I received this unsolicited review from a reader, Frank DiGiandomenico, about my most recent book Retire With The Wellington Fund.
Obviously, there is no way I’m going to post a review of my book that is negative. So just keep that in mind as you read this. But I think there a lot of positive stuff you can take away from Frank’s review, which is why I’m posting it for your reading pleasure.
Now, I do want to caution you that while back-testing is interesting, it is NOT a panacea for a successful retirement plan. Think about it for a second. Everyone and their mom uses the 4% “rule”. But what was that based on? BACK-TESTING. Yet if you used the exact same scenario today, the 4% rule would fail. Why? Because interest rates on the 10 year Treasury Bond are less than 1%. When the “rule” was derived they were around 5%!
Ultimately a back-test is no different than hindsight being 2020. It’s interesting, and maybe of use to some degree as a cautionary tale. But… the future is different. We simply do not know what the future holds. And, as such, you’ve gotta be nimble. Be ready to adjust. Be ready to tighten your belt if the situation dictates.
Okay, with that out of the way, on to the review:
Back Tested and It Works!
I follow Josh’s YouTube channel, and really enjoy his honesty and simplicity. His videos on retirement and personal finance are well worth your time, so when he wrote this book I jumped right on it and grabbed a copy.
It also didn’t hurt that I recently retired (6/1/2020), so I have been reading and researching everything I can get my hands (eyes) on. This book was a very quick and easy read, but don’t let that fool you into thinking the strategy in this book is flawed or too simple to work.
I spent almost all of my career as a software developer and managing software development teams, so I’m very familiar and comfortable writing and developing software. With that said, I don’t take anyone’s “word” on a strategy without back testing it to see if I can get the same results. Even though I finished this book a while ago, I finally got around to writing an automated test on this strategy.
I tested the strategy using a 30 year retirement period starting in 1930 and ending in 1990. A 30 year retirement starting in 1990 ends in 2019. Once 2020 ends I will then test how retiring in 1991 to 2020 fared. The test I ran was very similar to the process used on the FireCalc site (https://www.firecalc.com/). FireCalc works by starting in 1871 and it continues advances one year at a time to see how your retirement plan would have fared through each year. I did the same thing except I started in 1930 and ran for 30 years to 1959, then I started in 1931 and ran for 30 years to 1960, so on and so forth. The good news, no matter when you retired, you NEVER ran out of money! The bad news — THERE ISN’T ANY!
Keep in mind, sometimes you end up with more money than what you started with, and sometimes you end up with less, but Josh’s whole point is to enjoy your retirement early! What good is having 3 million dollars in your retirement account on your deathbed, if you had to live a Spartan type of retirement and failed to enjoy it. If your goal is to leave 3 million to your heirs all well and good, but if you’re trying to enjoy your retirement (especially your early retirement years), then this strategy is awesome.
It sure challenges the standard 4% withdrawal rate that is so freely advertised as the “way to go”.
I have created a Google Sheet with my test results, which contains all the data. The best way to use the sheet is to add data filters, and then filter by the column “Retired”, this way you can filter into any 30 year period and see the results. I also added “Minimum” and “Maximum” statistics above some of the columns. These values will honor the “filter” you apply, so they are always representing the filtered data.
Here is the link to the spreadsheet: https://docs.google.com/
If you want to reach out to me about this Google sheet please Email me at: firstname.lastname@example.org. Hopefully, you will not find any errors or issues; however, if you do please don’t hesitate to contact me and I will correct them. If you would like to see other things in the spreadsheet…just let me know. One thing I can think of is using a different mutual fund.