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Old 12-04-2015, 11:25 AM   #21
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Originally Posted by dtbach View Post
Thanks for the responses. Since I'm only talking about 1%, I think the risk is pretty low and the payoff (i.e. living a bit better) is high.

Just don't want to be like my parents who never spent anything on themselves and then had money galore when in their 90's (when it wasn't much use to them)
Reminds me of having lunch with my Dad the day after my Mom died (at 70). While he wasn't sitting on millions, he'd been tighter than necessary by most measures. He said "Maybe we should have traveled more like she wanted." I wanted to say "little late for that, don't ya think?" but kept my mouth shut.

I think fiscal conservatism (personal variety) has tremendous value. But when it gets in the way of spending reasonable amounts on things that you would value or enjoy, or stops you from retiring at an age that would allow you to pursue things you really want to do, it can be corrosive. Gotta learn to let go. I'm working on it.
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Old 12-04-2015, 11:29 AM   #22
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We have no choice but to do it this way. With no meaningful pension and our ages being 55/50 our withdrawal rate until SS is more in the 6% range. Once at SS we drop to 1-2%. (I'll be taking SS @ 62).

Firecalc and many other tools say we'll be fine.
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Old 12-04-2015, 11:51 AM   #23
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Thanks for this post & the responses.

When we ER'd, I chose to consider SS as a contingency plan and not use it to determine our SWR. Now, 7+ years into ER (though still 15 years away from planned SS at 70), I should revisit that decision and see what Firecalc comes up with. I'll discount SS by about 15% since that could happen if no changes are made to the program. I'll have to understand, and take into account, the tax implication of SS too.
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Old 12-04-2015, 12:55 PM   #24
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One way to handle this is to set aside enough money to pay yourself the same amount during the next 7 years, that SS will pay you later. For example, if SS will pay you $20K/year, then

$20,000/year x 7 years = $140,000.

Put that in something non-volatile, like cash, and don't consider it to be part of your portfolio for purposes of SWR calculations any more. You will be using it for "mock SS", payments to yourself to mimic what SS will pay you later.
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Another way to do this is to annuitize social security and pensions, and include them in your net worth for inclusion in your SWR calculations. Reduce them if you think the benefit will be cut before you take it. Before you start collecting those, take the full amount. Once you start collection, reduce your portfolio withdraws by that amount.
I have accounts earmarked for the method W2R in my plan, and it has been working well so far but I still cringe at the thought of spending down assets too early in the plan. So while Pre-SS 5%+ is probably still "safe", I've simply reigned in expenses to keep it closer to 4%. I had also looked at it the way RunningBum suggests, and when using NPV of future SS benefits my spreadsheet calculates the WR to be about half of what it is if not considering that. Following that logic then leads me to doing the same with pensions - and at that point I start having images of Clint Eastwood asking me just how lucky of a punk I think I am and decide temporarily at least, to hold back on discretionary spending.
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Old 12-04-2015, 01:20 PM   #25
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Like a lot of retirement guidelines, the much-discussed constant "safe" withdrawal rate is geared toward the majority of retirees, who continue working until they can take social security. But as others have noted, for most of us, it doesn't really apply, and that's where things like FireCalc come into play.
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Old 12-04-2015, 04:11 PM   #26
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Just wondering out loud:
If you're SWR is 4% and one plans to WD 5% for a few years and then 3% later on, aren't you eating into your 4% by doing so? It's not linear. (I need mathjack here, I think)

I view it as the principle of the commons where X acres of forest would provide firewood for 10 families forever, but would provide firewood for 14 families for like 10 years.

IOW, if you overspend your nest egg early you can't go back to a linear number a few years from now and hope to go from there because your new starting point will be a lower number.

No?
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Old 12-04-2015, 04:18 PM   #27
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Originally Posted by marko View Post
Just wondering out loud:
If you're SWR is 4% and one plans to WD 5% for a few years and then 3% later on, aren't you eating into your 4% by doing so? It's not linear. (I need mathjack here, I think)

I view it as the principle of the commons where X acres of forest would provide firewood for 10 families forever, but would provide firewood for 14 families for like 10 years.

IOW, if you overspend your nest egg early you can't go back to a linear number a few years from now and hope to go from there because your new starting point will be a lower number.

No?
What you said is true. That's why you need to enter all that info into FIRECalc to get an idea.

As I mentioned, whether I claim SS at 62 or 70 does not make that much of a difference. When I delay to 70, my SS benefit goes up, but my own stash would be drained more than if I claim SS early.
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