Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-03-2012, 09:56 AM   #41
Thinks s/he gets paid by the post
Major Tom's Avatar
 
Join Date: Nov 2009
Location: SF East Bay
Posts: 3,129
I'm living on a 2.65% WR - anything higher would make me uncomfortable, as I'm only 48 yrs old. If I need more money than that in the next few years (which may well be the case), I'll get some part-time work, rather than increase my WR.

When SS finally kicks in though, it's going to feel like fat city
__________________

__________________
ER, for all intents and purposes. Part-time income <5% of annual expenditure.
Major Tom is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-03-2012, 10:55 AM   #42
Thinks s/he gets paid by the post
veremchuka's Avatar
 
Join Date: Oct 2010
Location: irradiated - too close to the nuclear furnace
Posts: 1,294
Seems I have read that the 4% was based upon 25 years and that's 4% X 25 years = 100% but obviously that does not allow for gains, losses or inflation. That's not as important as the "order of returns", that is very important!
__________________

__________________
veremchuka is offline   Reply With Quote
Old 01-03-2012, 11:11 AM   #43
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,686
FIRECalc allows manual entry of spending changes. See "Spending Models" tab and "Manual Model of Spending Changes". When I put in a high spending model and then adjusted it down after a few years the model ran with much better results. You can do this very easily because putting in a number like -10000 after year 10 will reduce spending in all following years by this amount.

Key point: look at those lines on the final chart and make sure they do not go down too far for safety. If you have lots of lines with 10% of your starting portfolio (even though they eventually recover), are you going to be comfortable with that result? Will you see it coming and how will you react? We don't want too many sleepless nights.
__________________
Lsbcal is offline   Reply With Quote
Old 01-03-2012, 11:23 AM   #44
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Spending 4% of your port each year is 1/25th. If you need $50,000 each year, then your port should be $1.25M. Not exactly the same, but good for a quick, in-your-head calculation.
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 01-03-2012, 11:36 AM   #45
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,431
... except for the wild card called inflation...

Wade Pfau's paper cited by Nords earlier showed that a Japanese drawing 4% (adjusted for inflation) would exhaust his savings in 3 years, in the worst case (1940). Of course, we cannot plan for, nor expect such calamity (knock on wood), but it shows that YMMV. A lot!
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 01-03-2012, 11:42 AM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by Lsbcal View Post
Key point: look at those lines on the final chart and make sure they do not go down too far for safety. If you have lots of lines with 10% of your starting portfolio (even though they eventually recover), are you going to be comfortable with that result? Will you see it coming and how will you react? We don't want too many sleepless nights.
What is your recommendation to correct "having lots of lines with 10% of your starting portfolio?"
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 01-03-2012, 11:48 AM   #47
Dryer sheet aficionado
 
Join Date: Jan 2008
Posts: 48
Quote:
Originally Posted by REWahoo View Post
Those of us who believe FIRECalc has some value in determining SWR would disagree.

It is entirely reasonable to have a withdrawal rate greater than 4% during the initial years of retirement IF future income from SS or other sources sufficiently reduces the portfolio withdrawal amount.
I agree. Last year was our first full year of retirement and we withdrew 2%. This year we will be withdrawing more than 5%. We are withdrawing an extra $10,000 a year for 12 years for travel. Expectation is travel will be reduced after that. In 6 years our mortgage will be paid off. In 7 and 8 years, we will collect SS. At that point we won't be withdrawing hardly anything a year from portfolio because Pension, and SS will cover our living expenses. So we aren't using a standard withdrawal percentage.
__________________
sn2792 is offline   Reply With Quote
Old 01-03-2012, 12:18 PM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,686
Quote:
Originally Posted by youbet View Post
What is your recommendation to correct "having lots of lines with 10% of your starting portfolio?"
Depends a lot on your situation and income flows. One could do some of the following:
1) Figure out how to do investing with reduced expense ratios. That means maybe more index funds (ER = 0.15%) instead of higher ER active funds that might be over 1%.

2) Increase stocks over bonds. Not a risk free alternative.

3) Investigate reducing spending (using the manual spending model) in later years to see how sensitive your simulations are to spending.

4) Have a Plan B. For instance, maybe in the worst case (for me) I could sell the big house and buy into a less expensive housing arrangement.

I'm sure there are some other things I haven't thought of. Maybe others can comment here.
__________________
Lsbcal is offline   Reply With Quote
Old 01-03-2012, 12:38 PM   #49
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,476
1. I have handled some of the survival uncertainty by never indexing some initial value to inflation. I would rather take less out after a bad year. I expect (hope) to have surpluses most years and will allow these to accumulate in my short-term cash account for bad years or rainy days or that occasional splurge, or whatever.

2. Our personal spending has had no relationship to inflation (another rationale for point #1). The first 3 years were pretty spendy, but we had set aside quite a bit extra for travel and toys. The next 6 years spending dropped quite a bit initially and then was flat year-to-year i.e. no personal inflation. The last three years have been rising as we set up a new house and started gifting quite a bit more. I think you could say we ultimately loosened the purse strings as time went on.

3. I think I'm going to use 3.333% of Jan 1 value each year as my withdrawal rate. I may reevaluate this (whether I should increase it) at age 60, 65, and 70. We don't have children to bequeath an estate to. We would rather share it with siblings while we are all still alive.

4. I handled an extra early retirement by having other assets to draw on while letting my long-term conservatively invested portfolio grow mostly untouched for at least 10 years. It looks like 2013 may be the year I finally do a full annual withdrawal.

In my early retirement calcs, I added lot of padding! (just in case that wasn't already obvious)

Audrey
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 01-03-2012, 02:03 PM   #50
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,869
Quote:
Originally Posted by Major Tom View Post
I'm living on a 2.65% WR - anything higher would make me uncomfortable, as I'm only 48 yrs old. If I need more money than that in the next few years (which may well be the case), I'll get some part-time work, rather than increase my WR.

When SS finally kicks in though, it's going to feel like fat city
Same here, mostly. I am 48 and my SWR is in the mid-2s. Just using my taxable accounts (not my IRA) my SWR is still just under 4%. When SS and my frozen pension kick in, my SWR which will probably rise a little between now and then, will drop some more, giving me the "fat city" feeling too!
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 01-03-2012, 02:51 PM   #51
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,530
I'm planning on FIREing sometime in my 30's. Rough number I'm planning on is somewhere around 3%, maybe a little higher. Not 4% I don't think - too great a risk of exhausting assets.

Part of my rationale is that my dividend yield on the current portfolio is just shy of 3% and I'm not even in any dividend focused investments. Hard to see living on one's dividend stream from a diversified portfolio as that risky as long as you have a little cushion in your budget if the dividends go down some.
__________________

__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Will I Ever Be Able To Retire Early? nico08 FIRE and Money 28 09-20-2011 06:11 AM

 

 
All times are GMT -6. The time now is 07:52 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.