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View Poll Results: What Would You Consider SWR at Age 50?
< 2% 5 4.31%
2.0 - 2.5% 4 3.45%
2.5 - 3.0% 21 18.10%
3.0 - 3.5% 49 42.24%
3.5 - 4.0% 27 23.28%
> 4% 10 8.62%
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Old 07-15-2009, 08:11 AM   #21
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A 3.975% annual withdrawn rate is OK for 95% success rate for 30 yrs. Someone ERing in 40's needs to plan for 60 yrs, if we divide this in two 30 yrs period and for 95% success probability we need 30yrs success rate of 98% (95%^0.5). Firecalc tells that for 98% survival rate WR would be 3.76%. So I guess for someone ERing in 40's/50's, a WR of 3.5% should be ok if the future is like past.
I think the conventional 4% SWR assumes "success" even if you have drawn your principal down to zero after the given period of time. So, this isn't a common way of arranging a 60 year retirement. I would suggest adopting a lower withdrawal rate and living on dividends only.
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Old 07-15-2009, 08:29 AM   #22
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Suburbia I'd say that the whole 4% assumption that everyone seems to make is being challenged.
Care to elaborate and point to information that supports your statement?

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On the other hand, I have been pondering the declining expense rule that can be used in FIREcalc. Problem with that one is that the declines start too early in my opinion...
I'm struggling to model this. It makes intuitive sense and has been backed up by research (Bernicke), but trying to apply it to my specific case has me getting a serious case of the "what if I'm wrong" jitters. Same thing for SS - I know it will be there - but how much, and how will it be taxed?

I use ESPlanner to smooth out consumption and take all these things into account, but I can't get myself to "live" their recommendations. Instead, i fall back on simpler formulas like ESRBob's 4%/95% rule for real life implementation.
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Old 07-15-2009, 10:05 AM   #23
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In threads like this it's easy to lose sight of the dangers of withdrawing too little money. Over-skrimping now might lead to regret later on if you end up with plenty of dough and insufficient health to spend it.
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Old 07-15-2009, 10:08 AM   #24
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I agree with Ziggy> 3% or Less is best.. Otherwise, you can't afford to Financiall retire..
I always just take the Best and the Worse and divide them and compromize..
2% SWR is even better..
I 'Financially Retired" when I got down to a 1.5% SWR.. for margin of safety..
If you don't plan or want to leave much behind? Then I'd use no more than a 3% SWR, nomatter what the 'Charts' say ... thay are based upon the Past and As you know, Past performance will not Guarantee the future..

As for Taxing more of SS? Well Technically We didn't pay taxes on it putting $ in it, since it's deducted B$ payroll taxes, so like a IRA, and the Employer Matched it with their 7.5% and got to Deduct it , so Maybe It shoul ALL Be taxed? Just like Maybe employees Group Health Benefits Paid by the Employer, should also be taxed as well. The employer gets to Deduct it and the employee pays no tax for getting it ..thus it is a benefit and now ave some $7-$10k yr cost for them? That's alot of taxes out there that could help keep taxing everyone else so much for other things, that doesn't Get a Group Plan benefit..? makes sense to me.. Of course, I was mostly Self employed my Whole Working Life and didn't get such benefits..

And Just now, with Obma and his Paying for a NHCP?, is Stealing $ out of Medicare and Medicare Premiums will go up or services w/b going down.. Get Ready for it.. and buy stock in Bayer for the Asprin business is going to skyrocket after he has said in general " Just give your (senior) parents More Asprin to fight the pain from the Cancer" instead of giving them more expensive treatments, that don't work and he also inclues a plan to even PAY for One's NCHP if you can't afford it!

And seeing as Alot Fewer Minorities are qualified for Medicare and get little or no SS? I can see where he is comming from..and going.. Steal from the Middle and Rich and give it to the Poor trick.. and that will bankrupt Medicare even Sooner I think. And After Working for 40+ yrs , I'm supposed to pay More out to help Loosers? I don't think so...

I'm doing Resreach on Moving to Canada, where I lived for a Few yrs ...just in case.. The West Coast is Beautifull area.. Victoria island and other area's out there..Just came back from taking a Vaction out there for the 3rd time in past 3 yrs..
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Old 07-15-2009, 10:20 AM   #25
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In threads like this it's easy to lose sight of the dangers of withdrawing too little money. Over-skrimping now might lead to regret later on if you end up with plenty of dough and insufficient health to spend it.
Scott Burns addressed this in one of his books. I believe he called it "consumption smoothing" and made some good points about using withdrawals in a way to prevent deprivation in the early years of retirement. Like Al said, who wants to be the richest guy in the rest home?
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Old 07-15-2009, 10:35 AM   #26
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1993 age 49. I never used SWR but I read about it when Bernstein et al wrote about it in Efficient Frontier and when I joined this Forum 2003.

I keyed off then interest rates and the SEC yield of my portfolio. Also did one year temp work and sold and consumed duplex proceeds.

I guess my trial and error rule of thumb is SEC yield(3% minimum) to 5% of portfolio value(variable).

The SWR calc on this forum and elsewhere keep me in the ballpark - especially with my CB hat on when I feel expenses must be varied.

25X expenses is one of the most useful rules of thumb I've ever encountered. I voted over 4% but it varied all over - as high as 8% maybe one year post Katrina and depending whether one counts ones side income streams somehow.

A couple years of cash, sold the duplex, temp work, age 55 small pension, early SS 2005 and retiring in the 90's muddies things up quite a bit.

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Old 07-15-2009, 10:53 AM   #27
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I am 50 and retired almost 3 years now from a programming career - no pension, 100% individual stock portfolio almost entirely in my IRAs, paid off house. I try to match my spending to my dividend income, which is about 3.7% right now. This has been increasing 6-12%/year since retirement, consistent with the previous decade aand staying ahead of inflation. If I do hit a bump in dividend income, I could drop my spending substantially if needed. I do not take SS into account, although I will be happy to collect what I can.
We retired in December 2004 at 45 and 50. The stock market was booming, and we happily withdrew 4% a year, and maybe more. The financial crisis provoked some significant worry chez nous, so we cut our expenses to the point where we can live off of our interest and dividend income, and that turns out to be about 3% overall. (Renting proved to be a big advantage here. We just moved into cheaper digs.)

If and when our portfolio recovers, we will relax our purse strings again.
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Old 07-15-2009, 11:02 AM   #28
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Nah...I'll takes my chances with a million....
Based on what I have now, I'll just keep working.
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Old 07-15-2009, 11:07 AM   #29
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Care to elaborate and point to information that supports your statement? [...]
Er, didn't know there'd be a pop quiz.

Just what I've been reading in the financial press, the Internets etc. about declining bond yields, stock dividends, mutual fund yields etc.

Savers are really being punished these days.
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Old 07-15-2009, 11:24 AM   #30
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I'd like to do a lot of traveling from the ages of 56 - 62, so I plan on spending my "early retirement" pot of money during those years which will be way beyond 4%.
I'm going to respond as to the "travel" that those still in the "wo*k world" seem to pursue - that is "I'll travel when I retire".

While I don't disagree with this direction, I do wish to share what happened in our life.

During the latter part of my career, I was forced to do a lot of international travel (one of the main reasons why I retired in my late 50's). However, I did get accustomed to travel and working in foreign lands - primarily Western Europe.

Due to this, my wife expressed a desire to travel to see a bit more of the world (this was more than a dozen years ago).

Well, we traveled, traveled, and still travel. In fact, this is a line item within our budget, and has been for many years.

Today I'm retired, and my wife will be within the next year. We still travel globally (in addition to a US destination) every year. This has been for many years, and remains a line item in our budget.

We didn't plan on waiting till retirement to travel, but we pursued our travels even though we were working (BTW, for my wife, it is a "vacation"; for me being retired, it is just a "trip" ).

We've had it in our budget in the past, and still continue to do so in the present (and the future). We don't look at it as an "extra expense" and something that we will wait till retirement to do.

I know that many folks say that when they retire, they will travel (and use a separate pot of money do so). However, traveling all these years, and carrying it as just a normal expense item within our budget means that we don't look at any portion of our retirement income/expense of just being temporary in nature. Sure, we cut back on our travel budget at age 75, but that is an assumption of health challenges, and the fact that we may not be traveling internationally (but still traveling in the US).

Whatever works for you? Fine. Just reflecting on how we look at travel expenses as a part of overall retirement expenses.

A final comment; you may wait till retirement to travel, but there is a risk that you may not survive nor you health remain good enough for you to travel. Just something to think about when delaying desires for the future...
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Old 07-15-2009, 01:41 PM   #31
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In threads like this it's easy to lose sight of the dangers of withdrawing too little money. Over-skrimping now might lead to regret later on if you end up with plenty of dough and insufficient health to spend it.
I agree. The rate I'm using now includes some fun stuff...if it didn't, I'd take more... I could spend more money now, but I just don't want anything in particular. More than likely, I'll find something on down the road.
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Old 07-15-2009, 02:05 PM   #32
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I agree. The rate I'm using now includes some fun stuff...if it didn't, I'd take more... I could spend more money now, but I just don't want anything in particular. More than likely, I'll find something on down the road.
I'm not that expensive.
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Old 07-15-2009, 02:14 PM   #33
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I'm not that expensive.
Well now...I'll just keep that in mind.

However on down the road will put even more miles on me than I have now. My warranty has already expired...so you may want to think about this again.....

After thinking about this...perhaps you just want me to buy some golf clubs for you...in that case my warranty doesn't matter.....
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Old 07-15-2009, 02:23 PM   #34
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We'd be taking 4% but the recent downturn has made us into chickens.

Based on our SS statements, we could live just on the SS amount alone if we needed to. Plus, I don't figure the value of the house in our withdrawal rate. Under those circumstances 4% should be fine, and if the market recovers, that's where we'll be.
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Old 07-15-2009, 02:28 PM   #35
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In threads like this it's easy to lose sight of the dangers of withdrawing too little money. Over-skrimping now might lead to regret later on if you end up with plenty of dough and insufficient health to spend it.
An excellent point, and something I'm probably guilty of. When I first left my full-time j*b, I calculated that I could maintain my standard of living with something between 2.5 and 3% WR. But I was supplementing that with some enjoyable pt work income. Since I RE right at the start of the market's downfall (I left in Sept. 2007), I've managed to live entirely on that pt income. Not a bad lifestyle, and there really isn't anything I want for, but I just wish I could relax a little about spending!

Of course, it's nothing a stock market recovery wouldn't fix.
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Old 07-15-2009, 03:28 PM   #36
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We'd be taking 4% but the recent downturn has made us into chickens.
Yep - it's a mental thing. Even without sharpening the no. 2 pencil and budgeting we seem to be throttling back.

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Old 07-15-2009, 06:57 PM   #37
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Well now...I'll just keep that in mind.

However on down the road will put even more miles on me than I have now. My warranty has already expired...so you may want to think about this again.....

After thinking about this...perhaps you just want me to buy some golf clubs for you...in that case my warranty doesn't matter.....
I have a feeling I could handle a set of golf clubs better than............never mind.
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Old 07-15-2009, 11:37 PM   #38
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The basic FIREcalc calculates a 40-year 99%-safe SWR of about 3.34%.

That'd work for me, I think.

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Old 07-16-2009, 01:09 AM   #39
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Isn't it true that if the portfolio will fail at 4% you'll usually know your odds have gone down in the first few years? Still time to react if you're 50, be it going back to work (even part time for min wage makes a big difference in WR) or moving to Mexico or whatever.
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Old 07-16-2009, 08:25 AM   #40
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I retired in Jan. 2007 using a 4% .Luckily I had a lot of excess and never used the full 4% because without that I would not have survived the wreakage of 2008. So whatever percentage you use make sure you either have a lot of padding or a back up plan .
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