I do not get the link through yahoo....sorry...go to the search machine....and look for "early retirement spreadsheet".....take the first result....and look at the right part down on that site! Stephan
Thanks for the link. I've used T. Rowe Price's retirement calculator many times, but this one is better. Price's calculator inputs average historical returns for asset classes and their standard deviations, and then runs Monte Carlo simulations to arrive at the probability of survival. Retire-Early uses all, actual, historical time periods since 1871. That is better. (Price's graphs of the simulations are pretty cool, though.)
According to Retire-Early's spreadsheet the optimal investment is to have a constant, 60:40 allocation of stocks to bonds, regardless of stock market PE (I'm surprised that it doesn't help to adjust the allocation in accordance with current market PE.). One could then withdraw 4.12% of current assets each year with essentially 100% survivability (3.57% if you were unlucky enough to retire in August, 1929). Did I read this correctly?
That makes it tough for the couple in the example I gave. They would need a nestegg of $1M in order to have a first-year withdrawal of $40K.
Best regards, roberts1001
PS. From today's posts I think Marc Faber would put his money into commodities and Asia.