
'38Packard
Hi 38Packard,
“Not a fan of Utility companies”
I guess you are an urban person.
The only “big utilities” in rural areas are companies that create wind farms and solar farms, long distance transmission lines, etc.
Our electric company is a co-op.
Our water supply company is a co-op.
Our telephone, internet & TV company is a co-op.
We pay an initial fee to join. As we use services, a portion of our fees “pay down” the capital expense of our service connection. These are capital credits. After a long time, you may receive the capital credits as a payment.
Members of a co-op vote for the board of directors and are “stock holders” of the co-op.
You might say, “I” am the utility companies.
By the same token, I am also my mortgage company, an ag credit corp. It has some similarities to a co-op since I buy a share of stock and have voting rights. Each year, we may receive a patronage payment and a 1099-PATR to file with taxes.
Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
Hi Gene,
I guess you are an urban person.
Not quite, but we do live on the “South Shore” of Boston. We live in a small farming community which is not urban at all, but unfortunately, due to the way the utilities work in the Northeast, we have a for profit monopoly that delivers our electric and gas services that is quite profitable.
As a matter of fact, it’s so profitable that a large service area within New England and New York is owned by National Grid, a UK based utility. → https://www.nationalgrid.com
Here’s a link to their investor’s page dated May 2021 → https://www.nationalgrid.com/document/141791/download
So unfortunately, we have to deal with the high cost of electricity delivery here and the utility being pretty profitable for their shareholders.
'38Packard
So unfortunately, we have to deal with the high cost of electricity delivery here and the utility being pretty profitable for their shareholders.
In that case, you can buy some of those shares, and share in the profits, to subsidize the high cost of electricity.