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.
