At Age 50, What SWR Do You Like?

[unclemick]

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.

heh heh heh -

 

[IndependentlyPoor]

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.

 

[Lawrence of Suburbia]

Nah...I'll takes my chances with a million....

Based on what I have now, I'll just keep working.

 

[Lawrence of Suburbia]

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.

 

[rescueme]

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...

 

[bbbamI]

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.

 

[Dawg52]

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.

 

[bbbamI]

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.....

 

[TromboneAl]

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.

 

[ksr]

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.

 

[unclemick]

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.

heh heh heh -

 

[Dawg52]

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.

 

[SecondCor521]

The basic FIREcalc calculates a 40-year 99%-safe SWR of about 3.34%.

That'd work for me, I think.

2Cor521

 

[tuixiu]

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.

 

[Moemg]

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 .

 

[teejayevans]

The problem isn't SWR, the problem is projecting your expenses
for 40 years, especially health care.
TJ

 

[Helen]

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".

...

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...

Thank you for sharing, I appreciate your perspective and I share it. The reason we are waiting to do most of our travel is more about time than money. Both of our families live in the midwest and we are on the West Coast, so we both spend a good chunk of our vacation time visiting them.

If it weren't for that, I could figure out some nice, reasonably priced vacations overseas.

 

[Moemg]

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 hate having regrets so I just booked a fall trip . Thanks for the push !

 

[walkinwood]

I hate having regrets so I just booked a fall trip . Thanks for the push !

Yes, thanks! I'm leaving tomorrow! Off to Burlington VT, then a couple of days in the white mountains before visiting in-laws & returning at the end of next week.

 

[walkinwood]

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.

Didn't mean to put you on the spot. There are a lot of pundits making these statements, but I'm hoping they provide some research to back it up. Most of the current SWR research is based on past results - either history or a model based on history. While not ideal, I feel it is better than just the flavour of the day -- Stock market is going up - SWR = 5+%. Stock market goes down - 3% is the way to go.

 

[Spanky]

Yes, thanks! I'm leaving tomorrow! Off to Burlington VT, then a couple of days in the white mountains before visiting in-laws & returning at the end of next week.

We plan to visit Maui in August. Hotels are offering great deals!

 

[Spanky]

My plan is to start with 3% SWR and reduce it if necessary.

 

[rmark]

I picked 3-3.5, after taxes thats probably about 2.5-3.0 net. Mostly just dividing your portfolio over remaining IRS life expectancy, about 34 years at age 50 if single, about 40 years at age 50 if married.

I assume continued non-mortgage spending in my planning, with rising healthcare offsetting child and work related expenses. Cars, roofs, and hot water tanks will always need replacing, same as now, either on payments or as a lump sum.

My sister in law likes Maui also, says its a little less busy.

 

[tuixiu]

I'm curious, if you 3 percent types find your portfolio grows over time (as is statistically likely) will you ever reconsider your draw?

As an example if you start taking 30k per year from a million but five years later find yourself sitting on 1.5 million would you stick with the 30k+COLA or would you consider going upping the draw a little?

 

[W2R]

I'm curious, if you 3 percent types find your portfolio grows over time (as is statistically likely) will you ever reconsider your draw?

As an example if you start taking 30k per year from a million but five years later find yourself sitting on 1.5 million would you stick with the 30k+COLA or would you consider going upping the draw a little?

That's a good point. If that happened, I would think about increasing my withdrawal rate by half a percent. It still wouldn't be very high.