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Old 12-17-2012, 10:18 PM   #21
Confused about dryer sheets
Join Date: Mar 2012
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Originally Posted by REWahoo View Post

In the four years of retirement prior to SS kicking in our WR averaged 7+%. Now that both DW and I are drawing SS it has dropped to under 4%.
OK, I built another spreadsheet and did more modelling. Of course there are many variables, but I seem to come up models that show: 4.8% WR for 8 years, then 3.8% WR for 6 years, then down to 3.2% WR after that.

That would put me into the class of 2015 (early 2015 ). If I can hold out that long... if not, we may end up in a cheaper house in a less expensive part of the country, which might be just fine.

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Old 12-18-2012, 04:27 AM   #22
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For background on Safe Withdrawal Rates be sure to check the Trinity Study from whence it came: Safe Withdrawal Rates - Bogleheads

And, the update by the original authors: Trinity study update - Bogleheads

The SWR is, per Wade Pfau, a "probability based" retirement income model. There is another school of thought: "safety based". Wade compares the two in this chart:

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Old 12-18-2012, 08:59 AM   #23
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Another thing to consider is how important a fixed rate of spending is to you.

Our budget contains a number of items that are "nice to have", but we could certainly do without. So when the inevitable market down years happen, we'll cut back on things like travel.

Of course we'll see how well we stick to that - we've had two up years since we retired two years ago with me at 49 and DW at 58.
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Old 12-18-2012, 09:15 AM   #24
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Originally Posted by mpeirce View Post
Our budget contains a number of items that are "nice to have", but we could certainly do without. So when the inevitable market down years happen, we'll cut back on things like travel.
Just my $.02 cents on the "nice to have" or wants vs. needs way of budgeting while in retirement.

I/DW have always taken the position of not giving something up just because the market says we should.

That being the case, our retirement budget (we're both retired) does not break down by things we can give up if things get bad.

How do we do that? Simply by having enough cash (in our case, 3-4 years of gross - includes taxes due on withdrawls) to overcome any down years in the market. BTW, when I retired (age 59), we both had 4-5 years in cash; however since we're close to additonal income sources (two small pensions and SS in less than a year), we've reduced our cash holdings.

I know a lot of folks on this forum budget in a "two phase" manner. We've taken the position of not having to do so, by ensuring a constant revenue stream over an extended period, regardless of what happens in the market.

Just an alternative way of doing things, from our POV.
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Old 12-18-2012, 12:19 PM   #25
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You should read Guyton's paper on decision rules & maximum initial withdrawal rates.

From my experience
- you need to be flexible in your spending. We ER'd for the first time in May 2008. You can figure out what happened next.
- you should be ready to go back to work if needed as soon as you see a larger than expected drop in your portfolio. Hoping & waiting could make the situation irreversible.
- Have a lot of confidence in your baseline expense. I would recommend downsizing the house now so you know exactly what your new expense base is.
- Find out how much health insurance will cost. An insurance agent will be happy to help. (Can't remember if this is an issue for you)
- Remember - if you've won the game, there is no reason to keep playing. Stay conservative in your portfolio as long as it meets the assumptions used in your SWR methodology.
- Subtract 1 to 1.5 years of spending from your portfolio value before calculating your SWR. This can be your emergency fund for those years where you need to go over your budget. Of course, you could just reduce your SWR to account for this too.

All the best.
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Old 12-18-2012, 03:14 PM   #26
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When I retire at 55, I'll have my main/biggest pension plus plan a 3.5 WR. One I reach age 60 & start getting my mil/reserve pension, most likely will stop the WR for awhile to let it grow a bit.
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Old 12-18-2012, 10:04 PM   #27
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Marty B, just to give you a recent experience with the OPM backlog and getting finalized. I retired as a FERS guy on 6/30/12, got assigned an OPM Specialist on 10/24/12 and was finalized on 11/29/12. First full annuity paycheck will be 1/2/13.

Interim pay was about 2/3 the final number. "Adjustment Pay" to recoup the pay you didn't get while in Interim status was deposited within less than a week of getting finalized.

The OPM Specialist was easy to work with and I'd have been finalized sooner, but had to provide additional "proof" for some Reserve active duty days served prior to becoming an ART that I bought back but weren't covered by a DD214.

Your mileage may vary, but...

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