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12-24-2013, 10:16 AM
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#41
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Eh, what are you going to do all day, Brewer? Other than brewing and harvesting chicken off the limb?
To other posters who look for nice, nice MFs with high returns, I just remember now that one needs to be leery of touted 10-yr performance by mutual funds. For 2003 was a trough year in the market, so counting from there would show a really nice performance to the present time.
I just looked back at my own performance for Dec 2003 - Dec 2013 period. I clocked a 9.48% annualized return. Is that not great or what?
How much did I draw or add to my stash, I am not sure as I did not keep really good records. However, my wife left work in 2006. I stopped work 20 months ago, and only worked part-time since 2003, albeit with a good paying consulting job. However, our expenses were also high. We paid off our home mortgage, bought a 2nd home, bought a few vehicles (new and used), paid for the kids' college education, took 2 or 3 international and domestic travels a year. So, I do not think we were able to save much during that period.
So, how did I do it? I cannot reveal all of my secrets, but one of them was that from 2000 to 2003, my portfolio dropped 40% due to tech stocks. So, if I counted from 2000 high, my performance would be less impressive.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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12-24-2013, 11:16 AM
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#42
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,888
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Quote:
Originally Posted by robnplunder
True. Assumption there was that as we get older, we spend less. So, I didn't bother to make the adjustment. For most us, pension and/or SS kicks in at some point.
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If you are not accounting for inflation, and you assume SS/pension later, then your OP is totally misleading and the answers given are not relevant.
You need to look at the entire picture, and even then it's fuzzy w/o a certified Crystal Ball.
But for reference, 8% with no inflation adjustment only had a 43% success rate for 30 years (20% with infl).
-ERD50
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12-24-2013, 11:37 AM
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#43
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Full time employment: Posting here.
Join Date: Jan 2013
Posts: 681
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Quote:
Originally Posted by ERD50
If you are not accounting for inflation, and you assume SS/pension later, then your OP is totally misleading and the answers given are not relevant.
You need to look at the entire picture, and even then it's fuzzy w/o a certified Crystal Ball.
But for reference, 8% with no inflation adjustment only had a 43% success rate for 30 years (20% with infl).
-ERD50
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As several other posters have pointed out, the 8% withdrawal rate is really only a little over 6% if one includes the $300k cash cushion as part of the portfolio. I'm too lazy to run FireCalc to find out for sure, but I suspect that 6% without inflation adjustments has a similar success rate to 4% with inflation adjustments. With that in mind, OP's proposal looks less like a hyper-aggressive withdrawal strategy and more like a method to front load withdrawals in the early stages of retirement, when good health may allow one to enjoy the money more.
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12-24-2013, 01:14 PM
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#44
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
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$80k withdrawals not adjusted for inflation for 30 years from a $1.3M portfolio gives a 92% success rate with the default FIRECalc settings (75% equities).
That's not a bad result.
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12-24-2013, 01:22 PM
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#45
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Perhaps not adjusting for inflation is a simple way to implement Bernanke's WR method. I have always thought that I will spend less as I get older.
Up my WR to 7% next year instead of 3.5%.
The problem is what do I spend that extra money on?
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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12-24-2013, 06:41 PM
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#46
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
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Quote:
Originally Posted by NW-Bound
Perhaps not adjusting for inflation is a simple way to implement Bernanke's WR method. I have always thought that I will spend less as I get older.
Up my WR to 7% next year instead of 3.5%.
The problem is what do I spend that extra money on?
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You have to spend it on stuff you don't need since your real income will decrease in the future.
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12-24-2013, 07:28 PM
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#47
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Arghh... I meant to write Bernicke and put down Bernanke. All this QE and inflation talk got to me.
I have begun to see that I already accumulated a lot of things that I did not really need. I only need a roof over my head, and two meals a day, things that I already have.
Anyway, one should not downplay the pleasure of seeing one's Quicken bottom line inching up. Money can bring happiness even when one does not spend it. Some people do not understand, but I think plenty of people on this forum can identify with this.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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12-24-2013, 08:00 PM
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#48
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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Quote:
Originally Posted by robnplunder
Hypothetically, let's start with $1M mutual fund portfolio, 40/60 - stock/bond split. I pick 5 well proven mutual funds with at least 10 year performance history. Based on their 10 year performance, I get 8% total return from the portfolio if their past performance holds true in the long run. I will re-balance the portfolio at the end of each year to keep 40/60 split, and 8% return.
I have $300k cash to withdraw $80k/year. I will replenish this fund with $$$ gained from the said $1M portfolio. $300k will get me going for at least 3.5 years even if the 40/60 portfolio does not do well for a few years.
The idea is to live on $80k/year with $1.3M in asset (your expense/asset amount will vary).
What do you think about this strategy? The strategy won't work well if we go through another 2007/8 recession. So, I am assuming we won't see such recession for another 10 years if history is on our side.
( Pardon me if this was all hashed out before. I could not easily find similar post. )
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Quote:
Originally Posted by karluk
As several other posters have pointed out, the 8% withdrawal rate is really only a little over 6% if one includes the $300k cash cushion as part of the portfolio. I'm too lazy to run FireCalc to find out for sure, but I suspect that 6% without inflation adjustments has a similar success rate to 4% with inflation adjustments. With that in mind, OP's proposal looks less like a hyper-aggressive withdrawal strategy and more like a method to front load withdrawals in the early stages of retirement, when good health may allow one to enjoy the money more.
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Rob-
If front-end loading withdrawals and having a cash cushion to enable it is your goal, try a 'guardrails' approach like Guyton-Klinger.
http://cornerstonewealthadvisors.com...iteArticle.pdf
A 65/25/10 AA would allow you to start with a 5.8% WDR and have a 99% success rate, as long as you're willing to follow the rules, which your cash cushion would help you do. Your AA, as stated, is a little different but, the same mechanisms apply.
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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12-24-2013, 10:35 PM
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#49
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Bay Area
Posts: 2,745
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Quote:
Originally Posted by Huston55
Rob-
If front-end loading withdrawals and having a cash cushion to enable it is your goal, try a 'guardrails' approach like Guyton-Klinger.
http://cornerstonewealthadvisors.com...iteArticle.pdf
A 65/25/10 AA would allow you to start with a 5.8% WDR and have a 99% success rate, as long as you're willing to follow the rules, which your cash cushion would help you do. Your AA, as stated, is a little different but, the same mechanisms apply.
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It's a quite a reading but I get the gist of it. At the end of the day, I would be very flexible with WR when I RE. I want to front load it to some extent but if the market does not cooperate, I will adjust.
I have been conservative with RE planning and want to explore other less conservative alternatives. I just don't want to be too conservative with WR and end up with more $$$$ later in my retirement when I can't get around well.
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12-25-2013, 07:50 AM
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#50
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2013
Posts: 9,358
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Quote:
Originally Posted by NW-Bound
Money can bring happiness even when one does not spend it. Some people do not understand, but I think plenty of people on this forum can identify with this.
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I think of it as preferring to buy time freedom (from not having to work unless I want to) & financial security vs. depreciating consumer goods or status items.
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12-25-2013, 07:51 AM
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#51
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by robnplunder
It's a quite a reading but I get the gist of it. At the end of the day, I would be very flexible with WR when I RE. I want to front load it to some extent but if the market does not cooperate, I will adjust.
I have been conservative with RE planning and want to explore other less conservative alternatives. I just don't want to be too conservative with WR and end up with more $$$$ later in my retirement when I can't get around well.
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You sound like a good candidate for a percent-of-current-balance withdrawal strategy.
There are multiple versions: a flat percent, 1/life expectancy, 1/PV of fixed annuity, 1/PV of life annuity.
This recent thread is about the third type: http://www.early-retirement.org/foru...ate-68770.html
The linked calculator is simple to use and has some nice options.
Note that with the flat percent, you can set the percent at a number that's more than, equal to, or less than your "anticipated" investment return. That choice determines how much you're front or back loaded.
The same thing is true for the 1/PV rules.
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12-25-2013, 10:06 AM
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#52
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Quote:
Originally Posted by daylatedollarshort
I think of it as preferring to buy time freedom (from not having to work unless I want to) & financial security vs. depreciating consumer goods or status items.
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I was thinking of misers who like to accumulate more than they will spend.
Every so often, there's news about a lonely person dying and leaving behind millions or even in the hundred millions for charities, after leading a frugal life that does not reflect his wealth.
Why did they not give it away when they were alive? Surely, there must be the psychology of pleasure in having control of that money, or that of growing it via good investment choices.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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12-25-2013, 12:11 PM
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#53
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2013
Posts: 9,358
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Quote:
Originally Posted by NW-Bound
I was thinking of misers who like to accumulate more than they will spend.
Every so often, there's news about a lonely person dying and leaving behind millions or even in the hundred millions for charities, after leading a frugal life that does not reflect his wealth.
Why did they not give it away when they were alive? Surely, there must be the psychology of pleasure in having control of that money, or that of growing it via good investment choices.
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Sorry, I thought about what I wrote and I didn't mean to knock nice houses, vacations, vacation homes, cars, RVs or anything like that for people who can afford it. We live nice lives ourselves. I just meant people we know who have pretty decent incomes yet still manage to live above their means and are under a lot of financial stress. According to many happiness studies the extra spending is not buying them extra happiness, but spending less might buy them a better night's sleep.
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12-25-2013, 12:19 PM
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#54
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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You do not have to be sorry, as I completely understand what you meant.
Regarding nice homes, cars, vacations, etc... how nice is nice enough? I am at the point where I think my existing possession is nice enough, although I own no German luxury sedan, nor even desire one. I still like to have more money though.
In other words, I think I belong in the group of misers that I described in the earlier post, even though I did spend 0.5%WR on charities this last 12 months.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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12-25-2013, 12:53 PM
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#55
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Parenthetically, my philosophy is that in modern manipulated and politically tumultuous conditions for the most part we cannot know what our money needs will be during our lives. I'll spend money on things that I must be around to enjoy, and the charities can wait until I am ashes. And possibly beyond.
Ha
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"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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12-25-2013, 08:02 PM
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#56
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,139
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Doing percent of Jan 1 portfolio value here every year. (therefore no inflation adjustments, but if the portfolio manages to keep up with inflation, then so does our income.)
But we're not doing 4%. We do 3.33% since we are still in our 50s.
This may seem quite conservative, but I like having some excess in the portfolio in case we have to help backstop a financial crisis or something. You never know. And as we get older we can ramp up the percentage.
And then again, there are those occasional 27.5% bear market drops in the portfolio!!!! Been there, done that, easily see how it could happen again.
__________________
Retired since summer 1999.
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12-25-2013, 10:40 PM
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#57
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Recycles dryer sheets
Join Date: Nov 2005
Posts: 355
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@ the OP
Try any WD rate that you like for a few years. Plan to adapt your WD rate to your portfolio size. There is no need to choose one path for now until your death.
Consider tracking your WD against FIRE calc and the 4% + inflation WD as a way to monitor your portfolio depletion. I am not suggesting that you can spend more than those calculators. Your first post did not mention SS and less spending in later years. I'm wary of hedonic adjustment to the higher spending being compounded by another market decline. Overspending in the first decade of retirement is irreversible. You may have no choice about reduced spending in later years.
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12-26-2013, 03:25 AM
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#58
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Bay Area
Posts: 2,745
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Quote:
Originally Posted by heyyou
@ the OP
Try any WD rate that you like for a few years. Plan to adapt your WD rate to your portfolio size. There is no need to choose one path for now until your death.
Consider tracking your WD against FIRE calc and the 4% + inflation WD as a way to monitor your portfolio depletion. I am not suggesting that you can spend more than those calculators. Your first post did not mention SS and less spending in later years. I'm wary of hedonic adjustment to the higher spending being compounded by another market decline. Overspending in the first decade of retirement is irreversible. You may have no choice about reduced spending in later years.
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It was a hypothetical scenario for a discussion but I thank you for your response.
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