Sobering but valuable. Hoping Prof. Cederberg will continue dialogue on RR when new research is ready esp how now/close to retired are effected and how/if plans can be changed incl DIY. Thank you.
Fascinating stuff. I'm thanking my lucky stars that I assumed a pessimistic 2% real return when I was trying to decide if I could afford to retire (although it seems that even that may be too optimistic !)
A more recent paper from Scott (released the day we recorded - bad timing!) finds a 2.26% safe withdrawal rate for a retiree couple. papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132 -Ben
Not everybody had to grow food anymore in the UK in 1841 because the UK had India in her pocket by that time 😉 I am a big fan of your podcast, just felt like making a comment on this particular thing about UK.
Curious where the traditional notion of some of these asset types being uncorrelated came from. Maybe I just don't understand correlation... I'll add it to the list of things I have no idea about after all.
"Survival Bias", or "getting away with it" ignoring the consequences, this concept is very familiar, but what to do with the knowledge is the big problem, you can not use past Precedent to make reliable predictions for Future Markets. This presentation will make it clear and definite.
For pre-tax vs post-tax, if you do pre-tax does that leave more money in your paycheck that you could put into additional investments, thereby increasing the value of pre-tax?
Pre-tax should always be viewed net of the future tax liability, which is an unknown. At a constant tax rate, pre-tax = post-tax. Pre-tax works well when the future tax rate is lower than the current tax rate. The difference is like a bonus, -Ben
@@rationalreminder I was thinking the following scenario: a person gets $1000 gross pay on paycheck, 50% tax bracket, and they want to put $100 into retirement account. Post tax would be $500 after taxes, then $100 into retirement resulting in net pay of $400. Pre tax would put $100 into retirement and net $450 after taxes. If that extra $50 gets invested, does this make pre tax more valuable than post tax if the tax rates are equal?
To think through it properly you need to make the pre-tax contribution pre-tax, not with post-tax dollars. You put $100 (pre-tax) into the pre-tax account or $50 (post-tax) into the post-tax account. Once you withdraw from the pre-tax account you are in the same place. The extra $50 is still there pre-tax. Another way to think about this is that you never owned the extra $50. The government owns it and is letting you invest it on their behalf. At a constant tax rate any growth on that portion will always go to the government. At a lower future tax rate you get a bonus. -Ben
@@rationalreminder another thing to consider in the US specifically is that pretax 401k can be used 100% tax free to pay for long term care costs and charity.
If the historic US data supports the 4% rule withdrawal approach but the international data supports a lesser withdrawal rate, say 2.25%, isn't this a strong argument to be a US-only investor? (See 56:00 to 57:12 in the video.)
Depends on situations and other sources of safe income incl pensions, large inheritance etc. Able/willing to retire to a place/country cheaper to live either half or full time is a factor.
Public info avail if willing/able to find it. Growing incr in tech/automation etc going fwd (ie ARK funds) key and some countries move from US$ (how long?) and EM predicted trend. Truthstream media not $ based but maybe interesting and diff doc videos on YT. DYOR and decide. You maybe right. Cheers
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Just rewatched. This was a really good episode. Need the follow up for work he previewed at that time.
Sobering but valuable. Hoping Prof. Cederberg will continue dialogue on RR when new research is ready esp how now/close to retired are effected and how/if plans can be changed incl DIY. Thank you.
He will be back next week!
Fascinating stuff. I'm thanking my lucky stars that I assumed a pessimistic 2% real return when I was trying to decide if I could afford to retire (although it seems that even that may be too optimistic !)
A more recent paper from Scott (released the day we recorded - bad timing!) finds a 2.26% safe withdrawal rate for a retiree couple. papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132
-Ben
@@rationalreminderAs shown in the paper this is even worse with increasing lifespans, especially for countries that live longer than the US
Benjamin getting excited about the data when hearing the 2% withdrawal rate was a great listen. My reaction exactly.
Not everybody had to grow food anymore in the UK in 1841 because the UK had India in her pocket by that time 😉
I am a big fan of your podcast, just felt like making a comment on this particular thing about UK.
Curious where the traditional notion of some of these asset types being uncorrelated came from. Maybe I just don't understand correlation... I'll add it to the list of things I have no idea about after all.
Love this interview. Thank you.
"Survival Bias", or "getting away with it" ignoring the consequences, this concept is very familiar, but what to do with the knowledge is the big problem, you can not use past Precedent to make reliable predictions for Future Markets. This presentation will make it clear and definite.
Ya Scott is a really good guy ;) I had a lovely chat with him back in Budapest at the FIRS conference
Amazing episode!
Awesome 😊👍 Thanks. Scott is super nice guy
For pre-tax vs post-tax, if you do pre-tax does that leave more money in your paycheck that you could put into additional investments, thereby increasing the value of pre-tax?
Pre-tax should always be viewed net of the future tax liability, which is an unknown. At a constant tax rate, pre-tax = post-tax. Pre-tax works well when the future tax rate is lower than the current tax rate. The difference is like a bonus,
-Ben
@@rationalreminder I was thinking the following scenario: a person gets $1000 gross pay on paycheck, 50% tax bracket, and they want to put $100 into retirement account. Post tax would be $500 after taxes, then $100 into retirement resulting in net pay of $400. Pre tax would put $100 into retirement and net $450 after taxes. If that extra $50 gets invested, does this make pre tax more valuable than post tax if the tax rates are equal?
To think through it properly you need to make the pre-tax contribution pre-tax, not with post-tax dollars. You put $100 (pre-tax) into the pre-tax account or $50 (post-tax) into the post-tax account. Once you withdraw from the pre-tax account you are in the same place. The extra $50 is still there pre-tax. Another way to think about this is that you never owned the extra $50. The government owns it and is letting you invest it on their behalf. At a constant tax rate any growth on that portion will always go to the government. At a lower future tax rate you get a bonus.
-Ben
@@rationalreminder another thing to consider in the US specifically is that pretax 401k can be used 100% tax free to pay for long term care costs and charity.
do you think now is a good time to invest into the msci etf ? or the s&p etf?
s&p
For a 30-year timeline, anytime is good time to invest. For a 1-year timeline, no one knows when a good time to invest is.
Did you watch this video? International beats domestic. Therefore msci should beat s and p
If the historic US data supports the 4% rule withdrawal approach but the international data supports a lesser withdrawal rate, say 2.25%, isn't this a strong argument to be a US-only investor? (See 56:00 to 57:12 in the video.)
No. There is no reason to believe that the outlier of the last 120 years will be the same for the next 120 years.
-Ben
Excellent video.
TY
1:12:11
That can lead to a miserly miserable retirement lifestyle to use 2%
Depends on situations and other sources of safe income incl pensions, large inheritance etc. Able/willing to retire to a place/country cheaper to live either half or full time is a factor.
You need to adjust your savings rate now to account for it and you’ll be okay
Idk man. I’m trying to stay open minded but I’m having a hard time believing some of this doom and gloom
Public info avail if willing/able to find it. Growing incr in tech/automation etc going fwd (ie ARK funds) key and some countries move from US$ (how long?) and EM predicted trend. Truthstream media not $ based but maybe interesting and diff doc videos on YT. DYOR and decide. You maybe right. Cheers