How much is enough?

[Ready]

Requiring that you live on a 2% WR is ridiculous, unless you just have so much money that that's all you need to be comfortable. I tend to lean toward the ultra conservative side, even for this forum. But if I was only comfortable retiring on a 2% WR, I think my time would be better spent worrying about what happens if an asteroid hits earth during my retirement.

If a 3% WR survived the great depression, and the worst cycles in the stock market history, what would lead you to believe it won't survive these times?

[ejman]

This might be the appropriate place to reference the calculator from hell series, particularly part III. The Retirement Calculator from Hell, Part III

[NW-Bound]

I have a different problem. I don't think I will even live for another 30 years like the default FIRECalc scenario. So, I should spend more than 3.5%, in fact way more if I consider my future SS. But I do not want to go to a higher WR because I do not want to die with less money. Some people talk of dying a "thousandaire" being their goal. Heck no, I want to die with at least as much as I have now. Make it inflation adjusted please.

Still, my horizon is a lot closer than what other people think of theirs. No 2% for me.

[ejman]

Quote:

Originally Posted by NW-Bound I have a different problem. I don't think I will even live for another 30 years like the default FIRECalc scenario. So, I should spend more than 3.5%, in fact way more if I consider my future SS. But I do not want to go to a higher WR because I do not want to die with less money. Some people talk of dying a "thousandaire" being their goal. Heck no, I want to die rich. Still, my horizon is a lot closer than what other people think of theirs. No 2% for me.

Good points. Nothing like a little cardiac arrest episode to concentrate the mind on that business of taking an unlimited future for granted.

[pb4uski]

Quote:

Originally Posted by jjim6954 .....I'm starting to have concerns that that isn't low enough of a withdrawal rate. I don't see how we don't have a major issue like 2008 given the debt and current valuations. What am I missing? Am I wrong about the debt being a problem?

Most major declines are relatively short but many of us hold bonds as well as stocks... if you use Wellington as a proxy for a 60/40 portfolio, it was just a few years from peak to trough and back to peak again so even if a 2008 happened again after a few years things would likely be back on track.

http://quotes.morningstar.com/chart/...22%3A%5B%5D%7D

[brewer12345]

OP, you can always go back to work. Zero or negative withdrawal rates are very survivable.


As for the debt, deficit, etc., I get the feeling you are a true believer and I won't try to disabuse you of your specific views. However, consider that even if you are right and there will be a society-ending day of reckoning in the future you can do absolutely nothing to prevent it from happening and likely you will get crushed along with everyone else. When that happens, would you be better off if you had kept working? An exercise for the reader, I suppose.

[Aiming_4_55]

I'm probably looking at 45 - 50 year retirement if I'm lucky and thinking I would be happy with 3% if I only had equity/bonds/cash.

For me, it's hard to comment on your 2% SWR. Is it 2% of 1M, 2M, 5M, etc. The higher your invested amount, the more room to make adjustments.

[Danmar]

At 2% it is very much more likely that you will leave a very large legacy rather than run out of money. Better start thinking about that legacy?

[Gumby]

If you had all cash, you could withdraw 2% of the starting balance for 50 years before you run out. You may be a super centenarian, but most won't live that long. If you made the least effort to inflation-proof your portfolio, you'd be fine.

[JohnnyBGoode]

The good news is you are human, not a robot! So you have the option of adjusting your withdrawal rate if market conditions abruptly change. I am actually one of those who thinks 3.5% is actually quite safe as a long-term WD rate, but you know what will happen if the market tanks? I will likely adjust it downward. I also will have a couple of years of expenses in a FDIC insured account so I could even pause the withdrawals during the madness. (and you know what happens then? Equities just got really cheap!)

So I think (and I'm just echoing other, wiser folks on this forum) the secret is flexibility. Have a money stash that you can draw on if the market tanks and adjust your spending accordingly. Ideally you won't have too many fixed expenses during RE anyway (e.g. no mortgage, hugely expensive car payments) so if you have to take a modest vacation instead of a cruise for a year or two, that's OK!

Bottom line - do what is right for you, but know you can NEVER eliminate all risk, only manage it.

An anecdote that has stuck with me (true or not I'm not sure): Let's say you are too scared to drive or fly because you think the risk of dying in a crash is too high. So you stay at home - the place statistically where most accidents actually happen.

[Sycamore]

jjim,

One consideration is the yield from an ETF you mentioned, SPY. It's currently yielding 1.91%. VXUS, Vanguard's total int'l index ETF is yielding 2.82%.

Would you be comfortable spending the yield from an ETF portfolio? It might be possible to build a diversified EFT portfolio that yields more than 2%.

I don't advocate this approach and would not incorporate it into my own strategy as I think a total return approach will generate better returns and withdrawals over the long run.

Sycamore

[gronk]

I know this chick that works with DNA and stem cells and says she is about to go to human trials with a customized cell replacement and regeneration therapy. She thinks with fine tuning, they will put surgeons out of business and people could conceivably live to be 200 years old. So, yeah, maybe .1% withdrawal rate is appropriate if you have health insurance.

[brucethebroker]

I read an interesting book, The Great Depression: A Diary, by Benjamin Roth, which is based on the notes taken by a stock broker during the depression. Mr. Roth talks about how many people were wishing they had taken the safe rate of 2% US govt. bonds during those tough times.

I am not a bond expert, but aren't 30 year treasuries currently yielding 3%? Seems like an easy way to fund your 2%. If so, who cares about the ups and downs of the bonds values?

[2017ish]

3% of 30 year treasury is great if there is no inflation.

[GTFan]

Quote:

Originally Posted by jjim6954 My goal is to outlive my money. I've had people tell me that my allocation is too conservative, but I'm hesitant to put new money to work in the SPY at these valuations.

Who said you had to put it into stocks? I think holding 25% cash with a 40-50 year horizon is foolish, personally.
Of course if you don't need the cash to live on then have at it - you haven't provided any figures other than a 2% WR.

[RISP]

Quote:

Originally Posted by brucethebroker I read an interesting book, The Great Depression: A Diary, by Benjamin Roth, which is based on the notes taken by a stock broker during the depression.

It's quite an entertaining read, I agree. But wasn't he a young lawyer, not a broker?