Set forth below is the text of a comment that I recently posted to the discussion thread for one of my column entries at the Value Walk site:
It doesn’t require a valuations adjustment because it’s not relevant to the question, which is “What rate of inflation-adjusted withdrawal has lasted at least 30 years in all time periods to date?” The answer was 4 percent. No (credible) person has ever disputed that answer, because it’s simple, provable math.
This has been explained to you hundreds of times, but you reject it. Your entire 15 year jihad of futility is based on “NO!!! THAT’S NOT THE QUESTION!!!!”
I do reject what you are saying, Dan.
I believe that the question that a safe withdrawal rate study is supposed to answer is: “What is the safe withdrawal rate?” I know that that is what my fellow community members believed when they were using Greaney’s study to plan their retirements.
If Greaney had told them that all that his study revealed was “what rate of inflation-adjusted withdrawal has lasted at least 30 years in all time-periods to date” and that that number was nowhere close to the safe withdrawal rate (it was nowhere close at the time these discussions were going on), not one person would have been using his study to plan his or her retirement. But lots of people used it.
I of course always acknowledged that Greaney’s study reveals “what rate of inflation-adjusted withdrawal has lasted at least 30 years in all time-periods to date.” So that question has never been in any dispute. My claim has been that the Greaney study does not reveal the safe withdrawal rate. And Greaney’s behavior shows that he understands what I was saying and why it mattered. He never would have threatened to kill my wife and children if all he was telling people was “what rate of inflation-adjusted withdrawal has lasted at least 30 years in all time-periods to date.” He was telling people (falsely) what the safe withdrawal rate was.
Anyway, I think it would be fair to say that your response to my question is that Greaney did not include a valuations adjustment in his study. You did not state that directly even in this comment. But it is implied in what you said. And it is indeed the case that there is no valuations adjustment in the study. When the safe withdrawal rate is calculated accurately and honestly, the number obtained for retirements that began at the top of the bubble is 1.6 percent, not the 4.0 percent that Greaney claimed. So this is no small matter. The odds of a retirement that began at that time and that called for a 4 percent withdrawal working out are 30 percent. Those retirements are not “100 percent safe,” as Greaney claimed.
I would like to see all the Buy-and-Hold retirement studies corrected. I believe that we will see it happen in the days following the next price crash, when we all pull together to bring an end to this economic crisis and to the Buy-and-Hold investing strategy that served as the primary cause of it.
I wish you all good things.