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Old 04-08-2012, 07:49 PM   #41
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The Bikerdude SWR = Good years spend more, bad years spend less.
+1 That's my withdrawal plan in a nutshell.
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Old 04-08-2012, 09:57 PM   #42
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One size does not fit all.

Not ER or SER yet, but hopeful. As I think and think about our family's personal situation, it'll change almost every few years, so my plan has to be very customized. It would be easier if our barebones budget was covered by a pension, SS, etc, but it is not. I have to plan from mid-40's to early 60's before anything kicks in.

I see some years in the 3% SWR and others in the 4 - 6%. Life happens.
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Old 04-09-2012, 02:00 AM   #43
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We know far too many people who ended up having no clue as to what was being spent, where they lived, how much money they had or even who they were in their final years. If you live to be 95 and have retained your mobility and brain, you will know the difference if you have to cut expenses by 75% to survive. But I believe those folks are a very small minority. Unfortunately, none of these analyses take into account the real possibility that those of us who make it to extreme old age will not have the faculties to enjoy them.

If I am the last survivor (extremely unlikely - my wfe's mother died at 87 and her aunts in their 90s), I would like to pass with all my credit cards maxed out and deeply in debt, having enjoyed myself to the fullest while alive .

For us, the biggest question, like others have said, is inflation - $20 a gallon gas, and everything else priced similarly. Having a DB inflation adjusted pension will help a lot, until the government goes bust.
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Old 04-09-2012, 07:15 AM   #44
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I have created two retirement funds. The first includes a small DB pension (not COLA'd), cash to bridge us until Medicare and SS kick-in, the eventual SS payments and enough cash to supplement this up to our "basic" spending level effectively forever. Realistically, we could still significantly reduce this spending level if necessary but that's "Plan B." The second plan is designed to be more along the lines of a Bernicke 20 year plan with a 70% survival rate. It's amazing how much spending that allows. It's significantly higher than a level "safe" spending rate which would be less than I would like to spend in my early retirement years and more than I would likely want to spend as I start falling apart.

Of course, I realized I was FI around 2005 just after I started to "lurk" here. I continued with employment because my in-laws had all sorts of issues that kept DW from traveling. If I didn't have a j*b, I knew I would be spending many hours accompanying DW visiting her parents in whatever stage of care they were in. This has resulted in my nest egg being safely above what a classic early retirement goal would need to be. Right now I could be one of people bragging about the under 3% SWR. Instead, I start at almost 10% as I drop assets to pay for delaying SS to age 70. This would be reduced over time. If the stock market truly falls apart and doesn't come back, I'll be down quicker than hoped for but I should still be in a safe position. I plan on reviewing assets versus spending annually to validate the plan or to make needed changes.

The one thing that we can never truly account for are the uncontrollable risks. Major cuts to SS would hurt. Hyper inflation would destroy my asset base and effectively eliminate the value of my pensions. Even those with COLA'd government pensions can't consider them totally risk free. Municipalities have reduced pensions in this country and many more including various state governments are in a death sprial trying to continue with the payments.
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Old 04-09-2012, 08:50 AM   #45
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I do not consider any surplus "more than I need". The extra 2 years I worked (past when I reached FI) buys me peace of mind, and is worth far more to me than an extra $10-20K a year to spend.
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Nothing wrong with that at all, as long as you have good uses for a large residual should that be the case. We don't...
I am still accumulating, although I have reached FI by 4% measures. I could retire and even spend more, but I am more interested in buying safety and certainty of having "enough" than I am in spending more, or even sooner. Planning scenarios to a very fine level of detail seems like overthinking to me. The future events that are included in the plan are unlikely to occur within the limits described in the plan. Some thing(s) never imagined are likely to occur that will change the plan. By squeezing the highest "predictable" spending from an asset base, a retiree makes themselves vulnerable to unexpected downside risk, for the sake of marginal (at best) increased spending.

It's very much like the decision to LBYM and accumulate assets in the first place. I am very willing to trade excess current spending that brings me limited enjoyment for future ability to spend. Leaving some (or even a lot) on the table is not lost. It bought me security and a level of certainty in an otherwise very uncertain world. The trick is deciding how to value what I might do with spending now compared to how I value the safety I am buying. I am comfortable with my valuations. Others likely have different values.
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Old 04-09-2012, 09:32 AM   #46
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I see some years in the 3% SWR and others in the 4 - 6%. Life happens.
Actually, your assumption is closer to reality (as is actually happening in my/DW's case, today) - especially in an "ER situation".

By that term, I mean a person/couple who decides to retire earlier than what is considered "normal" - that is before all their respective "income streams" become effective.

I know I tell the same old story but it's like a comedian. They don't necessarily change their jokes, but tell the same time worn jokes to a different audience.

DW/me made plans to both retire (we're the same age) a bit earlier than normal, at age 59. While a lot of folks may think that age is not ER, to us (who decided to w*rk till our SS FRA age of 66), it is.

I retired in early 2007, at age 59 - as planned for. DW (who is sort of an "Energizer Bunny") planned for the same year, but decided to stay employed (until last Monday - her first day of retirement).

Anyway, using the facilities of FIDO's RIP program (better known as "Retirement Income Plan), which shows a year by year breakdown of estimated withdrawal rates, we are quite in excess of that "magic 4%".

Is there really a problem? For us? No.

That's because we are retired and are funding our respective retirement income only through our respective retirement portfolios.

But wait. In 13 months (when DW turns age 65), she will start to receive two small (defined benefit) pensions. A year after that, she will start receiving her FRA (age 66) SS benefit, with me applying for 50% of that amount for the next four years.

At that time (when I'm 70 - assuming I'm still alive, an accruing an 8% increase per year - plus any COLA, since DW applied for benefits), I'll max out my SS (primarily for the benefit of DW - assuming I'll pass first) we will have our "maximum planned retirement income" - along with a withdrawal rate of much under 4%, even with our "planned excessive ER spending", which will not exceed that 4% rate for many years into the future - in our late 80's, in our case.

The simple question is why would I/DW in ER stick to a current day 4% rate, when future income streams will ensure an eventual withdrawl rate much below that?

Should we delay "life" at an ER age just to meet some published rule?

I think not. Just my/our POV on the subject being discussed...

BTW - just a note on leaving a big estate (per the thread title). For us (and our only (disabled) adult child) - we are fortunate that we will be leaving a quite "healthy" estate, primarily for his care after we're both gone. Sometimes, there are reasons not to "die broke". If you feel you must, consider yourself lucky...
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Old 04-09-2012, 10:42 AM   #47
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When I was working my philosophy was to save some and spend some. I spent money without a budget but there was always money left over. In reality, I ended up saving more than I thought I was mainly because of basic LBYM life choices that just came naturally. The article seems to be saying that a 4% SWR is unnecessarily conservative given the probability of your lifespan. That you are forcing yourself to "suffer" in your early retirement years and that, in the end, "you can't take it with you".

I would never advocate that people deprive themselves in their working years to provide for an early and/or lavish retirement. Nor would I advocate the same for the early retirement years vs old old age. The key to me is to figure out how to enjoy the life you can afford at any point in your life. If I end up with a chunk of money at the end that I can't take with me . . . well, then I'll make sure it goes to some worthy use after I'm gone. I can certainly read the lifespan tables but, personally, I'm concerned about quality of life at the end. So my personal preference is to make sure I have what I think is adequate funds at the end to cover health care costs. If I kick off early or am too mentally out of it to use the money then, c'est la vie.
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Old 04-09-2012, 10:56 AM   #48
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@Martyp. good post and I agree with your philosophy. Putting it in practice is the tough part though.
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Old 04-09-2012, 11:03 AM   #49
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When I was working my philosophy was to save some and spend some. I spent money without a budget but there was always money left over. In reality, I ended up saving more than I thought I was mainly because of basic LBYM life choices that just came naturally. The article seems to be saying that a 4% SWR is unnecessarily conservative given the probability of your lifespan. That you are forcing yourself to "suffer" in your early retirement years and that, in the end, "you can't take it with you".

I would never advocate that people deprive themselves in their working years to provide for an early and/or lavish retirement. Nor would I advocate the same for the early retirement years vs old old age. The key to me is to figure out how to enjoy the life you can afford at any point in your life. If I end up with a chunk of money at the end that I can't take with me . . . well, then I'll make sure it goes to some worthy use after I'm gone. I can certainly read the lifespan tables but, personally, I'm concerned about quality of life at the end. So my personal preference is to make sure I have what I think is adequate funds at the end to cover health care costs. If I kick off early or am too mentally out of it to use the money then, c'est la vie.
+2. The search for that balance never ends. I know I can't really die broke, but if real returns are better than I expect, I'll certainly adjust spending accordingly along the way and more aggressive the older we get.
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Old 04-09-2012, 12:04 PM   #50
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+2. The search for that balance never ends. I know I can't really die broke, but if real returns are better than I expect, I'll certainly adjust spending accordingly along the way and more aggressive the older we get.
I'm trying to banish from my head the vision of a number of e-r.org members at an extremely advanced age and in decrepit condition, trying desperately to act out some rather excessive and inelegant "spring-break" type behaviors while struggling with canes, walkers and electric scooters in an effort to "spend down the stash"
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Old 04-09-2012, 12:14 PM   #51
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I'm trying to banish from my head the vision of a number of e-r.org members at an extremely advanced age and in decrepit condition, trying desperately to act out some rather excessive and inelegant "spring-break" type behaviors while struggling with canes, walkers and electric scooters in an effort to "spend down the stash"
I think the usual spring-break fleshpots would much rather have our free-spending drunken behavior than a bunch of cheapskate college students' drunken behavior...
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Old 04-09-2012, 12:26 PM   #52
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I'm trying to banish from my head the vision of a number of e-r.org members at an extremely advanced age and in decrepit condition, trying desperately to act out some rather excessive and inelegant "spring-break" type behaviors while struggling with canes, walkers and electric scooters in an effort to "spend down the stash"
When I get to that age, I want to be able to afford the coolest looking, prettiest, most ergonomic walker in town. I'm going to be a senior with style! I expect prices of walkers will have gone up by then, too.

Right now, I have a 60" plasma TV but by then I'll bet they will come in much larger versions and I'll want one of those too. Or maybe two, to cover both walls - - I can use the other one for my computer display.

Even though the focus of our desires may change, we may still want some expensive things.
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Old 04-09-2012, 12:44 PM   #53
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Right now, I have a 60" plasma TV but by then I'll bet they will come in much larger versions and I'll want one of those too. Or maybe two, to cover both walls - - I can use the other one for my computer display.
In the overall scheme of things, TVs are actually pretty cheap nowadays. Just the other day in Costco, I saw some 60" 3D flatscreens that were only around $1400-1500.

To use a reference point in the past, in 1972 my grandparents bought a brand-new Zenith console tv. 25", no remote control, no digital tuner, one speaker. It was $700. Adjust for inflation, and that's around $3800 today!

When I was 13-14, I saved up some money working weekends doing house and yard work for a friend of my grandmother's. I wanted a color tv, and my Granddad said that if I saved up half, he'd pay for the other half. The tv I got was a 19" Toshiba, what passed for a "portable" in those days. I think it was close to $400 with tax, so I put up $200. I can't remember now if that was 1983 or 1984, but adjusting for inflation, that $200 would be either $438 or $457, depending on the year. So, double that for the price of the tv.

However, that 1972 Zenith lasted until 1987, I think. And I think my old Toshiba still works. At least, it did the last time I turned it on, which has been a few years now. I dunno how long these modern flat-screens will go. I had one that only lasted about a year and a half, but in its defense, one of the cats projective vomited off the staircase and plastered the back of it, shorting it out.
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Old 04-09-2012, 01:10 PM   #54
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+2. The search for that balance never ends. I know I can't really die broke, but if real returns are better than I expect, I'll certainly adjust spending accordingly along the way and more aggressive the older we get.
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I'm trying to banish from my head the vision of a number of e-r.org members at an extremely advanced age and in decrepit condition, trying desperately to act out some rather excessive and inelegant "spring-break" type behaviors while struggling with canes, walkers and electric scooters in an effort to "spend down the stash"
I get it. Though I might do a little lavish traveling, buy a better car, eat dinner out more often and more electronic doo-dads. But I'd really enjoy giving even more away later in life while I'm alive, more than just leaving it after I'm gone. I couldn't handle spring break behavior now, not a chance decades from now...

For the next 10-20 years, I'll probably have to plan as though catfood is a real possibility. Time will tell.
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Old 04-09-2012, 03:06 PM   #55
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Good post Marty, one that I also agree with.

So far we are doing all we want to do, with big plans already for 2013 and 14.

With the market doing so well since we RE'ed the WR is well below our target of 3% but we can't bring ourselves to simply spend a lot more.

I'm trying to persuade DW to travel Business Class to Oz and NZ in 2014, but her first response was that she couldn't bring her herself to spend all that extra money over Coach. I'll keep working on her, plenty of time....
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Old 04-09-2012, 03:28 PM   #56
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I'm trying to persuade DW to travel Business Class to Oz and NZ in 2014, but her first response was that she couldn't bring her herself to spend all that extra money over Coach. I'll keep working on her, plenty of time....
Offer her a compromise - you fly business class and she can stay in economy......
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Old 04-09-2012, 03:50 PM   #57
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I don't care about leaving money on the table but I care about limiting my experiences . I fully intend to take a few great(expensive ) trips with my daughter & grandson while I am physically able and if my budget exceeds 4% that year so be it . To me great memories are sooooo worth it .
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Old 04-09-2012, 03:55 PM   #58
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Intercst did some work on this concept back in 2003 here although he focused on 40 year time frame rather than 30. Not as rigorous as Wade's work but pretty easy to understand.
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Old 04-09-2012, 04:26 PM   #59
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Intercst did some work on this concept back in 2003 here although he focused on 40 year time frame rather than 30. Not as rigorous as Wade's work but pretty easy to understand.
As long as the market performs no more poorly than in any 40 year period in history, who knows. Again, the OP paper is based on having some assured floor income.
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Old 04-09-2012, 05:08 PM   #60
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As long as the market performs no more poorly than in any 40 year period in history, who knows. Again, the OP paper is based on having some assured floor income.
Therein lies the key. When I read Hussman's fact based valuation analysis concluding about 4% market returns for the next decade and current interest rates at record lows, we could be facing some challenging times generating returns.
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