Wednesday, July 29, 2015

Discounting or The Non Recognition of Our 2nd Most Valuable Assets

Discounting or The Non Recognition of Our 2nd Most Valuable Assets

(Whatever it is), I’ll figure it out (regardless of the situation)
A Former Client

            We believe in the current currency (money)
            The money belief supersedes even God.
            Forget our words to the contrary – look at our actions.
            (Jesus saves; Moses invests)
            As a result, when younger, we engage in the ‘rat-e race of return’ in wealth accumulation and older (if the former rat-e rate isn’t habituated) the emphasis in our personal financial literature (an oxymoron itself) is on sustainable income to ‘not outlive our money.’ Of course the implication in the fear of outliving one’s money is dependence, taking shit, losing fu-ability. And so, we focus almost exclusively (and that’s a kind characterization) on distribution rules (for independence, not taking ca-ca, and fu-ability) to sustain income (fu-ability)  including but not exclusive  be it:

·         various systematic withdrawals
·         the 4% rules,
·          modified 4% rules,
·         buckets,
·         ladders,
·         annuitization,
·         matching,
·         glidepaths,
·         triple floor leverage rules
·         guardrail (1)
·         ratchet (2)

The emphasis in the wealth accumulation then transitioning to income sustainability cycle is on putting’ it in and takin’ it out (relative to money not as in our youthful escapades). The aforementioned is not to dispel the use and application of any particular method or combination thereof – but rather to recognize that they are but tools not idols not our saviors to bow down & genuflect to save one’s tool or tuchass for that matter.
(Yes, of course, I’ll concede, one thing money can’t buy is poverty as my own Dad would say.)
            At the same time while idolizing at the altar of money (the current currency), we minimize, discount, and ignore (other than lip service) our adaptability and resourcefulness especially those of a self proclaimed religious bent that ‘all is derivative’ (but not from government, Senator Warren or President Obama). Most ignore, whether religious or not, our own empirical experiences of past adaptation to challenges and give little credence in the future to again be able to ‘figure it out.’ Assertions of being old aside, wisdom beats energy despite the fact it’s 10% inspiration and 90% perspiration. Financially speaking, there is not only a sequence of rate of return to recognize but also a lifecycle sequence of consumption which is also inherently adaptable (though – using hyperbole giving up On Star™ on the  Cadillac or Showtime’s monthly cost as a sacrifice in reducing one’s $40,000/mo.spending suspends credibility).

            The aforementioned isn’t a question of money as one’s savior vs distribution method vs one’s resourcefulness and adaptability but context. Rather than elevating the recognition of our adaptability and resourcefulness we devalue ourselves only increasing fear and the pursuit of MORE which is never ENOUGH. (Result: too often ‘More, Better, Now has a habit of becoming Worse, Less, Later.)
            (Of course, if all else fails, there is always political legalized theft and coveting renamed and justified as entitlement, fairness, redistribution, social justice and or other assertions to mask legalized robbery but that means prostrating and  bowing to another false idol progressive liberal government and its Dear Leader. Ironically, the theft only leads to equality of misery.)

A prisoner cannot escape a prison if he doesn’t know he’s in prison
To paraphrase Guirjieff
(he’ll just go into another cell – Schwartz)

            I can’t say I’m a “I’ll figure it out, deal with it” person. But recognition & re-evaluation of one’s adaptability and resourcefulness allows even increases a little more choice (rather than anxious Xanex inducing blind slavery & idolatry to a current currency which tomorrow could be devalued, confiscated in the name of ‘social justice, fairness, entitlement, redistribution’ – HELLalujah.)

*(1)*(2) Floor Ceiling Systematic Withdrawal Rules
(see previous blogs on distribution methods mentioned above)

            “Yeah, yeah, yeah… that’s nice – so what - but tell me about the Guardrail and Ratchet” distribution methods, “Mr. Adaptable, Resourceful, I’ll Figure It Out!”
            Recognizing the futility of the aforementioned, there are two other methods of distribution to consider for income sustainability systematic withdrawal (without or without Viagra ‘for premature accumulation’):

            The Guardrail Rule by Jonathan Guyton:
·         initial withdrawal rate 5%
·         adjust for inflation
·         Prosperity Rule: yearly when withdrawal amount is 4% or less of accumulation thereafter increase the withdrawal amount by 10%
·         Capital Preservation Rule: yearly when the withdrawal amount amounts to 6% of the accumulation take a 10% cut in the withdrawal amount

The Ratcheting Safe Withdrawal Rate by Michael Kitces
·         If and when the initial accumulation has increased 50%, can increase the annual withdrawal amount (increased annually by inflation) another 10% but the bump can only occur once in every three year period.

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