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Old 07-16-2016, 12:19 PM   #141
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I don't target a particular withdrawal nor do I budget, but I do check Quicken rather obsessively to review spending. I'm only withdrawing 1.1% but if I were approaching 3.5% I'd be more apt to budget. My Fido advisor keeps telling me to spend more, and three years into retirement I'm starting to think about it.
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Old 07-16-2016, 12:23 PM   #142
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Originally Posted by ERD50 View Post
I doubt that many here would withdraw for the year, and then check that it isn't 'too high'. I think they know the numbers upfront.

Also, be aware that the traditional 'Trinity Study' that FIRECalc is based on, uses an initial WR%, based on the starting portfolio amount. For future years, the withdraw amount is adjusted for inflation, but a WR% is not recalculated based on the current portfolio amount.

In the many historical cycles, the actual current WR% would vary significantly - going high during downturns, and getting lower in boom times. For example, a historically 100% WR of 3.5% for 30 years, would more than double (even after adjusting for inflation) in year 5 in the worst case, but still succeed over 30 years. And the WR% would be cut in half if you follow the best case line.

-ERD50
Good point! Personally I am not following the Trinity Study's methods of sticking to one WR and adjusting for inflation each year. Instead I am using the method of taking a percentage of my 12/31 portfolio value each year.

While my percentages average 2% during these boom times, I also compute them relative to my lowest portfolio value on 3/9/2009 just so that I know. My WR with a lower portfolio value like that averages a full percentage point higher.
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Old 07-16-2016, 12:24 PM   #143
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Originally Posted by Done View Post
I don't target a particular withdrawal nor do I budget, but I do check Quicken rather obsessively to review spending. I'm only withdrawing 1.1% but if I were approaching 3.5% I'd be more apt to budget. My Fido advisor keeps telling me to spend more, and three years into retirement I'm starting to think about it.
You need a boat.
Or, I can definitely attest to the fact that buying a Dream House in cash will take care of that little problem for you!
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Old 07-16-2016, 12:32 PM   #144
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It's been zero so far. With my husband's pension and two social securities, we don't need it now.


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Old 07-16-2016, 01:08 PM   #145
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It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?
That's a good description of what I do. My goal is to have my dividend income, mostly from one large bond fund holding, but also some smaller amounts from 2 other bond funds and 1 stock fund, cover my expenses. Even last year with the spike in medical expenses due to my hospital stay, I still had a surplus, albeit a smaller one than in most other years. This year, that surplus will be a little higher although I have had some smaller spikes in health expenses.

I don't expect this surplus to appear every year going forward. If I have to dip into principal a little bit between now and when I turn ~59.5 in 6 years, that's fine.
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Old 07-16-2016, 01:40 PM   #146
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....

I wonder if anyone 'banks' the difference for later use. For example, if your SWR is 4% and one year you only take 1%, does anyone view that additional 3% as banked so that one year you might withdraw 7% and still be 'safe'?
I think some here are really mangling the terminology.

If your "SWR" (Safe Withdraw Rate) is 4%, but you only take 1%, then your actual withdraw rate (the topic of this thread) was 1%. Period.

All else being equal, and sticking strictly to the arithmetic and the historical data, sure, if you withdraw less than the X% inflation adjusted amount, there will be more $ available to WD later, at the same level of historical safety. How could it be otherwise? But depending on how the portfolio performed in those intervening years, the % number might not be a simple add-on.

But this brings to mind an interesting view I've read about - the concept of "Retire Again and Again". Mathematically and historically, you could recalculate your "SWR" each year using your new portfolio balance, and one less year for the time frame. It's valid, and solves the paradox of the two retirees exiting the workforce a few years apart and finding that their spending amount is different even though their time frame and portfolios are the same. It is the absolute best system for maximizing spending, minimizing money 'left on the table', and still assuring a historically safe portfolio. Though it is a case of 'curve fitting', but I think it could be followed a bit more conservatively, and still work very well and provide a margin of safety.

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Old 07-16-2016, 02:40 PM   #147
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Just looked back at my original post on ER, in 2012, to see if my memory was correct on calculating our retirement safety margin. We still use this exact same plan, 27 years later. Just pulling it up for newer members who haven't been there.

Quote:
There are hundreds of financial planners on line where you put in your estimates of assets, and return and inflation, and come up with the amount you need to retire. In our case it doesn't work... All of the planners make the assumption that you will want to maintain your asset capital until you die... In our case, had we followed their plan, we NEVER would have retired.
We just decided to die at age 85... dead broke. Made our planning much easier. Personal decision of course, but if you plan to spend down capital assets, it makes planning easier.

Our plan is extremely simple... On the spending side, we have three different budgets that we can adjust as circumstances warrant. Best case... Nominal... and Austerity.

On the Asset/Nest Egg side, We boil our assets down into three categories.
1. Fixed assets... house, auto, and other valuable non cash items... real property, jewelry, . We do not count household goods... (experience tells us that this is not realistic)
2. Non Income producing assets... bank accounts, cash, cash value life insurance policies.
3. Income producing assets... stocks, bonds, annuity.

All of these items are kept on a spread sheet and periodically updated. It's easy to come up with a total value... and then to average the income from the total...

To calculate where we stand in our retirement plan, we add
a. Social security amount.
b. Amount of interest earned on income producing assets.
c. ... and add the Total Assets divided by the number of years between now and age 85.

That establishes how much we can spend, which we then adjust to our best/nominal/austerity budget.

Sounds funky, but it works,and it takes about 2 minutes to tell if we're on budget or not.
Not suggesting that anyone do this, but just to point out another way to check on asset viability. We do a revaluation of every variable asset for increase or decrease.
Just did a recheck on our current situation, and it looks to be clear for living to age 95. Our initial net worth, though meager, is within one percent of what we had back in 1989, and right or not, we never worry about money.
.................................................. ........................................
Don't know how to reverse calculate the withdrawal rate, but out of curiosity, did a current Vanguard calculator analysis, using net worth as our "portfolio " amount, and it shows 100 success rate for the next 15 years.
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Old 07-16-2016, 03:31 PM   #148
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Originally Posted by Done View Post
I don't target a particular withdrawal nor do I budget, but I do check Quicken rather obsessively to review spending. I'm only withdrawing 1.1% but if I were approaching 3.5% I'd be more apt to budget.
Me neither, we just take what we need, if we need less we take less, if we need more we take more, and the number still increases or stays at par. The stash seems to mostly increase though and we are VERY conservative "Non" investors (All our assets in Fixed income and have been for 25 years).

We spend way too much as it is in our opinion, we do not have a mortgage or any other debt. We pay cash for everything big, like cars, etc. and never finance everything. We consider that investing in ourselves.

We are not gazzilionaires and have far less than some I read about here.

I wonder sometimes what all the fuss is about, and we retired the first time at 48 (DW was 43) to go sailing. After a few years bumming around on a boat we both went back to work for a few years. We fully retired at 59 & 56 respectively.
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Old 07-16-2016, 05:48 PM   #149
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Originally Posted by audreyh1 View Post
It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?

I left enough in the 401k to get me to 59.5 at a 4.5 WR and pull what I need every quarter.

I'm happy to see REWahoo's post and REWahoo vs. FireCalc is the most reassuring thread on this board.

Reran RIP when I verified I will be getting Survivors Benefits from SS at 60 and between that and full SS at 70 I bump up discretionary spending by a large amount and it says I'm good at an almost 6% withdraw. Maybe bumping spending up when I reach 59.5.
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Old 07-16-2016, 10:03 PM   #150
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I don't know about others, but spending more money just isn't as fun as it was when we were younger.


Same here...Maybe that is why I have more leftover money from my pension each year than what I had left over yearly when I worked. Plus the expenses have dwindled and I am so routine driven, that spending money just to spend doesn't register with me. Possibly also its just because I like saving more now than I used too.


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Old 07-17-2016, 02:35 AM   #151
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First year of retirement for me. We are on track to spend 2.9% of initial portfolio value (vs budget of 3%).
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Old 07-19-2016, 12:33 PM   #152
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Originally Posted by W2R View Post
I am using the method of taking a percentage of my 12/31 portfolio value each year...While my percentages average 2% during these boom times, I also compute them relative to my lowest portfolio value on 3/9/2009 just so that I know. My WR with a lower portfolio value like that averages a full percentage point higher.

I began doing the same when I semi-retired two years ago. One column each for my actual WR% based on portfolio at beginning of SR and for WR% based on 12/31 of previous year. I've even toyed with the idea of adding additional columns for Trinity (4% initial PF + inflation) and for VPW - just for reference - but haven't done so.

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Originally Posted by ERD50 View Post
But this brings to mind an interesting view I've read about - the concept of "Retire Again and Again". Mathematically and historically, you could recalculate your "SWR" each year using your new portfolio balance, and one less year for the time frame. It's valid, and solves the paradox of the two retirees exiting the workforce a few years apart and finding that their spending amount is different even though their time frame and portfolios are the same. It is the absolute best system for maximizing spending, minimizing money 'left on the table', and still assuring a historically safe portfolio. Though it is a case of 'curve fitting', but I think it could be followed a bit more conservatively, and still work very well and provide a margin of safety.



-ERD50

This idea had somewhat occurred to me from time to time but - not being the most financially astute - I'd always dismissed it thinking I was probably missing something. When you first posted about it sometime back, it rang a bell and I thought, "Yeah, maybe this is a reasonable way of looking at it after all." It stuck and regardless of how I might tweak my WD strategy over time, I like the idea that I can play it against RA&A.
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Old 07-19-2016, 11:38 PM   #153
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It sounds like most folks don't target a particular withdrawal percent number year in and year out like we do. But rather withdraw what they need for a given year, and then compute the withdrawal rate to check that it's not too high?
this is what we do. I call it the Taylor Larimore (from Bogleheads) method. We have been running in the .8%-1% range. Pension will start in two years so rate will drop. SS and RMDs will kick it way up @70 due to taxes. At that point we will be doing some significant charitable endowments so our spending rate will jump a lot.

I know a lot of retirees and not one of them uses a mathematical withdrawal rate. Typically they use judgement (Taylor method), have pensions with modest investments for special items or some use the "spend dividends and interest only" system.
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Old 07-20-2016, 06:47 AM   #154
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It depends on whether or not you count that cash as part of your portfolio. If not, then I agree 0 withdrawal.

But a retirement portfolio should grow, hopefully (especially in the first half of retirement), to counter inflation and have enough built up to smooth out the down years. Just because a portfolio increases enough to cover the withdrawal in a given year doesn't mean your withdrawal rate was zero.
Good points, (as always, from you).
I count all of my assets, other than the value of my home, and sometimes I count that too.
I'm only a few months into my retirement, and with the recent market gains, my NW hasn't gone down yet. Of course, I know at some point it will, if not from my WR, from market reversals. I hope I can handle it when it does.

I suspect that for a few years, I'll at least try to keep my WR at a point where my NW does not diminish. Not because I need to, but because that's the way I've become during my accumulation years. I'm not sure I'm emotionally ready to reverse that yet.
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Old 07-20-2016, 08:40 AM   #155
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Only been retired a little over 3 years, but here are my stats:


2013 2.50%
2014 2.12%
2015 2.17%
2016 on track for 2.44%


Reduced post ER expenses by ~$9K by firing financial advisor, dropping DirecTV & phone land line, cheaper cell phone plan, bargain shopping and doing car my own maintenance and other jobs that I would have called "the guy" to do because I was to busy w**king. However, heath insurance added ~$3K so that bring my post ER savings to ~$6K.
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Old 07-20-2016, 10:00 AM   #156
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About 3% for each of the first 3 years of ER, calculated as follows: (total spend) - (earned income from consulting) / (total portfolio, including cash bucket)
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Old 07-20-2016, 10:14 AM   #157
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So far since we retired-
2.964% withdrawal rate 2013
2.703% withdrawal rate 2014
2.876% withdrawal rate 2015
2.365% withdrawal rate 2016 (so Far)
I just turned 60 and wife is 59 so we have a few more years until SS when the withdrawal rate should drop.
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Old 07-20-2016, 12:50 PM   #158
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I got a feeling there are going to be many happy, happy heirs of this group.
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Old 07-20-2016, 01:43 PM   #159
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I'm something of an outlier here, in both my NW, spending level, and overall lifestyle. I began withdrawals 5 years ago. At that point, my portfolio, which constitutes my entire NW (I don't own any property) was just 600K. (I have previously stated it was 640K, but a quick check of the facts reveals that it was lower than my memory indicates.) Ever since then, I have been withdrawing $15,600/year, which represents 2.6% of the starting portfolio value. The portfolio now stands at 780K, so those same withdrawals represent 2% if I were to "reset" and start again.
Thanks for sharing Major Tom. It is interesting to learn about the many different lifestyle paths that makeup the community. I agree you're probably an outlier, as $16k/year in expenses is like 150% of poverty level for a single person! But cheers to you for doing it your way and good luck to you as you continue down your own path!
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Old 07-20-2016, 02:01 PM   #160
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several people noting they are withdrawing very little or 0. Just curious what you are living on.
Is this cash on the side that you don't see as part of your investments?
Is this rental income?
Is this SS or pension? (some noted this)
Is this dividend or interest?
Is this an annuity purchased with your investments/retirement $?

Just curious how 0 is obtained.
Hobby jobs, SS, pensions, cheap tastes and low overhead. (I don't know what we are withdrawing now as a percent, but that is the long term plan once we are on SS and college costs are done with.)
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