cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Ah, the circle of [-]bacon[/-] life.
Let's not recreate a new prison called 'financial anxiety'.
About six months before I retired I broke my knee sky diving so the ground rushing up image is scary. Luckily, I have a good pension so I will land in a marsh, not on rocks.To those of you with generous pensions, oversized portfolios supporting low WR's or both, congratulations! You'll probably won't have the opportunity to see the ground rushing up at you as you free fall through economic downturns.
Didn't ESRBob cover this with his 95% rule? Basically you adjust the 4% by only taking 95% of what you took last year if it is a down year - it allowed for a graceful reduction.
I call dibbs on a bunk in SteveR's rolling palace.
To those of you with generous pensions, oversized portfolios supporting low WR's or both, congratulations! You'll probably won't have the opportunity to see the ground rushing up at you as you free fall through economic downturns. But to those who have little ongoing income and are counting on a full 4% WR to support your desired lifestyle, my hat is off to you. You're really walking the talk!
I wonder about the people that claim they are living on some extemely small % as the "SWR." That tells me they are either depriving themselves of a more enjoyable lifestyle or they waited way too long to ER (or both).
30 year fixed at a good rate is always smart but what does the lender matter? They all sell the mortgages anyway. And if your lender goes belly up no one can call your loan can they?I thought a 30 year fixed with a solid bank that had a long history was safer, though, and now I'm glad I went that way. It's all a matter of viewpoint.
I wonder about the people that claim they are living on some extemely small % as the "SWR." That tells me they are either depriving themselves of a more enjoyable lifestyle or they waited way too long to ER (or both).
Maybe they are just being more cautious than others. Some may think that an SWR of 2% is too cautious, and that they are depriving themselves,
.... Often the unexpected happens and preparing for it isn't necessarily a bad thing, though it may seem overly cautious.
.... It's all a matter of viewpoint.
The concept is pretty obvious if you stare at the FireCalc results in detail. A 4% SWR is hyper conservative unless you retire right in front of a major market downdraft (ala 1929) or a longterm flat market ( ala 1968 ) that goes on for a decade or more. If you could somehow "know" you have ten years for retirement before a major market downturn, your portfolio would grow so high that you could take the big hit and not run out of money.
Actually, I think we've finally outed CFB -- he is Scott Adams!
I'm in for a spot in the campground. Who's collecting the 30k?
Seriously (or unseriously), while markets are going up, we're all growing our confidence in ER based on the financial possibilities. I think the discipline now is that if markets go down, we don't get panicky-obsessed about the money side of ER. Instead we need to start thinking about the whole bigger purpose of this path -- it is about Freedom, about Living Life, about Discovering. If the money gets tight, then find a cheaper way to live! Some of the most uptight and unhappy people I know are the ones with the most money.
Sure a certain amount of money/savings is essential to ER, but if we're looking at today's stock market to figure out if we can ER or not, or whether the path is viable, I think that misses the point. The point is to hope for the best, but be prepared to make trade-offs if the finances run against you for a sustained period, and at every turn, keep focussed on the benefits of having your life back, your time, your freedom to fully access all this life has to offer. ER is like getting out of prison. Let's not recreate a new prison called 'financial anxiety'.
Bob I think your post was brilliant and apropos to the current discussion. It seems to me that on this forum sometimes people get so wrapped up in worrying about dire financial outcomes, that they miss the whole point of ER.Actually, I think we've finally outed CFB -- he is Scott Adams!
I'm in for a spot in the campground. Who's collecting the 30k?
Seriously (or unseriously), while markets are going up, we're all growing our confidence in ER based on the financial possibilities. I think the discipline now is that if markets go down, we don't get panicky-obsessed about the money side of ER. Instead we need to start thinking about the whole bigger purpose of this path -- it is about Freedom, about Living Life, about Discovering. If the money gets tight, then find a cheaper way to live! Some of the most uptight and unhappy people I know are the ones with the most money.
Sure a certain amount of money/savings is essential to ER, but if we're looking at today's stock market to figure out if we can ER or not, or whether the path is viable, I think that misses the point. The point is to hope for the best, but be prepared to make trade-offs if the finances run against you for a sustained period, and at every turn, keep focussed on the benefits of having your life back, your time, your freedom to fully access all this life has to offer. ER is like getting out of prison. Let's not recreate a new prison called 'financial anxiety'.
I'm with you on this, Bob. If ER means being in a constant state of worry, maybe we should just forget about it.
...
All we can do is plan as well as we can and adapt to the inevitable changes that will come our way. While a certain amount of caution is commendable, fear of an unknown future should not prevent us from living our lives today.
People seem to be taking on my comment about a hyper-conservative 2% SWR pretty hard. I intend to start out with a 4% SWR (factoring in future SS) but my lifestyle plan includes a substantial amount of discretionary spending ....
I would agree 2% is "reasonable" if someone was just barely surviving on that amount with little discretionary spending. ....
I will be willing to adjust my lifestyle as necessary.
There simply isn't 100% financial security. No one knows what the future will bring, or whether or not you will even be alive to enjoy or suffer it!
ER takes a leap of faith. But sometimes we forget that what we are leaping from isn't guaranteed either - all sorts of bad things can happen no matter which life stage.
Audrey
As others have said, you would not wait until you have lost 73% of your money before taking action.
But no one should be under any illusion that even a 2% withdrawal rate guarantees anything.
For some, realizing this issue and planning for it with a conservative SWR may be exactly what is needed to avoid a 'constant state of worry'. No reason to forget about ER, but one should know what the past has held for people. That is what FireCalc is all about.
What seems 'prudent' to some, seems like 'needless worry' to others. As I said before, find your own comfort level, but I will recommend that you run FireCalc and look at those portfolio dips (NOT just the end balance), and decide if that is really something you could be comfortable with.
A 2% withdraw rate does guarantee something - that you will be in a better financial position than if you used a 4% or 3% withdraw rate. If we see some repeats of the bad years or worse, that may be a very important distinction.
-ERD50
So if, for example, I had a $1,000,000 portfolio the average worst case situation I should expect to experience is a portfolio of $720,000. The absolute worst case portfolio situation would have left me with $380,000 before rising again.
I think that I should be mentally prepared for at least the average worst case situation. But it will still be an uncomfortable situation.
I don't think the solution to all of this angst has been mentioned yet: annuities!
Some people seem to have pension envy. Annuities!
The real reason we're all sticking with stocks and bonds is greed, right? We're basically betting that worst-case won't really happen to us.
It's a tradeoff. The inability to stomach portfolio value swings during the withdrawal phase = needing a more conservative approach (larger portfolio supporting a lower WR or more conservative AA). A more conservative approach = working more.
... that could mean 5 - 10 years of additional work. You have to weigh these lost years of your life against the need to feel more secure.
...rather I'd be preparing myself to accept less than average, even the worse case $380k.
Remember, because the distribution of outcomes is widely disbursed (relatively flat distribution) the probability of achieving approximately average results is little more than the probability of achieving any other result, higher or lower than average.