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Old 02-04-2016, 03:59 PM   #21
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Right. VPW does that as does the RMD calculation. But neither of those methods adjust for inflation but instead rely portfolio gains. A perfectly valid method, but even with VPW's increasing withdrawal percentage per year, you can fall behind inflation for sometimes many years (late 1970's for example). Not a bad thing if you have other sources of income that can act as a floor and are inflation adjusted.
If you're falling behind inflation for many years you might need to cut your spending anyway, so VPW works well for this. Otherwise, just blissfully increasing your withdrawal with inflation may lead to one of those lines in Firecalc that goes to 0.
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Old 02-04-2016, 05:01 PM   #22
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First off, I like VPW.

The problem I have with Firecalc is that in order to have 100% safety the vast majority of the time you end up with a big pile of money at the end (unless that 1 in 100 scenario happens - then we might all be in trouble).

Our philosophy is that we'd rather spend, especially on our kids if there's extra, instead of leaving a pile for them to inherit.

The tricky part of VPW is picking the end date (duh) and having the flexibility to vary your expenses if the market goes down. We have a pretty large travel budget that can certainly be that buffer if needed. Otherwise, as the % withdrawal goes up with our ages that just leaves more money to spend on our kids while they are living and we get to see the benefit of things like group travel or helping fund grandkid needs/education.
Good points. Agree. Leaving a big pile at the end is not optimal but sometimes difficult to avoid, I think, other than through anniitization of course.
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Old 02-04-2016, 05:29 PM   #23
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We plan to increase the withdrawal rate in the future if we can find anything worthwhile to spend it on. Right now we're targeting a dynamic 4% of portfolio value each year. The problem is that we only spent $25,000 last year and our 4% should have us spending $48,000 this year.

Looking at the VPW materials, I suppose we should increase that 4% variable rate to 5%+ as we get into our 50's or 60's. Especially considering SS will start at 67 for us (equating to an effective 2% withdrawal rate replacement).

I'm not too worried about following a mechanical rule though. We'll spend more than 4% some years, and less than 4% in other years. I like the variable nature of it since we're still in our 30's. I'd rather tighten belts now and cut back to $24-30k spending for a few years if necessary instead of blindly depleting our portfolio with a 4% + inflation withdrawal rule that wouldn't give us any extra spending headroom in really good years.
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Old 02-04-2016, 05:49 PM   #24
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Most people spend less for travel and fun as they age but more for healthcare. WE spend more now then I think we will in 10-15 years. We are traveling why we can. I could care less if we leave any $ behind.
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Old 02-04-2016, 06:46 PM   #25
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... data and anecdotes indicating that, as we age past 75, our spending demands will likely go down.
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Yeah, that's the conventional wisdom. I always wonder how much of that data is influenced by people who find themselves income constrained. If people had the resources to spend what they wanted, would their spending go down?
When you are old with creaky and arthritic bones, your eyesight and hearing shot, your palate dull, your hands trembling, your walk a shuffle on shaky legs, what do you care to spend your money on?

If you are not afflicted with any physical deterioration, then you are not old no matter what your age. Spend away.
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Old 02-04-2016, 08:44 PM   #26
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When you are old with creaky and arthritic bones, your eyesight and hearing shot, your palate dull, your hands trembling, your walk a shuffle on shaky legs, what do you care to spend your money on?
A nursing care facility that doesn't abuse me and hires hot nurses to bathe me and convincingly pretend I'm attractive.
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Anyone planning to increase their WR with age?
Old 02-04-2016, 09:10 PM   #27
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Anyone planning to increase their WR with age?

I think it would be OK if I did. Who knows what the future might bring? The objective is to not end up old and broke. As long as that does not seem at all likely, the rest is just details.

As for whether or not I will even want to spend more when am older, well, who knows. For the first five years of retirement I wasn't spending my full 3.5%, because I was perfectly happy spending less. Last year at age 67, I spent a whole lot more (dream house purchase). And then this year I seem to be piling up big expenses of various kinds as well. I wonder if spending more as I age is a trend? Guess we'll see.
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Old 02-04-2016, 09:29 PM   #28
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It seems like an obvious thing to do. The older we are the less likely we are to deplete our portfolio at a given withdrawal rate.

Using FireCalc to figure the highest withdrawal rate possible from a 50/50 portfolio that still results in 100% success you get these results for various withdrawal periods:

40 yrs - 3.3%
30 yrs - 3.7%
20 yrs - 4.6%
10 yrs - 7.5%

Does anyone here plan to adjust their withdrawal rate upwards as they age?

I think I probably will, although I don't have anything formulaic in mind.
Sort of. But only very gradually. RMD tables present one model that seemed reasonable.

I use % of remaining portfolio, so my withdrawal amount goes up if the portfolio does well, and shrinks if the portfolio loses.
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Old 02-04-2016, 09:45 PM   #29
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I am not "planning" on it as I read the question but I am expecting to. Medical spending in just a few years towards the end of things will use more money than I will save in normal "age related budget savings". Maybe I get lucky and remain healthy as a horse or just drop dead suddenly. But I am not counting on it.

Also, right now I have very little housing costs. In the next 10-15 years I can see where I might want to move into an apartment or even some kind of non-medical type senior's digs. eg Not assisted living etc. Just an apartment complex. Well, rent for any basic apartment that I would care to live in would be several hundred dollars per month more than I am spending now. So, yes, somewhere along the way I will be spending more. Now, if I make a lot more money in that time maybe my actually withdrawal rate won't go up?

But I do not plan on any "Eat, drink, and be Merry, it's the 2 minute warning!" lifestyle changes.
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Old 02-04-2016, 09:57 PM   #30
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Yes. I am at a steady 2.5% now, but I intend to use the RMD tables for my withdrawal % beginning in 4 years at age 55. Thus my % withdrawal rate will very slowly increase over time as I age.


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Old 02-05-2016, 02:56 AM   #31
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When you are old with creaky and arthritic bones, your eyesight and hearing shot, your palate dull, your hands trembling, your walk a shuffle on shaky legs, what do you care to spend your money on?
.
Boy you are depressing me. Health care, gifts to family and charity, round the world cruise with companion nurse? Bigger TV? You are going to spend it or give it away no matter what.
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Old 02-05-2016, 06:57 AM   #32
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When you are old with creaky and arthritic bones, your eyesight and hearing shot, your palate dull, your hands trembling, your walk a shuffle on shaky legs, what do you care to spend your money on?

If you are not afflicted with any physical deterioration, then you are not old no matter what your age. Spend away.
Sounds a lot like my parents. They now spend nil on travel and not much on entertainment, but would like to live someplace where all meals are served so they don't have to cook, but can't afford it.

Comfort in those years is probably even more important to me than stuff and experiences now. I'm at least going for a nice balance. If you don't think you'll mind eating ramen and keeping the heat low or sweltering without A/C in your old age, spend away!
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Anyone planning to increase their WR with age?
Old 02-05-2016, 07:12 AM   #33
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Anyone planning to increase their WR with age?

How we spend changes. While in early years certain spending may be "up to" a certain WR to fund travel or vehicle choice or home upgrades. That lifestyle spending can be modulated downward fairly easily

In later years that same WR may only provide for essential necessities such as nursing care , food prep, or other life extending medical help. Survival spending is not easily modulated.

Then comes the quality of life question. Does a Medicaid bed feel any differently from a self paid bed in the nursing home ? Would that money have been better spent to party like a rock start while you had your youth instead of saving it for a rainy day ?

That is ... If you're lucky enough to make it to that point and have the opportunity of living in a nursing home.

Balance is key. Balance. No one knows for sure.

Remember all plans are inaccurate the moment the ink dries.
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Old 02-05-2016, 02:31 PM   #34
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Our WR will increase when the last cat dies. He is 18 now...

We might get another pet in 15 years.
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Old 02-05-2016, 02:44 PM   #35
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I am still trying to figure out ours SWR. Our complete Portfolio (Hardly a portfolio) is invested at 3%. We currently use a little over half what it returns PA. Nothing in stocks. The investment matures in 2019. Approximately 50% of the capital is in qualified tax deferred accounts. The other part has no tax obligations other than the returns. (Which we live off) We do not take money from our Qualified accounts, although I could.

I am 62, DW is 57. I do not take SS yet ,but at 66 it will give me about $30k pa. Our family Life Expectancy is average so I will not wait till 70. 66 is the limit. The reason I do not take it now is it will put us over the ACA rebate levels we currently enjoy, otherwise I would have taken it this year.

I am still trying to figure out what to take. We have no debt. Every 3 years we lease a car and pay it all up front. On those years, the lease payment is the excess and comes from the unencumbered capital.


As far as inflation is concerned we do not notice that it makes a great impact on our Standard of Living, at least not yet.

Confused.... I am.
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Old 02-05-2016, 02:47 PM   #36
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No plan to increase withdrawal rate, but I might buy a few big ticket items or give money way. My goal is not to spend it all, but to leave lots to my nieces and a couple of charities.
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Old 02-05-2016, 06:16 PM   #37
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No, RMDs will take care of that whether I like it or not.
IIRC, my eventual RMD is about the same as my current SWR, so IMHO, IDC!
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Old 02-05-2016, 06:30 PM   #38
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A nursing care facility that doesn't abuse me and hires hot nurses to bathe me and convincingly pretend I'm attractive.
If in your old age you still have as much as J. Howard Marshall did, you are set.
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Old 02-05-2016, 06:50 PM   #39
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I am not "planning" on it as I read the question but I am expecting to. Medical spending in just a few years towards the end of things will use more money than I will save in normal "age related budget savings". Maybe I get lucky and remain healthy as a horse or just drop dead suddenly. But I am not counting on it.
.
+1

I am not planning to increase spending on "normal" stuff. But, I'm thinking we may be forced to increase spending on elder care.

As I get closer to the end, it may turn out that I get more enjoyment out of leaving money to children or charity than I get from spending it on myself. Or not. I won't know until I get there.
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Old 02-05-2016, 09:02 PM   #40
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If in your old age you still have as much as J. Howard Marshall did, you are set.
Truly, his cup floweth over.
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