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Old 07-03-2014, 10:20 PM   #21
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Originally Posted by braumeister View Post
A very big part of this is maintaining a cash balance that acts as a buffer for your portfolio withdrawals.

I think I'm about in the middle of members here, with a cash balance of about three years worth of spending. I know some have much more, and many somewhat less, but three years seems good to me and gives great peace of mind.
This is one thing I'm struggling with. I know I'll carry some cash, but I can't decide how much. Right now I'm about where you are, but this will be something DW and I can discuss and see where we land. This might help with the worry she is having about this.

“If you don't do it this year, you will be one year older when you do.” - Warren Miller
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Old 07-04-2014, 01:35 PM   #22
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We FIRE'd in 2006 and I use the Guyton-Klinger decision rules with a 4.5% initial w/d rate. Guardrails are 5.4% and 3.6%.

The MWR rule kicked in for 2009 & 2012, the CPR rule kicked in in 2009. The w/d percents (after all rules) has varied from 4.2% to 7.1%. The 7.1% was for 2009 after the big 2008 loss.

A few other points:
If there is a sustained multi-year downturn, ALL withdrawal methods will be harmed. If you don't reduce you'll exhaust your portfolio. If you want to protect the portfolio, you have to reduce your withdrawal.

The thing I like about G-K is that the w/d changes are gradual, some of the other methods can have you cutting your w/d in half after a really bad year or doubling your w/d after a really good year.

Keeping several years in cash is NOT a good plan. The benefits are all psychological not financial. Financially the best thing to do is maintain your asset allocation.

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