Lot's of fear here lately - Anyone still believe in FireCalc?......

[Gone4Good]

I believe FIRECalc tells me the same thing it has always told me (whether a particular asset allocation and withdrawal strategy was successful over specifically defined historic periods). It is not, nor will it ever be, a crystal ball. Whether or not we're in for a worse investment environment than has existed in over 100 years is unknowable. But what is knowable, is that most of us have a belt and suspenders plan that would survive a worse than 100 year investment outcome.

I wonder how people depending on a job to pay their bills will fair if we enter such a prolonged economic slump. I guess the difference between many of us, and most of them, is that we've thought about, and planned for, our financial future enough to worry about it. Sometimes excessively.

 

[2Moutal]

Tools.......

I use Firecalc, Vanguard and TRowe price tools and typically come out with similar results. Just finished doing some Pilades, amazing how good you feel when you get done. We need to keep our bodies healthy so we can enjoy the fruits of our investing efforts.

 

[Ken11]

I agree that Firecalc seems safer today than when portfolios were at their peak a few years ago.

To me if times ahead are sluggish this corresponds to the "less fortunate" trajectories that firecalc looks at from history. ( perhaps starting retirement during the seventies stagflation for instance)

Anything is possible. However, I consider it unlikely that, in the long run the economic future will be fundamentally different than the past. Markets tend to self govern for value- therefor future returns (see paragraph 1 above). I think its likely that human ingenuity, greed, worldwide standard of living gap closure will eventually do their magic.

 

[Independent]

This sums up my opinion:

I believe FIRECalc tells me the same thing it has always told me (whether a particular asset allocation and withdrawal strategy was successful over specifically defined historic periods). It is not, nor will it ever be, a crystal ball. Whether or not we're in for a worse investment environment than has existed in over 100 years is unknowable. But what is knowable, is that most of us have a belt and suspenders plan that would survive a worse than 100 year investment outcome.
.

FIRECalc and its kin are a vast improvement over the older strategy of a 7% withdrawal rate, based on the observation that, on average over long periods, stocks historically generated CPI + 7%.

I'd guess that someone retiring today and planning on 4% is safer than someone retiring in 1999 with the same plan. But that's a guess, no crystal ball here.

My personal belt and suspenders plan uses lots of TIPS. Boring, but I sleep better.

 

[old woman]

I am afraid to believe in 4% SWR. I am planning to give it time to work out and see what happens.

I feel like I am up and down so far so fast it doesn't seem real. I made thousands yesterday and can lose or gain about 15K in a single day. I am up just a little from 3 years ago but have put more than that in.

I will keep working as long as it seems worth doing and see what it looks like then. If I make 10% a year for 3 more years I will know I will be fine taking out 3-4% for a few years giving it more time to grow.

 

[Helen]

Hi Cut-Throat,

It's really nice to see your font again and to get an update on how you are doing. It sounds like you are still enjoying life/retirement.

I'm still a couple of years away from my retirement date 5/13/2013 so I can't really answer your question. I guess I could say that's a firm date even in this economy.

I hope you continue to post, I've always enjoyed them in the past.

-helen

Posting from beautiful Bend, Oregon

 

[shotgunner]

Retuning to w**k is another.

I think to many of the people in these forums returning to work is considered a suicide of sorts

 

[rescueme]

I made thousands yesterday and can lose or gain about 15K in a single day.

That's not a problem at all; it only is a reflection of a fairly large portfoio where even a small move will make a big $$$ daily variation.

It's not important if it goes up or down daily. It's important that it is up over a certain period and when you take your withdrawls for living expenses.

I'm like you. I have the same variation (actually much more, some days ), but unlike you I'm retired and using my portfolio for the bulk of my retirement income (no pension, no SS).

I "harvest" during up periods during the year (when my stock/bond funds are above their set point) and sit tight during downturns (when I draw from my accumulated cash bucket).

Without market variation you can't buy low and sell high. That's how the game is played ...

 

[rescueme]

I think to many of the people in these forums returning to work is considered a suicide of sorts

That, or insanity...

 

[chinaco]

I am confident about FIRE. I will ER from work in less than a year with a small pension and our portfolio.

If the S&P 500 were still at the market bottom from the meltdown (around 650), I would still FIRE based on our funds and projected expenses. But emotionally... I would probably delay until things at least stabilized... stopped dropping.

However... If I were FIRED and the meltdown occurred, I would not go back to w*rk due to fear... only if it was an absolute and obvious necessity. Of course, we have quite a bit of cushion between our income and expenses.

 

[Onward]

I "harvest" during up periods during the year (when my stock/bond funds are above their set point)

rescueme, how do you establish that set point?

 

[rescueme]

rescueme, how do you establish that set point?

Actually I have two (tracked via spreadsheet). I know my original investment purchase year by year and my YTD returns for the current year for the funds I/DW own.

I have my "anal budget" - I track/forecast everythng, matched to a number of months that I keep in cash. Currently, I have a target of 3-4 years in gross cash (e.g. includes taxes due upon withdrawals).

Currently (as of today, a bit over half way through the year) I hold 2.5 years in cash. My DW has 2.63 years in cash. In both cases, it's quite a bit of actual cash holdings; some may criticize us for having that much in actual cash, but for us, it works. Anyway, since we're pre-pension (my wife will have two small pensions at age 65), pre-SS (my wife will draw at her FRA age of 66, I'll draw 50% spousal against her at my FRA age of 66, and my SS at age 70), so over time the actual amount of cash will be greatly reduced.

As an example, my DW/me are the same age (62). I retired at age 59. My DW planned to retire at the same time, but three years later she still has a j*b since she is not "emotionally ready" to retire.

I'm currently drawing from my cash bucket but my wife is not since she still is wor*ig. Again, she has 2.63 years in current gross cash income, so she could retire tomorrow, if that is her wish. If she stays till age 66 (in less than four years), the addition of her SS means that her current cash represents 7.07 years in gross income, even though she dosen't add a penny to her cash bucket.

A lot of words, but I wanted to just set it up for you so you understand the underlying facts at this time.

Like I said, there are two set points, one by year contributed and one by YTD. I have full records of our contributions by year and total portfolio value for each of us, going back to 1982.

I retired in early 2007 and my cash bucket was full (e.g. I had between 36 & 48 months of current gross income available). During the remainder of 2007, it dipped below 36 months and since 2007 was an "up" year overall, I did an across the board withdrawal from all funds that were positive for the year ("harvesting") and added it to cash.

At the end of 2008, a down year for most folks, I restocked my cash account again, at end of year. I took the profits from some funds (as measured from Jan 1, 2008 till mid December, 2008) and harvested those gains. However, I also harvested others that showed an actual loss as measured from YTD, but showed a profit as measured from originally purchased. For me, it was easy since for the majority of my funds, I'm a long term holder (for instance VGHCX, over 15 years) and was easy to see if I was selling for more than I purchased shares. For me, it's not the profit YTD that matters, but rather year over year - total holding time.

2009 was an up year, so of course I did some more harvesting.

I've changed my manner of harvesting this year. Due to the flux of the past few years and while in retirement (e.g. plan vs. reality), I've shortened up my periods of when I harvest. Since bond funds (such as GNMA) are up considerably and I don't want to risk a sudden reversal in interest rates (probably won't happen, but you never know), I've done some early harvesting during the year. In other words, as I age I've become more conservative in withdrawals (take profits when you can) than possibly waiting and maximizing total returns for the year, such as if GNMA keeps on an upward slope.

I don't need to take chances, and I don't need to be greedy so I've shortened the "crop growing and harvest time".

Anyway, a long answer to a short question - but since you asked. And no, it's not complicated at all - at least for me. I've kept good records over the years so it's easy to determine (for most funds) if I'm up or down, YTD and since purchase...

 

[JOHNNIE36]

There is a very good article in today's paper, "Ten stock-market myths that just won't die". On the web, go to The Wall Street Journal Sunday, click on Sunday Journal Partner Main, then select Ten Stock Myths----------.

 

[Nords]

rescueme, how do you establish that set point?

We have bands around our asset allocation (+/-5%), and we also look at how far the portfolio's value has risen above what's required for a 4% SWR.

The first keeps any one asset from getting too far out of whack, and the second keeps a lid on the "problem" of everything going up all at once. 2007 turned out to be a very good year to replenish the cash stash and end up with at least two years' expenses in CDs/MMs.

If our reaction to our portfolio has been mostly "Woo-hoo!" and if it's starting to take up dinner-table conversation, then it's probably time to take a little off the portfolio table too.

 

[rescueme]

...we also look at how far the portfolio's value has risen above what's required for a 4% SWR.

Just a note. We forecast as if my DW was retired although as previously stated, she has not ...

However our actual WD rate is much less since she is still the "energizer bunny" and want's to be among others of her ilk.

Our current WD rate (assuming she is retired, today) is above 4%; in fact it will be above that rate for the next 7.5 years (till I draw SS).

At that time, it will drop to less than 2% (even with our pre-SS withdrawls) and stay at less than 4% till age 100 (the end of our plan, regardless if we live that long).

4% is a good target, but don't limit yourself to it. It only matters if on the day you retire you have all income sources "on-line".

For us, that won't happen for another 7.5 years.

Just a comment from somebody who knows little, but is retired (and no, I don't have a part time j*b - I am retired!)...

A picture of my DW, below ...

 

[Nords]

4% is a good target, but don't limit yourself to it. It only matters if on the day you retire you have all income sources "on-line".

It's just a tripwire we've picked to begin thinking about sweeping a little more cash out of the portfolio. In this case it doesn't have any more significance than that.

 

[rescueme]

It's just a tripwire we've picked to begin thinking about sweeping a little more cash out of the portfolio. In this case it doesn't have any more significance than that.

Uh, being a Nam vet, I know what a tripwire signifies ...

Often it's not a good thing (bouncing Betty's and all that)...

But hey, if it works in your life, that's all that matters...

 

[Onward]

Anyway, a long answer to a short question

Ok. I think I get it.