“Fixed Income Should Equal Age, BUT Adjusted Up or Down Depending on Valuations”

Tom Behlmer, a financial planner in Nevada City, CA, wrote me a kind note the other day:


“Great website.

“I have counseled my clients to allocate a percentage to equities based upon market valuations. Fixed income should equal age, BUT adjusted up or down depending on valuations.

“It is amazing that so much material has been written about safe withdrawal rates, but valuations have been ignored in much of what has been written. Ed Easterling wrote a wonderful piece on withdrawal rates and valuations.

“I feel like I found a kindred spirit.

“Fascinating web site. I assume the risk evaluator is based on 10 years of average earnings?”

Here is my response:


“Thank you for your kind words.

“Yes, it is indeed amazing that valuations have generally been ignored in the calculation of safe withdrawal rates. I attribute this largely to cognitive dissonance. Many researchers understand that valuations play a critical role. But it becomes clear quickly that including valuations in the analysis produces very different results. I think this holds people back. There is a social stigma today that stops people from discussing these issues frankly and plainly and clearly.

“The valuation metric for the Risk Evaluator is P/E10. That’s the price of the S&P index over the average of the past 10 years of earnings. If you have an interest in looking at the statistical research that supports the calculator, please take a look at John Walter Russell’s site, www.Early-Retirement-Planning-Insights. John was the co-developer of the calculator and he was the Numbers Guy in our partnership (John died recently).

“I have a section on the home page of the “A Rich Life” blog at which I quote people who have said kind things about the site. I would like to use your words in a link there and link to a blog entry where I would report what you have said if that is okay with you. Could you please let me know if you have an objection? [Note -- Tom gave his permission]

“Please let me know if you have further questions. It is encouraging to hear that there are financial planners out there who are giving their clients good valuation-informed advice (I knew that there were such people, but unfortunately we don’t hear about them often enough).”


Programming Note: The blog will next appear on Monday, January 4, 2010.


  1. Rob says

    My experience is that it does not require big bunches to get started. You might want to save up enough to buy a Marvin Gaye album. That can help.


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