My S(?) WR

[eytonxav]

REW,

Good post, thanks for sharing. Don't feel bad, even though I'm not retired yet, last year I had to take a distribution from my IRA to pay my property tax. The cost of sending DD to private college is exceeding my after tax $ and income stream. This situation may keep me working a little longer than planned

 

[Tadpole]

Well, I like the graph. Somehow it makes those possible failure cases very real.

 

[REWahoo]

Well, I like the graph. Somehow it makes those possible failure cases very real.

I sure hope you're referring to the FIRECalc graph, not mine...

 

[haha]

REW,

Good post, thanks for sharing. Don't feel bad, even though I'm not retired yet, last year I had to take a distribution from my IRA to pay my property tax. The cost of sending DD to private college is exceeding my after tax $ and income stream. This situation may keep me working a little longer than planned

Lots of good, less expensive college right home in College Station or Austin, as well as other state schools. Repatriate your assets!

Ha

 

[MichaelB]

Even though my portfolio shows a decline in value after inflation, FireCalc shows an slight improvement in odds, from low 80’s to low 90’s. Not sure how meaningful, and ot is a bit difficult to dig back to the original data. I know my portfolio value then and now, and I have some interim year end numbers, but have to estimate some lump sum withdrawals for college expenses (7.5%) and real estate (7.5%).


Firecalc

My portfolio YE (rebased to 100)

 

[REWahoo]

Very nice Michael. Looks like you weathered the two periods of "market unpleasantness" in very good shape.

You feeling bulletproof yet?

 

[timeasterday]

The trend of my projected withdrawals as a percentage of my beginning of year balance is similar - higher in the early years and lower once my pension kicks in at age 60 and lower still one SS kicks in at 70.

Mine too. I'm still a ways out from retirement, and things will probably change between now and then, but my projected withdrawals look like this right now:

Age
60 6.8%
61 7.3%
62 7.8%
63 8.5%
64 9.3%
65 9.3% <- small pension begins
66 10.4%
67 2.1% <- my SS begins
68 2.2%
69 2.3%
70 2.3%
71 2.4%
72 2.5%
73 2.6%
74 0.0% <- wife's SS begins

From 74 onwards, SS and pension covers 100% of projected expenses. My projected IRA balance is still quite high at that point, so as I get closer I may need to go back and tweak my spending higher so I don't die with a lot of money sitting around (no heirs besides my wife).

 

[MichaelB]

Very nice Michael. Looks like you weathered the two periods of "market unpleasantness" in very good shape.

You feeling bulletproof yet?

Bulletproof - no. More like beat up. And there were some sleepless nights, and probably more ahead. But the real lesson for me is, despite all the math, graphs, failure rates and safe withdrawal calculations, risk is better appreciated after the market falls 50%, and safety is not a percentage but how one acts and reacts when that happens or things just go bad.

This though has led me to lighten up on the budget stress, increase the withdrawal rate, and try to chill a bit more.

 

[Midpack]

Bulletproof - no. More like beat up. And there were some sleepless nights, and probably more ahead. But the real lesson for me is, despite all the math, graphs, failure rates and safe withdrawal calculations, risk is better appreciated after the market falls 50%, and safety is not a percentage but how one acts and reacts when that happens or things just go bad.

I just retired 6 months ago, but I wonder if I may have to relearn that crucial investing mindset (underlined) again. I was fully invested in '87, '00 and '08 and never came close to bailing - but part of the "discipline" may have come from knowing I still had income to build assets again and could always stay working longer. Without the latter option, it may be more difficult to mentally withstand the next big downturn, won't know until it happens. Where I was at least 80:20 most of my working life, I'm close to 50:40:10 now, hopefully that will help me stay the course.

Thanks for posting your progress too, great thread. I'd post my progress, but there's not enough history yet...

 

[REWahoo]

I just retired 6 months ago, but I wonder if I may have to relearn that crucial investing mindset (underlined) again. I was fully invested in '87, '00 and '08 and never came close to bailing - but part of the "discipline" may have come from knowing I still had income to build assets again and could always stay working longer. Without the latter option, it may be more difficult to mentally withstand the next big downturn, won't know until it happens...

Based on my single (so far) experience, it truly requires an act of faith to stay the course when the market pulls the drain plug on your only pool of assets. And some might say you have to believe in miracles to stick to your rebalancing strategy when what you are selling has been going up and what you are buying is in free fall.

It ain't easy...

 

[MichaelB]

I doubt anyone is going to be able to beat my first five year withdrawal percentages.

We had college expenses bunched together which I thought would get us up there but no. Close, though.

I just retired 6 months ago, but I wonder if I may have to relearn that crucial investing mindset (underlined) again. I was fully invested in '87, '00 and '08 and never came close to bailing - but part of the "discipline" may have come from knowing I still had income to build assets again and could always stay working longer. Without the latter option, it may be more difficult to mentally withstand the next big downturn, won't know until it happens. Where I was at least 80:20 most of my working life, I'm close to 50:40:10 now, hopefully that will help me stay the course.

Thanks for posting your progress too, great thread. I'd post my progress, but there's not enough history yet...

The '08 / '09 downturn brought us within 5% of our "minimum portfolio" - the number that would have forced a portfolio shift that, while preventing further loss, would also guarantee a permanently smaller portfolio. Way too close for me, and showed me that I was not effective in assessing portfolio risk, something I hope to have changed.

I look forward to seeing your progress here soon. And another thanks to REWahoo for starting this thread.

 

[Finance Dave]

Good topic, fun to read. I'm not yet FIRE'd, so no charts from me.

 

[Mulligan]

Bulletproof - no. More like beat up. And there were some sleepless nights, and probably more ahead. But the real lesson for me is, despite all the math, graphs, failure rates and safe withdrawal calculations, risk is better appreciated after the market falls 50%, and safety is not a percentage but how one acts and reacts when that happens or things just go bad.

This though has led me to lighten up on the budget stress, increase the withdrawal rate, and try to chill a bit more.

I have retired and am drawing a pension that is 2% annual COLA'd . While I dont have to worry about withdrawal rates, the markets " drops" worry me also. My pension trust fund dropped from 30 billion to 19 billion, before bouncing back, a couple years ago. If the market ever drags you down its inevitable it will eventually get me too. The only benefit I have going for me personally is I dont control my money, as I am sure I would panic and permanently lock in my losses!

 

[Lsbcal]

Very interesting thread so far and thanks to everyone for sharing.

Here are some stats for us:

year  spend  portfolio
2004  6.4%   15%
2005  3.7%   16%
2006  4.5%   14%
2007  5.2%   20%
2008  4.7%  -10%
2009  6.6%   -2%
2010  5.6%    0%
2011  4.8%  -11%

That last column is the inflation adjusted portfolio balance. I figure that is really the figure of merit for us. So we are down 11% from the start of retirement.

Besides my lack of great stock/bond returns, my excuses are:
1) Delaying SS until 2 years from now. DW started hers in 2010.
2) Helping DS get through college
3) Converted a lot of IRA money to Roth triggering heavier tax bite.

This year DS graduates from college and we will be taking some income from Roth's to reduce taxes a lot. When I take SS our spending could go down into the 3% range but I figure we will want to live it up a bit. Don't really want to be on one of those FIRECalc lines that go up and to the left. Flat might be better in terms of quality of life before we turn off the lights for good.

 

[REattempt]

Kudos to REWahoo

REWahoo...did you post this as a result of our Capital Markets/SWR discussion? If so, niiiiiice....

Here is my firecalc result...absolutely not meaningful (doesn't include real estate equity my "buffer" and doesn't include pensions or SS...I'm only 47, so who knows if they will be around)

and

Here are my results since 8/31/11...again, absolutely not meaningful...

I budgeted at 2.8% and ran at 2.6% of Investible Net Worth for September through Now. Really didn't change my spending from pre to post retirement.

The difference between investible and Total is my homes. I don't include the value of the properties I own in my WR calculation. I thought it was a good way to keep a buffer.

 

[Nords]

2009 wasn't nearly as scary as that 2002 thingy. Although I have to admit that we had a much larger dollar drop in 2009, but the percentage wasn't as bad.

This has been "normalized" to start at 1.0. It begins at June 2002 when I started [-]surfing lessons[/-] ER and skips along in six-month intervals to Jan 2012. Green reflects assets, the lower blue bars reflect mortgage debt, and the line is net worth. And, yes, since I'm including mortgage debt it only seems fair to include the equity on our home and our rental. Not that I can sell call options on real estate equity.

 

[ejman]

Fascinating thread. Retired 12/31/2002


Year Expenses % Liquid Assets as % of Initial Amount
2003 8.49% 100%
2004 5.13% 123%
2005 3.94% 144%
2006 5.09% 154%
2007 4.05% 168%
2008 3.27% 177%
2009 4.76% 135%
2010 5.63% 155%
2011 4.26% 181%

I guess we went kind of loopy the first year of retirement. The expensesl % are calculated as a percentage of the portfolio at the end of the prior year

 

[REWahoo]

REWahoo...did you post this as a result of our Capital Markets/SWR discussion?

I'd been thinking about doing it for a while and your thread influenced me to follow through. I thought a little reality might be a nice change to our usual discussion of which prognosticator has the most accurate crystal ball...

 

[REWahoo]

And, yes, since I'm including mortgage debt it only seems fair to include the equity on our home and our rental.

But, but... my graph shows only my portfolio value, not my net worth.

And where is your withdrawal rate on that chart?

 

[Lsbcal]

But, but... my graph shows only my portfolio value, not my net worth.

And where is your withdrawal rate on that chart?

This is a good point. My stats are fully inflation adjusted outcomes and do not include the house equity.

If your investments include real estate then that is a lot tougher to assess now. Our house equity has gone up but I only have an estimate. RE doesn't sell that often in our neighborhood in even good times. Appraisals for refinancing do not reflect reality in our neighborhood but who cares if you own a lot of the house value and just want a better interest rate.

P.S. This hopefully is not a who-did-better thread. Comparisons are kind of meaningless. Some have done part time work, have unusual income streams, whatever. Some are eating at expensive restaurants on their 4.0% spending and some are just getting by on their 4.0% spending.

 

[Nords]

But, but... my graph shows only my portfolio value, not my net worth.
And where is your withdrawal rate on that chart?

I'm still stumbling around trying to figure out how many digits to use on the 2011 data... when you do home improvements at $200 sq ft you hope it's a one-time lifetime event.

I guess I should search for any old threads where we were tracking our SWRs over the years.

Been a few changes since 2002. When I ER'd we had no rental income (parents-in-law were squatting) and spouse had just resigned from active duty with no clear prospect of getting a Navy pension (although the Reserves looked promising). By October of 2002, based on the drop in our portfolio from June, it looked like we wouldn't have an ER portfolio by 2004 either.

Today... much better. Maybe we'll get two pizzas from Costco this week for tomorrow's dinner.

Anecdotally I think there's a strong correlation between ER'ing and having the time/motivation to improve one's financial situation. I guess another way to state that would be "ERs will work incredibly hard to avoid having to go back to work"...

 

[MichaelB]

And where is your withdrawal rate on that chart?

Last night I looked at some old spreadsheets. Back then I wasn't focused on things like withdrawal rates and only tracked certain expenses, so my calculations still have some assumptions, but I suspect they are pretty close.

My first year withdrawal rate was 3.8% (not including college expenses). Using that reconstructed data and including lump sum withdrawals, FireCalc give me an initial success estimate of 70%.

Total CPI has been 36%, but our budget is up less than that, and this year the budget is around 4.2%. FireCalc is more generous now and now says our projected success rate is above 90%. The difference, of course, is life expectancy. Still, 12 years later, I think if we can keep our spending increases limited to CPI and avoid a major portfolio loss we should be in pretty good shape, despite a withdrawal rate that I have frequently classified as risky.

 

[ripper1]

I'm one of those demonized public employees who gets a cola'd pension so I am just withdrawing what my portfolio is yielding. Somewhere about 2.8% a year.

 

[Midpack]

I'm one of those demonized public employees who gets a cola'd pension so I am just withdrawing what my portfolio is yielding. Somewhere about 2.8% a year.

I hope you don't feel demonized here. I've made the distinction in some threads at times, but only because it's different planning with a COLA'd pension and subsidized retiree health care vs someone with neither. It can be misleading when someone at one extreme offers advice to another on the other end of the benefit spectrum without either recognizing the distinction. Of course there are all kinds here, at the extremes and between, and we all face risks...

 

[Mulligan]

I hope you don't feel demonized here. I've made the distinction in some threads at times, but only because it's different planning with a COLA'd pension and subsidized retiree health care vs someone with neither. It can be misleading when someone at one extreme offers advice to another on the other end of the benefit spectrum without either recognizing the distinction. Of course there are all kinds here, at the extremes and between, and we all face risks...

I think Ripper was teasing a bit. I'm a cola'd pensioner (no health insurance), too and have never felt unwelcome over the issue. I think several threads in the past have shown opinions that the government should get out of the pension business, but never has anyone felt we should have them taken away. Midpack, you are certainly correct about different planning aspects though. Instead of me having a withdrawal rate, I am having a 20% deposit rate to be used in case my pension would ever get reduced. This forum has been very beneficial to me in realizing you shouldnt put all your trust in the government as things can change. If I had retired 15 years ago with a pension, I would have just spent it all and waited for the next one to come in the mail without a concern in the world.