I’ve posted Entry #298 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Retirement Risk Evaluator Is the First Safe Withdrawal Rate Calculator That Contains a Valuations Adjustment.
Juicy Excerpt: I call the calculator The Retirement Risk Evaluator. The headline at the page of my web site that houses the calculator is: “Retirement Planning Calculator Smashes Safe Withdrawal Rate Myths.” That says it. I believe that the primary reason why the Shiller-based model for understanding how stock investing works (Valuation-Informed Indexing) has not become dominant in the 35 years since publication of his research is that the the huge effect of the valuations factor is a highly counter-intuitive reality. We all accept that valuations matter. But until we see with numbers how big the effect is, most of us (this included me at one time) fail to recognize how much harm we do to ourselves by our failure to take this one factor into consideration. The purpose of the Risk Evaluator is to confront our cognitive dissonance head on and smash it into bits.