Thanks for running that. Looks like you picked the worst date possible (I think) and it just barely failed. See my post above where I think you should use 3.03% withdrawal rate to make it like for like on an after tax basis vs a 4% withdrawal rate.It is not particularly easy to simulate because I don't know a good way to pull LIBOR/SOFR values for any of the simulators that I have used. I wanted to a get a decent rough idea of what would have happened had you started this strategy in March 2000. I simulated using the 3-month T-bill rate plus 0.5%, which I think should roughly mimic SOFR + 0.8%.
The simulated balance of the loan amount in March 2009 was about $5.125M. The simulated balance of the portfolio on March 6, 2009 was $7.263M, for a 70.56% loan to value ratio. So, in my rough simulation at least, you got margin called by having bad timing in the recent past.
As other threads have demonstrated, the year 2000 retirees using the 4% rule have done fine, so I don't think you have discovered a better strategy.
Also, for what it is worth, I am a U.S. income tax lawyer at a large international law firm. I have advised several billionaires, and dozens of ultra-high net worth individuals with assets far in excess of $10M. I have never seen a single one of them that actually used "buy-borrow-die" as a tax management strategy (borrowing to deal with illiquid assets is another story and plenty of people are doing that). At least in my experience, the press that this strategy receives far exceeds its practical utility in the real world.
At that number I am sure it will work and I bet if you calculate the ending portfolio balance (net of the loan) after 30 years it will result in tens and tens of millions of excess dollars and the same spend rate through those years.
Statistics: Posted by LFKB — Sun Mar 31, 2024 11:13 pm — Replies 60 — Views 4270