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View Poll Results: How do you start out your retirement?
Start out living large and enjoying life with the 3.5%. It will decrease naturally when I'm in my 80s anyway. 34 32.08%
Exercise a little caution and start out a 3.0% and get used to living off of investments. 37 34.91%
Better safe than sorry. Ease into things at 2.5%. 35 33.02%
Voters: 106. You may not vote on this poll

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Old 02-01-2014, 08:08 AM   #21
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more ranges are needed:
<1.0% (super rich, super frugal, fat pension, etc)
1.0%
1.5%
2.0%
4.0%
4.5%
5.0%
>5.0%
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Old 02-01-2014, 08:09 AM   #22
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Originally Posted by brewer12345 View Post
3% WR to start and if things go well in the first 5 years you give yourself a raise. If you are really, really conservative, start shopping longevity insurance.
At first, I was going to join the 3% crowd, but then I saw your second post:

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Originally Posted by aim-high View Post
I've never done index investing but LBYM, while working and investing in a couple of startups and throwing excess cash flow back into those as well as a couple of concentrated positions.
...
I don't know what its like to have a broadly diversified low beta portfolio. I think I need to get used to the idea of living from our investments instead of my ability to perform. My startup mindset has always recognized that what I have today could be wiped out tomorrow and I have always drawn comfort in from being able to earn a good living consulting. But once I turn that off, I want it to be off for good.
So what exactly does your portfolio look like currently? Almost entirely of private company start-ups? While owning partial stakes in private businesses can be lucrative, I would have a hard time knowing how to value your different positions in terms of a SWR.

Are your taxes on distributions considered part of profits, or are they qualified dividends? If the former, your taxes will likely be considerably higher in retirement, rather than having a good chunk be qualified dividends and long-term capital gains at lower tax rates.

The issue of 3% also depends on your final portfolio, in terms of what % to bonds, what kind of bond holdings, what kind of stock holdings, etc. Perhaps you could try figuring out a target AA, and seeing what that would spin off in estimated income each year.

It's good that you have SS covering 20% of your budget, which would help give a little bit of a cushion and let you splurge a little bit more now while you're young, but a 50 year retirement is something you want to have a strong financing for.

Then there's the age-old question of how much you'll spend from years 80-90. While you might encounter high expenses in 90+ with assisted living, there's a good chance your current projected ER budget at age 50 will be considerably higher than when you're 80-90 (minus healthcare issues), so perhaps a 3.5% WR for the first few years could work out. Hopefully you'll have more free time to be able to time your purchases better and you'll enjoy an upgraded lifestyle for the same 3% WR cost (think: specials on airfare/trip costs, last-minute cruises, early bird dinners, etc.)
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Old 02-01-2014, 08:29 AM   #23
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We have spent 12 years doing whatever we want. Trips, snowbirding, restaurant meals. The first 5 years were a little high based on our long range plan (running out of money before 90) but they have come into line since we bought our southern home. Now we can live forever!
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Old 02-01-2014, 09:37 AM   #24
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At first, I was going to join the 3% crowd, but then I saw your second post:



So what exactly does your portfolio look like currently? Almost entirely of private company start-ups? While owning partial stakes in private businesses can be lucrative, I would have a hard time knowing how to value your different positions in terms of a SWR.

Are your taxes on distributions considered part of profits, or are they qualified dividends? If the former, your taxes will likely be considerably higher in retirement, rather than having a good chunk be qualified dividends and long-term capital gains at lower tax rates.

The issue of 3% also depends on your final portfolio, in terms of what % to bonds, what kind of bond holdings, what kind of stock holdings, etc. Perhaps you could try figuring out a target AA, and seeing what that would spin off in estimated income each year.

...

Then there's the age-old question of how much you'll spend from years 80-90. While you might encounter high expenses in 90+ with assisted living, there's a good chance your current projected ER budget at age 50 will be considerably higher than when you're 80-90 (minus healthcare issues), so perhaps a 3.5% WR for the first few years could work out. Hopefully you'll have more free time to be able to time your purchases better and you'll enjoy an upgraded lifestyle for the same 3% WR cost (think: specials on airfare/trip costs, last-minute cruises, early bird dinners, etc.)
We are still in our concentrated positions awaiting an exiting event and expiration of lockup period. The percentages I'm estimating are net of taxes. Tax planning going forward should be easy. Two-thirds of the nest egg is in Roth accounts. We moved most of our under appreciated assets to a Roth in 2010 and took the tax hit over two years with a fair, but low valuation.

I never thought about being able to better manage the lifestyle costs by being able to have flexibility, so maybe I can save a good bit there.

I think I will consult for a couple of years to offset the increased travel and philanthropic activities, but I'll be extremely picky about the projects I work on. I can easily imagine the expenses increasing once we are fully retired depending on how our kids land.
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Old 02-01-2014, 12:10 PM   #25
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......
I never thought about being able to better manage the lifestyle costs by being able to have flexibility, so maybe I can save a good bit there.

I think I will consult for a couple of years to offset the increased travel and philanthropic activities, but I'll be extremely picky about the projects I work on. I can easily imagine the expenses increasing once we are fully retired depending on how our kids land.
Very wise plan to keep up a flexible income stream. At just 50 yrs old & with 2 kids your financial cone-of-uncertainty remains rather wide.
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Old 02-01-2014, 12:30 PM   #26
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To the OP : I am turning 49 this year, planning to FIRE hopefully this year with 50-year horizon.

Using a planned SWR around 3-3.5% in my calculations.
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Old 02-01-2014, 12:39 PM   #27
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To the OP : I am turning 49 this year, planning to FIRE hopefully this year with 50-year horizon.

Using a planned SWR around 3-3.5% in my calculations.
We'll be in the same class. What's your AA?
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Old 02-01-2014, 01:30 PM   #28
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Have you considered living some place low cost in Europe and covering your expenses with part time lap top work? If you live in Europe you can drive to different countries. Hiking is usually free and so is kayaking if you have your own gear, which you can buy used.
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Old 02-01-2014, 02:12 PM   #29
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Have you considered living some place low cost in Europe and covering your expenses with part time lap top work? If you live in Europe you can drive to different countries. Hiking is usually free and so is kayaking if you have your own gear, which you can buy used.
Not if I want to stay married.
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Old 02-01-2014, 02:25 PM   #30
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Not if I want to stay married.
Okay, second option - slow travel. Rent a flat or apartment in some central location like the south of France for extended periods. Rent is cheaper than hotels and you can cook most of your meals at home. Have a lock and leave, home base condo in a low cost of living area in the U.S.
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Old 02-01-2014, 02:37 PM   #31
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Okay, second option - slow travel. Rent a flat or apartment in some central location like the south of France for extended periods. Rent is cheaper than hotels and you can cook most of your meals at home. Have a lock and leave, home base condo in a low cost of living area in the U.S.
Mentioned the first half to DW and she thought that is a great idea! That way we could stay in Europe for a few months.

Where we settle in the US is going to be determined on where the kids land, as long as we're able to afford it. If not, your suggestion is a good one.
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Old 02-01-2014, 02:40 PM   #32
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My goal is not to worry about running out of money........and, have enough for emergencies as I get older. So, I don't even think about what % I'll take out......I look at how much I've got, will I still have enough if the stock market gives us a number of lean years, will I have enough if they raise taxes.......and after thinking about everything, the most important question is, "do I have to worry?". Since I have kids and grandkids, since a stroke could send me into a long term nursing home, I think about the unexpected. The good news is I've been lucky, always LBYM and saved, saved, saved. But I THINK I'll need less than 2% so I'll probably have a bit left even if I live a long time. My mother was a worrier and so am I.......I just don't want to run out of money and worry that I'm a burden on anyone when I'm in my 80's or 90's.
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Old 02-01-2014, 03:02 PM   #33
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90%+ in CDs, munis, deferred annuities and similar conservative products in Europe.
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We'll be in the same class. What's your AA?
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Old 02-01-2014, 03:24 PM   #34
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We don't have any pensions, and like you, I expect SS will cover 20% of my expenses at age 70. I will be starting with a WR of 3.25%, but I could potentially run out of money between age 90 and 95. I have a bit of fluff in my budget for healthcare for the two of us (30k/year to age 70 and 15k/year thereafter) so I'm hoping that will help extend the longevity of the portfolio.

FIRECalc gives me 100% to age 85 when I input only 80% of my portfolio value. There is a decent "smallest residual portfolio" that would probably last another 5 years. Fidelity RIP gives me a 10% risk of shortfall at age 85 using 80% of my portfolio, and 95 using my current portfolio.

Because of your projected longevity I voted start with 3%. I think you'll be just fine.
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Old 02-01-2014, 03:30 PM   #35
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Mentioned the first half to DW and she thought that is a great idea! That way we could stay in Europe for a few months.

Where we settle in the US is going to be determined on where the kids land, as long as we're able to afford it. If not, your suggestion is a good one.
If you Google the term digital nomad, you might get some additional ideas. Also, we watch House Hunters International for inspiration. There is a cool one on a couple with lap top jobs who rent an apartment in Cannes.

For years on the work forums I have hung out on there were younger guys doing lap top work and living on tropical islands or moving around the EU, saving lots of money by living in really inexpensive places like Croatia.

We aren't there yet, but once the kids are launched, we've gotten rid of decades of clutter and the house is sold, that could be us! It has been a blast just realizing we might be able to actually pull this off.
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Old 02-02-2014, 10:59 AM   #36
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saving lots of money by living in really inexpensive places like Croatia...
We spent three weeks in Croatia in 2012, and for sure, it is cheap for Europe. Almost like being at home. Lots of natural and historical things to see. The beaches are not great sand, but the Adriatic is just fine for swimming and kayaking. Some neat national parks. And island cities that are over 1000 years old. There is even a coliseum that is in better shape than the one in Rome.
Adriatic cruise - a set on Flickr

And of course great site-seeing and eating in Zagreb.
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Old 02-02-2014, 01:17 PM   #37
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3% is still rather conservative withdrawl, even for a 40+ year retirement. So I voted that as the option to allow you to do some fun activities and travel now while you have good health and desire to do them. As you said, if needed it can be cut back without a big sacrifice. You can also do some part-time work to supplement for those extra expenses for big trips.

It also comes down to your risk tolerance, if you can handle the bigger swings, then with more equities in your portfolio you can allow more flexibility in your plans. As you are aware, the biggest issue is your SS will be a small amount, and no pension or other defined benefit, so you are quite dependent on your savings being able to provide the bulk of your retirement income.
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Old 02-02-2014, 01:33 PM   #38
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3% is still rather conservative withdrawl, even for a 40+ year retirement.
I wish I could convince myself of that. I could give myself a nice raise and some extra luxuries if I could increase my WR to 3%.

So if 3% is conservative, what do you call the folk on 2 and 2.5% WR's? Anally retentive?
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Old 02-02-2014, 01:51 PM   #39
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So if 3% is conservative, what do you call the folk on 2 and 2.5% WR's? Portfolio retentive?
Portfolio retentive...
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Old 02-02-2014, 01:52 PM   #40
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I wish I could convince myself of that. I could give myself a nice raise and some extra luxuries if I could increase my WR to 3%.

So if 3% is conservative, what do you call the folk on 2 and 2.5% WR's? Anally retentive?
Probably richer then me.

I remember Joe Montana (49ers QB) was interviewed during the bull market in 2000. He said he "didn't do stocks". Well, if I had that kind of money I might not either.

Buffet probably could do handsomely on 0.1% SWR.
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