Another wrinkle to SWR i was unaware of....

[galeno]

Since Jan of this year, we use a 3% AWR using a port consisting of 65% equities + 35% cash (5yr CD ladder). We planned on a 40 year retirement from Jan 2013.

Our total expense ratio = 0.71% (expense ratio 0.07% + tax ratio 0.43% + hidden fees 0.21%).

The current net yield (interest + dividends) of our portfolio = 1.23%.

 

[youbet]

to assume there is only one number and the money spender will not change their consumption and/or withdrawal rate is naive.

I don't know a single person that makes that assumption either on line or in the real world. Do you?

 

[packrat44]

Said it before and I'll probably say it again. I've never used the SWR concept to "live by" (actually, slavishly pulling X.YZ% out of the port each year). Rather, I used it as a planning tool BEFORE retirement to see when I had enough to pull the trigger. I always assumed that once I had enough to comfortably live on about 4% or a little less, that I'd play the actual withdrawals by ear as events unfolded. That's what I've done in ER.

If your success in ER DEPENDS upon being able to (slavishly) pull a given amount (in the 4% range) out of your port (or else you starve or live in the street), I'd rethink the whole process. Too many variables, not enough data and heaven only knows the future. Keep telling yourself over and over, "IT'S ONLY A TOOL. IT'S ONLY A TOOL..." Of course, YMMV.

Apparently we both acquired the same "play book". Used the guides only as a tool. Being an engineer, threw in a safety variance.

Similar to steering a ship. It may look like a straight line from point A to point B, but you will make many steering adjustments along the way to keep on course. I wish you all smooth sailing.

 

[rmark]

withdrawal rates have varied considerably over the years.

Does the 4% rule hold up? | Vanguard Blog

 

[RenoJay]

I think the thing missing from many of these SWR discussions is that all the data are based on a 30 year retirement. Most of us here are probably planning on a 35, 40 or 45 year retirement. Is there any academic data on SWRs for these longer durations?

 

[Animorph]

I think the thing missing from many of these SWR discussions is that all the data are based on a 30 year retirement. Most of us here are probably planning on a 35, 40 or 45 year retirement. Is there any academic data on SWRs for these longer durations?

Yes, many of the studies go beyond 30 years. The SWR heads toward about 3% for the normal conditions. However, the end portfolio values are so varied that you have to question the value of demanding the precision of 40 years versus 30 years. Also, when using historical data, there are 10 less test scenarios (starting years) when looking at 40 years instead of 30 years.