Set forth below is the text of an e-mail that I sent to J.D. Roth, owner of the Get Rich Slowly blog, on April 20, 2009:
This is Rob Bennett. You may recall that not too long ago you wrote a blog entry about an article at my site on Unconventional Saving Strategies. Some ways back you wrote about a profile of my Retire Early plan written up by Liz Weston.
The author of the Lazy Man and Money blog suggested in a thread at the Money Bloggers Network that I ask your help in a matter being discussed there that has become a bit contentious. Here is the thread:
[this thread has been deleted from the forum]
The background is that I was an extremely popular poster at the Motley Fool site for a number of years. I was the lead person in building up a Retire Early discussion board that had become the most popular board at the site. I discovered through personal research analytical errors in the Old School Safe-Withdrawal-Rate (SWR) studies (these are the studies that most financial planners use to help us plan our retirements). My posts on this topic prompted a huge positive response among my fellow community members.
But John Greaney was also a popular poster at this forum (he founded it and he had a web site on the topic of early retirement for many years before mine went up). John had published one of the Old School studies at his web site (www.RetireEarlyHomePage.com) and he did not want people discussing the errors made in the study. John and his Goon Squad have for the past seven years devoted huge amounts of time and effort to destroying discussion boards and blogs discussing these matters or related matters, using a host of extremely abusive posting practices to do so. I argue in the thread that the owners of personal finance blogs should organize to prevent Goon posters from destroying our property and from intimidating our readership.
Lazy Man said that he does not personally understand the SWR topic (many do not, of course) and suggested that I contact you to see if you would be willing to look into the matter and to help others come to a better-informed understanding of it. I of course think this is a great idea in the event that you are willing to take some time to help us all out.
The problem with the Old School studies is that they do not contain an adjustment for the valuation level that applies on the day the retirement begins. They say that the SWR is always 4 percent. Studies using an analytically valid methodology (one that adjusts for the effect of the valuation level that applies on the day the retirement begins) report that the SWR can drop to 2 percent at times of high valuations and can rise to 9 percent at times of low valuations. It is not a stable number, but one that varies (this shows that the core premise of the Passive Investing model — that allocation changes are not needed in response to big price changes — does not hold water).
Several big-name experts have announced agreement with my findings. William Bernstein has said that anyone giving thought to using one of the Old School studies would be well-advised to “FuhGedDaBouDit!” Larry Swedroe has described the Old School studies as “Garbage-In, Garbage-Out research. Michael Kitces has linked to my New School calculator at his web site, saying that he views it as a great tool. Ed Easterling has pointed out that millions of retirees will need to take jobs as greeters at WalMart in the days ahead because of the demonstrably false claims made in the Old School studies and the failure of so many to publicize them once we learned of them. Scott Burns has said that I have added a new level to our understanding of safe withdrawal rates but explained that the conventional media does not want to report on our findings because “it is information that most people do not want to hear” (Scott said this before the huge stock crash).
Here is a link to the New School SWR calculator that I make available at my web site:
If you scroll down that page, you will find links to a number of articles providing further background on the New School research and on the need to warn people about the analytical errors in the Old School studies. If you want to check the research backing up the New School findings, please check out the web site of my partner in development of the calculator, John Walter Russell:
I would be grateful if you would be willing to take on this task. I think that you could help a lot of blog owners understand some important things about how stock investing really works by doing so. All of the investing materials at my site (there are now four unique calculators, over 100 articles, and close to 100 podcasts) are the work product of investigations into the realities that began after I learned about the errors in the Old School studies and the reluctance that many feel to acknowledging those errors.
Lazy Man has locked the thread linked to above. He has said that he will be discussing the idea of having it taken down altogether with the other owners of the site. An earlier thread called “Problems With the Conventional Investing Advice” was taken down at an earlier time after attracting lots of good comments from a good number of community members (as well as two abusive posts by the Greaney Goons). I have copied Lazy Man on this e-mail as your decision might influence the decision of the owners of the Money Blog Network site on whether or not to permit people there to discuss the matter.
If I can help with any questions, please just let me know. Thanks for the great work you do with your blog and thanks for giving some consideration to the idea of looking into the SWR matter.