While I agree that we can't predict the future, so need to be prepared to adjust if needed, this is presented as a false equivalence, for a couple reasons:
1) We *know* that Karsten's analysis is safer, because he says you need a significantly lower safe withdrawal rate than Frank claims. Which means the odds of having to adjust spending downward are lower following Karsten than Frank.
2) You mention math, but objectively Karsten's math is more correct than Frank's. Karsten has a PhD. in economics, a former quant for the US Federal Reserve, and taught both undergraduate and PhD level economics university courses. Morningstar's Director of Personal Finance and Retirement Planning (Christine Benz) recommends Karsten as the foremost expert on FIRE Safe Withdrawal Rates.
Whereas Frank is a former lawyer. Karsten brings up relevant econometric and statistical analysis that is simply not within Frank's academic expertise, and points out the analysis Frank relies on (mostly PortfolioCharts) does not have a statistically significant sample size for FIRE timeframe retirements (currently 55 years of data to predict 5+ decades retirement planning horizons - at best 5 independent first decades) and is overfitted (a statistics issue).
Treating both as equivalent would be analogous to asking a surgeon and an English professor for second opinions on the pros and cons of a specific surgery. One is academically and experientially competent to provide the professional opinion and the other has expertise in a field irrelevant to that question. The very objections Karsten has with raising safe withdrawal rates with Risk Parity rely on the unique expertise of PhD level economics (though he explains the issues in terms easy enough for non-economist intelligent people to be able to understand).
Why would you treat the assertions and analysis of the English professor (or in this case, former lawyer) equivalently to the analysis by a top professional in the relevant field? Not to mention, Karsten lays out his analysis in great detail and with reasons for each factor, and every time they've debated, I've never heard Frank actually go toe to toe with Karsten's specific arguments.
Great. By the way, I meant to say false equivalence, rather than false dichotomy above - just edited/corrected it.
And I'll add that I see value in Karsten's SWR analysis because it helps identify retirement "means" - what I can assume is likely safe to spend from a given portfolio, to help determine what you called "escape velocity" elsewhere, and ongoing means) even with the risk of having to adjust later. Though it also provides the ability to adjust upwards as desired by recalculating SWR in the future.
For all the diligence - that I love to read - index funds weren't even around for many of the back tested periods. Let alone easily accessible for regular people. The S and P 500 didn't even have its current float-adjusted market-capitalization weighting until 2005.
In any case, a 'Black Swan' could wipe either portfolio out. Is that likely? no. I suspect either is likely to be overly conservative.
But I think what you are saying is neither is 'true', but both may be 'useful'.
While I agree that we can't predict the future, so need to be prepared to adjust if needed, this is presented as a false equivalence, for a couple reasons:
1) We *know* that Karsten's analysis is safer, because he says you need a significantly lower safe withdrawal rate than Frank claims. Which means the odds of having to adjust spending downward are lower following Karsten than Frank.
2) You mention math, but objectively Karsten's math is more correct than Frank's. Karsten has a PhD. in economics, a former quant for the US Federal Reserve, and taught both undergraduate and PhD level economics university courses. Morningstar's Director of Personal Finance and Retirement Planning (Christine Benz) recommends Karsten as the foremost expert on FIRE Safe Withdrawal Rates.
Whereas Frank is a former lawyer. Karsten brings up relevant econometric and statistical analysis that is simply not within Frank's academic expertise, and points out the analysis Frank relies on (mostly PortfolioCharts) does not have a statistically significant sample size for FIRE timeframe retirements (currently 55 years of data to predict 5+ decades retirement planning horizons - at best 5 independent first decades) and is overfitted (a statistics issue).
Treating both as equivalent would be analogous to asking a surgeon and an English professor for second opinions on the pros and cons of a specific surgery. One is academically and experientially competent to provide the professional opinion and the other has expertise in a field irrelevant to that question. The very objections Karsten has with raising safe withdrawal rates with Risk Parity rely on the unique expertise of PhD level economics (though he explains the issues in terms easy enough for non-economist intelligent people to be able to understand).
Why would you treat the assertions and analysis of the English professor (or in this case, former lawyer) equivalently to the analysis by a top professional in the relevant field? Not to mention, Karsten lays out his analysis in great detail and with reasons for each factor, and every time they've debated, I've never heard Frank actually go toe to toe with Karsten's specific arguments.
My response to this comment will be at the end of Monday's episode of Earn & Invest
Great. By the way, I meant to say false equivalence, rather than false dichotomy above - just edited/corrected it.
And I'll add that I see value in Karsten's SWR analysis because it helps identify retirement "means" - what I can assume is likely safe to spend from a given portfolio, to help determine what you called "escape velocity" elsewhere, and ongoing means) even with the risk of having to adjust later. Though it also provides the ability to adjust upwards as desired by recalculating SWR in the future.
Yes.
For all the diligence - that I love to read - index funds weren't even around for many of the back tested periods. Let alone easily accessible for regular people. The S and P 500 didn't even have its current float-adjusted market-capitalization weighting until 2005.
In any case, a 'Black Swan' could wipe either portfolio out. Is that likely? no. I suspect either is likely to be overly conservative.
But I think what you are saying is neither is 'true', but both may be 'useful'.