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Old 10-16-2015, 10:38 AM   #61
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The result that caught my attention was the relatively high level of spending possible using the "Annuitize Floor & Aggressive Discretionary" approach. Its spending rates are within 5% of the highest (Guyton-Klinger) decision rules approach, even though it's more closely related to the "safety first" camp.


The 'take away' for me is that, if one has (SS, pension, etc) or purchases (annuity) income sources to cover their floor expenses, that retiree can spend a relatively high percentage of initial wealth with what I'd describe as a relatively high level of confidence. This is because: (1) floor expenses are covered, (2) sequence of returns risk is highly mitigated, and (3) having a covered floor would likely help to preclude poor investment behavior [buy high/sell low].

Of course, there's a price for this (primarily loss of liquidity) if one uses as much of NW (40%) to purchase an annuity as in Pfau's example. But, if part/much of the floor expenses are already covered by SS and/or pension, then annuitizing a smaller percentage might be attractive to more retirees.

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Old 10-16-2015, 02:12 PM   #62
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Originally Posted by Huston55 View Post
The result that caught my attention was the relatively high level of spending possible using the "Annuitize Floor & Aggressive Discretionary" approach. Its spending rates are within 5% of the highest (Guyton-Klinger) decision rules approach, even though it's more closely related to the "safety first" camp.
I've always planned to generate most of my retirement income from SS, pensions, TIAA-Traditional interest, and rent and invest my remaining money aggressively, so I was happy to see that result. Of course I think part of the reason for the Annuity success is the low bond rates assumed. Also these models assume you want to spend the max amount and if you only need 1% withdrawals a 100% equity portfolio will probably be best as the chance of running out of money is basically zero and you just go for the AA that maximizes the potential size of the portfolio.

"The needs of the many outweigh the needs of the few, or the one." - Spock
Retired Mar 2014 at age 52
Target AA: 70% equity funds / 28% TIAA-Traditional/ 2% cash
Target WR: 0.0%,
Income from pension, rent, and eventually SS
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Old 10-17-2015, 02:53 PM   #63
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This is the first year we've hit the magic 4% WDR. There were special circumstances. So, after 10 years, I don't usually think too much about WDRs any more. SS will soon kick in, so there's that as well. At 68, I'm beginning to think a 30 year time frame is overly optimistic. Hope I'm wrong!

Actually, my biggest concerns now are the "black swans" or whatever folks call the potential for when TSHTF. World instability, incredible national debt, terror attacks, run away inflation, etc. etc. seem much more likely to derail my "plan" than any "normal" mistake I might make at this time (over spending, improper AA, coming RMDs, current taxes, etc. etc.) Most issues are out of my control, so I attempt to make back-up plans for the general unknown "what-ifs" of our current world. At this point in my journey, I'd rather see a "paper" on such planning than one more WDR strategy paper - but that's just me, so YMMV.

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Anything which can be used can be misused. Anything which can be misused will be.
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