There is a shocking amount of complacency around a potential return of durable inflation and the devastation it would cause on ports.To your (Watchnerd's) point, I think I played with Firecalc and found basically what you just posted here...that even portfolios with no withdrawals lost half of their real value in the 15 years 1966-81. There was just nowhere to hide. Yeah we have TIPS today, but they don't work well enough for someone with a large taxable portfolio to gamble on that one scenario (big inflation). Despite my disagreement with Mr. Bengen on market timing and tweaking portfolio asset allocation to some optimal portfolio of the past, I do agree with him that a big and long inflationary period is similar to a meteorite hitting...there's not much big taxable investors can do. As I've stated in another thread, for me the answer is a 2% SWR. 1966-81 drawdown is about half, as you point out. But doing 4% draws down 80%. No sane investor can tolerate that. I get it that not everyone can or will do 2%. But my own personal humble opinion is that the risk of the current financial era ending in big inflation is great. And frankly I think there's a lot of recency on Bogleheads that downplays this risk as merely tiny/unlikely/1966 was a "one-off".
It doesn't matter.
You can put in a smaller withdrawal rate and it still loses to inflation over that period.
Change it to 33x an you're down to $562k in inflation adjusted terms.
I guess more people worry about 1929-type crashes because crashes are within living investor memory, whereas very few of the current BH cohort were actively investing 1966-1981. I'm 54, and even my 81 year old father was only 23 at the start of that period and certainly not investing.
Statistics: Posted by watchnerd — Mon Dec 09, 2024 7:53 am — Replies 46 — Views 3608