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Old 12-19-2013, 12:32 AM   #21
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On the other hand, if I buy a beach cottage now, I worry that something will happen to my husband, or that one or both of us will be diagnosed with some long protracted illness requiring my assets or that something will happen to the family business and that K1 income will dry up...
What I would ask myself is whether I would really enjoy that cottage, or is it something just to have?

My only real indulgence was to buy a 2nd home in the high country to escape the summer heat, which had a higher value than our main home. That was 8 years ago. I bought it early enough that my younger son who's 24 now was in his teen years back then, and we spent a lot of time together riding our dirt bikes exploring the surrounding national forest. Now that he is a young adult and working on his career, that time is past.

So, if and when we are no longer able to enjoy that 2nd home due to illness, I would sell it even at a loss with no regret. We had plenty of use out of it. And by the way, I just looked at my records, and our portfolio sans RE values has increased 54% since then, despite that purchase.
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Old 12-19-2013, 12:58 AM   #22
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I ERed in late 2008 when the markets were tanking. But despite that and having taken about $21k per year to cover my expenses, I am still up about 42% in the last 5 years with a 60/40 bond/stock portfolio. My Rollover IRA, which is about 55/45 stock/bond, is up 85% since I took the rollover from my 401k 5 years ago and I have not added one dime in outside money in that time although I have rebalanced a few times.
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Old 12-19-2013, 02:42 AM   #23
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I am one of those Y2K retiree who should be growing broke if I took a 4% SWR.
According Raddr's calculation, a $1 million portfolio would have started 2013 worth $493,000 (358,000 Y2K dollars and my inflation adjusted withdrawal would be about $56,000. This year the portfolio would actually make money for the first time in a long time.

I avoid many of the worse problems of the Y2K portfolio (primarily by withdrawing only between 2.5-3% most years.). However, my portfolio didn't get back to its nominal level until 2007 and then again the end of 2010. In real terms I start 2013 about 10% behind what retired with in 99/2000 and am comfortably ahead of it in real dollars today.

Still having two ugly bear markets at the first 8 years of your retirement is not recommended.
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Old 12-19-2013, 07:51 AM   #24
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Not necessarily. Yes, if someone is planning a 30 year retirement is withdrawing 10% a year then maybe they need to rethink it. On the other hand, if someone is spending down some of the portfolio for specific expenses that won't continue forever or to bridge the gap to SS then maybe that is just part of the plan.

Our portfolio has not grown over the past 3 1/2 years (measuring from when DH retired since he took a lump sum at retirement which he rolled into an IRA so we didn't have a good part of the portfolio 5 years ago). However - this was planned and our withdrawal rate plan is variable. We knew that the portfolio would go down during a period of 5 years of high expenses primarily having adolescents still in the household, college expenses and we also used some money to buy our current home (that money is no longer in the portfolio but is still part of our net worth).

The point is that once our kids are out of school we project that we will thereafter being withdrawing only a little over 3% from what will then be our smaller portfolio.

As it turns out, however, due to to market performance since DH retired the portfolio has not gone down very much and much less than I had originally projected it would go down by this point.
Fair enough, though I said "reconsider", not reduce outright. It was meant to apply for those planning a somewhat constant %WR inflation adjusted, not someone who's knowingly planning larger withdrawals in the earlier years.
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Old 12-19-2013, 08:01 AM   #25
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Ours has continued to grow because of the equities market. On most Firecalc scenarios that should be the case but that can change in a heartbeat if a black swan swims by. At a certain point, if it becomes clear that we remain on a typical good glide path we may be able to revisit our SWR and spend more on ourselves or increase giving.
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Old 12-19-2013, 08:22 AM   #26
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No growth from our starting point for us due to high withdrawal rates during the first few years of retirement (prior to SS kicking in). Happy that we came through that period plus the Great Recession and are now back "even" with where we started 8.5 years ago. Withdrawals are now down into the 3% range so it is possible we will see growth in the future, but that's not a goal.
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Old 12-19-2013, 08:34 AM   #27
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Have been ERd for a little over a year. My NW is up about 20% - mostly due to two things:

1. The performance of the market. As others have said, this won't last forever.
2. I cut down my expenses the first 6 months or so of ER just because I'm cautious by nature. Now that I feel more comfortable, I'm increasing my expenses to the levels I planned.

The real enjoyable thing is that my NW has grown more in the past year than what my salary would have been if I had kept w*rking. That is a great feeling! (Although it won't last forever).
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Old 12-19-2013, 09:10 AM   #28
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What I would ask myself is whether I would really enjoy that cottage, or is it something just to have?

My only real indulgence was to buy a 2nd home in the high country to escape the summer heat, which had a higher value than our main home. That was 8 years ago. I bought it early enough that my younger son who's 24 now was in his teen years back then, and we spent a lot of time together riding our dirt bikes exploring the surrounding national forest. Now that he is a young adult and working on his career, that time is past.

So, if and when we are no longer able to enjoy that 2nd home due to illness, I would sell it even at a loss with no regret. We had plenty of use out of it. And by the way, I just looked at my records, and our portfolio sans RE values has increased 54% since then, despite that purchase.
NW-Bound..don't want to hijack this thread but want to answer the question you posed to me. The beach cottage or second home, if you will, would be to increase our quality of life. I know we would enjoy it if I could find it which I haven't yet. What usually kills the deal in one of the places we looked (and actually put contracts on a couple), the sellers want top dollar while not having maintained them. The properties usually require $50K and up to start- money the sellers will have to eventually spend but will give little to no consideration to the buyer. (full exterior paint job, no upgrades to kitchens or baths since they were built 20 plus years ago...that sort of thing).
For all who say their portfolios went up, I'm curious. Is that UP after you went down during 2008 financial crisis or is that UP from where your portfolios were prior to the financial crisis?
I cashed out prior to the big drops loosing maybe 5% before doing so. Didn't get back in until late 2009 and only with half of what I had in prior to crisis. The other half in CD's and out of the market but still generating good income. In fact I just (invested) paid off my husbands business office loan to his bank....as we decided he can pay me instead of the bank (5% interest) and it's helping us rather than the bank. By doing this, we also eased up his cash flow such that it meant an extra $2,000 a month cash flow to our family on top of principle payments. Seemed like a no brainer, especially since my "income" check cuts off this month. Point is, I look for other ways for my money to make money (don't we all!).

All told I'm up 64% as compared to my net cash out prior to Dow 6000 drops, but a lot of that is savings on top of investments. Had a couple of small blunders along the way....with some principle losses...Dang, BAC, LVS......etc.that were offset with great cap gains in bonds during that time. I still have over 50% out of the market but invested....put quite a bit in those 3% Pen Fed CD's SueJ lets us know about. If I can make that while insured and keeping up with inflation with "some" of it as a "base" so to speak, I'm all for it. In other words, my stock market investments are there to finance me when I hit 70 or for our children to inherit if we don't spend it.

I hear you on selling the 2nd home even if at a loss if one of you gets sick. Perhaps I need to change my perspective on this. It's just that the older I get, the less hassle I seem to want. Can't have it both ways, huh?
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Old 12-19-2013, 09:26 AM   #29
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With an infinite number of possible outcomes and paths along the way, all we can do is develop a plan, have contingencies mapped out, and adjust along the way. Where we find ourselves at any point along the way, doesn't ensure the final outcome...
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Old 12-19-2013, 09:49 AM   #30
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I have no historical data on how my net worth has changed since I only retired at age 49 last May. I have been using MS Lifetime Planner for years to plan my ER escape from Megacorp life. If I'm to believe this tool based on my inputs and assumptions my net worth in today's dollars sees a slight increase of 5% at age 57 where it stays level until I'm 71. This is when my net worth starts to decrease due to taxes on RMD from IRA & higher medical costs. My plan shows that my net worth at age 95 is ~50% (todays dollars) of what I started with. I do not assume SS benefits in my ER plan, but if I add SS in at age 67 my net worth shows to be 10% higher in todays dollars...

I know this is just a plan and best laid plans are never perfect or even close to being right depending how the variables change over time. It will be an interesting journey to see how well my planning and re-planning will get me through my retirement years. I'm just glad I have this forum to ask questions and get advise from people who have real life ER experiences.
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Old 12-19-2013, 10:34 AM   #31
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Old 12-19-2013, 10:41 AM   #32
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Originally Posted by clifp View Post
I am one of those Y2K retiree who should be growing broke if I took a 4% SWR.
According Raddr's calculation, a $1 million portfolio would have started 2013 worth $493,000 (358,000 Y2K dollars and my inflation adjusted withdrawal would be about $56,000. This year the portfolio would actually make money for the first time in a long time.

I avoid many of the worse problems of the Y2K portfolio (primarily by withdrawing only between 2.5-3% most years.). However, my portfolio didn't get back to its nominal level until 2007 and then again the end of 2010. In real terms I start 2013 about 10% behind what retired with in 99/2000 and am comfortably ahead of it in real dollars today.

Still having two ugly bear markets at the first 8 years of your retirement is not recommended.
I am surely glad that I left the failing business ventures in 2003 and started making money again, and did not throw in the towel and leave work for real.

Without that good-paying part-time consulting work, I would be broke when my wife left work for real a few years later due to unbearable pressure at her megacorps, and both of my children were in college.

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NW-Bound..don't want to hijack this thread but want to answer the question you posed to me. The beach cottage or second home, if you will, would be to increase our quality of life. I know we would enjoy it if I could find it which I haven't yet.
...
I hear you on selling the 2nd home even if at a loss if one of you gets sick. Perhaps I need to change my perspective on this. It's just that the older I get, the less hassle I seem to want. Can't have it both ways, huh?
One can nearly always trade money for the hassle. This is of course easy if one has an abundance of the former, but the frugal mentality often gets in the way too. It's a balance that we all need to fine tune.

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For all who say their portfolios went up, I'm curious. Is that UP after you went down during 2008 financial crisis or is that UP from where your portfolios were prior to the financial crisis?
I maintain a diary going back to 1999. It has the total daily value of my portfolio, the Dow, NASDAQ, and the S&P500. For simplicity I did not breakdown into retirement accounts, after-tax brokerages, etc... Nor did I log inflow and outflow.

The finer details should be already stored in MS Money, except that I did not set it up to cover checking account, where my earned income got deposited. And there was no easy way to retrieve deposits and withdrawals from the tracked accounts.

When MS Money went defunct in 2009, I switched to Quicken and have been doing a better job of logging all financial activities. It was about time, as I was contemplating ER seriously when I saw that my expenses were going down when my children were done with schooling.

However, I still maintain my diary, which is the first thing I refer to when looking for historical values of my liquid assets - I do not even carry the RE values in Quicken.

Now, back to your question, we would fool ourselves if we pat our own back for comparing market tops to market bottoms of our portfolio. From the bottom of the Great Recession, I am up 1.85X, compared to the S&P of 2.87X. I trail the S&P due to not being invested 100% at any time, let alone at the market bottom. I also hold very little bonds, so my large cash stash holds me back. The S&P has dividends which were not included in the number above, but my number included withdrawals, so let's call it even.

If counted from the top in 2007, then I am up a mere 1.17X, exactly tracking the S&P. However, I had withdrawals and was never 100% invested, so I am still OK with what I got. I am not an indexer by the way.

PS. All the above numbers were not adjusted for inflation, which would make them look less well.
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Old 12-19-2013, 10:52 AM   #33
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We are still able to save monthly so our assets increased by about 14% in 2013. Income from DHs pension is still more than our monthly expenses and on top of that we have my very small income from my part-time job as a school crossing guard. Our Vanguard investments have grown and we also get some interest income.

It's been a good year!
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Old 12-19-2013, 10:54 AM   #34
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With an infinite number of possible outcomes and paths along the way, all we can do is develop a plan, have contingencies mapped out, and adjust along the way. Where we find ourselves at any point along the way, doesn't ensure the final outcome...
Except that when we find ourselves forever approaching the ground and the ground proximity warning sounding urgently "Pull up... pull up", the harder it is to gain altitude, particularly when your stick shaker also comes on.
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Old 12-19-2013, 11:33 AM   #35
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One can nearly always trade money for the hassle. This is of course easy if one has an abundance of the former, but the frugal mentality often gets in the way too. It's a balance that we all need to fine tune.
......
However, I still maintain my diary, which is the first thing I refer to when looking for historical values of my liquid assets - I do not even carry the RE values in Quicken.
.......
Now, back to your question, we would fool ourselves if we pat our own back for comparing market tops to market bottoms of our portfolio. From the bottom of the Great Recession, I am up 1.85X, compared to the S&P of 2.87X. I trail the S&P due to not being invested 100% at any time, let alone at the market bottom. I also hold very little bonds, so my large cash stash holds me back. The S&P has dividends which were not included in the number above, but my number included withdrawals, so let's call it even.

If counted from the top in 2007, then I am up a mere 1.17X, exactly tracking the S&P. However, I had withdrawals and was never 100% invested, so I am still OK with what I got. I am not an indexer by the way.

PS. All the above numbers were not adjusted for inflation, which would make them look less well.
Yes, the frugal part of my brain gets in my way! With a net worth north of couple of million with over half of that in liquid assets (I won't say how far north!) and not counting my husband's assets, I'm starting to think I'm getting ridiculous. The Frugal Genie has me in his/her grip! Ex: Had yards of mulch delivered this week and won't pay the doubled labor price to have them lay it. Do it myself with a minimum wage helper to save almost $900 in labor.

I too keep a daily accounting of stock market totals for the day and a monthly asset accumulation total (includes the CD's, savings...etc.). It has served me well, keeping me on track to reach certain milestones.

My large cash stack holds me back too but I'm o.k. with it as long as I'm able to get 3% or higher on it. While I am an overall total net 40% higher than I thought and projected I'd be 10 years ago on just my investable liquid assets, a large chunk is due to my savings which I estimate to be at least 50% or more of the net worth growth each year. I'm not an indexer but sure wish I had been this last year! Who could have predicted.?!

My liquid assets are up 10.5% in 2013 over 2012 so at least the trajectory is right!
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Old 12-19-2013, 11:47 AM   #36
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My objective is to grow our spending as much as possible consistent with keeping a secure portfolio for the future. It is not just to watch our net worth grow.

As others have noted, it is hard to get the balance just right.
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Old 12-19-2013, 11:47 AM   #37
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Yes, the frugal part of my brain gets in my way! With a net worth north of couple of million with over half of that in liquid assets (I won't say how far north!) and not counting my husband's assets, I'm starting to think I'm getting ridiculous. The Frugal Genie has me in his/her grip! Ex: Had yards of mulch delivered this week and won't pay the doubled labor price to have them lay it. Do it myself with a minimum wage helper to save almost $900 in labor...
Same here about networth, with only 20% in home values. I still change the oil in my vehicles, and do as much home maintenance as possible. It's a form of exercise also.
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Old 12-19-2013, 11:47 AM   #38
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Stopped working in Aug of 2007, officially retired Jan 2008. Current liquid net worth is 23% higher than the day I stopped working.
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Old 12-19-2013, 12:48 PM   #39
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With a 2.3-2.5% WR it's grown significantly since retired ~2 years ago. Pension pays half our expenses, won't take SS until 70. We're looking for ways to increase the spending but have all the stuff we want, it's travel and freedom from family responsibilities that we're looking forward to. At this point the nest egg is just growing for the benefit of DS and DD, both of whom could RE on their own if they wanted. We have a lot to be thankful for.
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Old 12-19-2013, 12:52 PM   #40
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I like to grow my portfolio because I am scroogy. Even if it just stays constant despite our withdrawals, when we croak my two children will become instant millionaires already when we pass it to them.

But realistically, I like to see it at least grows somewhat to match inflation. And then, we have been in a bull market, and need to have some reserve to prepare for the next downturn.
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