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View Poll Results: Which fits you best? See first post for explanations.
I am a retiree whose WR (% withdrawn) is more or less constant each year, and I spend all of it. 11 7.05%
I am a retiree whose WR (% withdrawn) is more or less constant each year, and I tuck some away outside my portfolio, for future use. 21 13.46%
I am a retiree whose spending is more or less constant each year,and I let my WR vary accordingly. 27 17.31%
I am a retiree who doesn't withdraw about the same amount, or about the same percentage each year. 47 30.13%
I am not a retiree. 20 12.82%
I don't fit into any of these categories. 30 19.23%
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Poll: Retirees, do you keep your Excess Withdrawal? Or Spend it?
Old 01-10-2017, 02:19 PM   #61
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Poll: Retirees, do you keep your Excess Withdrawal? Or Spend it?

I keep the excess withdrawal stashed away since I figure at some point the Bear will come out of its cave and take a big swipe out of my assets. That's when I'll spend the excess.

If you've ever experienced a relentless nasty bear market as an investor you know what I mean.
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Old 01-10-2017, 02:19 PM   #62
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Quote:
Originally Posted by ERD50 View Post
I don't understand the question in the OP.

What does it mean to "withdraw it", but not "spend it" ("keep it"?)? If you don't spend it, it is still in your portfolio, you didn't withdraw it.
I agree. But I think W2R is doing some mental accounting. She is thinking of the money she withdrew from her "investment portfolio" to cash as being in a different compartment. In reality, since money is fungible, and cash is a legitimate component of an investment portfolio, she has just reallocated it to cash.
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Old 01-10-2017, 02:24 PM   #63
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Originally Posted by ERD50 View Post
I think you are confusing the terms here.

I wouldn't reduce my spending by SS/pension - that makes no sense at all. I think that what you mean is, to the extent that SS/Pension covers a portion (or all) of your spending, that is money you don't need to withdraw from your portfolio.

Income is not 'added to the portfolio value', it offsets your spending. Alternately, you could calculate the value of that income stream, add it to the portfolio, then ignore it as income, but that seems like the long way around, and I probably just confused myself .

FIRECalc handles this. Entries for SS/Pension offsets your spending, so less is required for withdrawals.

-ERD50
Correct if my WR of 4% on a million allows me 40K and I have SS for 20K I can spend 60K and be in compliance. Or if I spend 40K and have 20K SS the dent in my portfolio is only 2%.

I did not understand why OPs spending would not be reduced in the last year from the first year assuming SS was available in year 7 and not in year 1. As stated income is not added to portfolio value it is subtracted from spending with the goal of not exceeding allowed WR.
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Old 01-10-2017, 03:05 PM   #64
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I don't know, W2R, at that 2% WD rate, you might run out of money when you are 120 or so. Better get plan B ready.

You probably won't be buying another dream home that requires landscaping etc., so I think you can sleep at night.
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Old 01-10-2017, 03:20 PM   #65
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One's spending money should go up a bit with time to compensate for inflation. The inflation has been below the historical average. Still, from 2010 till now, the cumulative inflation is about 10%, so one should allow for at least that much (and to temper his giddiness by discounting his portfolio growth too).

Even after taking into consideration the inflation, if one still finds his WR fluctuating wildly from 2 to 3%, a 50% increase OMG, relax. A 4% overshooting to 6% is cause for alarm, but 2% increasing to 3% is still very golden.

Anything below 3.5% is quite OK, and one will run out of life before he runs out of money (unless Attita the Hun or Hiltler is reincarnated, to borrow from Bernstein, then both life and money will be at risk). I would spend more time worrying about my health than about my money.
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Old 01-10-2017, 03:46 PM   #66
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... I would spend more time worrying about my health than about my money.
Right, and let's not forget ... having fun.
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Old 01-10-2017, 04:08 PM   #67
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Right, and let's not forget ... having fun.
I am still working on that.

It's a good thing I do not crave expensive stuff and still have enough so that I do not need to spend 6% WR to get the "fun".

Else, even 6% is OK and not the end of the world, because only running out of life is really the end of, er, life.

I leave the worrying about money to youngsters who have 60 years left to live. Me, nah!
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Old 01-10-2017, 04:20 PM   #68
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My definition of withdrawal is what I spend, period. Once it is out of my control it is gone. So, I don't consider donations to my DAF as withdrawal but I do consider tax payments as withdrawal.
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Old 01-10-2017, 04:55 PM   #69
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I had to go with the last option. I don't fit in anywhere.

I'm getting VA disability, and what I don't spend each month goes into investments to someday get something more than a small fixed income for the next 40+ years.
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Old 01-10-2017, 06:59 PM   #70
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RMD here, and it goes straight to taxable account.
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Old 01-10-2017, 08:29 PM   #71
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I guess we have just dodged a bullet; from here on out I say spend.



https://www.cnet.com/news/asteroid-2...th-moon-slooh/
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Old 01-11-2017, 07:07 AM   #72
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I guess we have just dodged a bullet; from here on out I say spend.



https://www.cnet.com/news/asteroid-2...th-moon-slooh/
Bernstein forgot to include cataclysmic meteor/comet impact in his list of why not to go nuts in seeking 100% chance of success.

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A wildly optimistic historian might give us another few centuries of economic, political, and military continuity. Back-of-the-envelope, that’s about an 80% survival rate over the next 40 years. Thus, any estimate of long-term financial success greater than about 80% is meaningless.

Now, let’s return to the above table. The historically naďve investor (or academic) might consider reducing his monthly withdrawals to a very low level to maximize his chances of success. But history teaches us that depriving ourselves to boost our 40-year success probability much beyond 80% is a fool’s errand, since all you are doing is increasing the probability of failure for political, economic, and military reasons relative to the failure of banal financial planning.
The Retirement Calculator from Hell, Part III
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Old 01-11-2017, 10:43 AM   #73
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Originally Posted by exnavynuke View Post
In order to keep up with inflation I'd generally assume that a "constant spending" budget would increase over time. Have you accounted for inflation in your budget/spending changes?
Yes I have an assumed inflation of 2% per year. I also assume portfolio returns of 7%. Reset the plan to actual each year.
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Old 01-11-2017, 10:58 AM   #74
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The only withdrawals from the paper portfolio are the RMD's from the inherited IRA's. I pay off more than that on the rental mortgages every year, so it's really a transfer from paper to real estate assets. Not looking forward to age 70.5 for a number of reasons, including much higher RMD's.
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Old 01-11-2017, 11:34 AM   #75
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Quote:
Originally Posted by 2017ish View Post
Thanks for that info! (DS1 and his Canadian bride are considering migration from SanFran to Toronto ....)
They should probably find living expenses comparable once they get over the higher taxes on everything.
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Originally Posted by Meadbh View Post
They should check out the Canadian Money Forum.Canadian Money Forum
Also the Canadian Financial Wisdom Forum:
Financial Wisdom Forum - Index page
it is a more mature forum and has a financial wiki:
finiki, the Canadian financial wiki
Quote:
Originally Posted by ERD50 View Post
I don't understand the question in the OP. What does it mean to "withdraw it", but not "spend it" ("keep it"?)? If you don't spend it, it is still in your portfolio, you didn't withdraw it.
Yes it is compartimental thinking. We only withdraw what we need and it is usually from the cash that the dividend stream has generated. If our draw is below the dividend stream, we reinvest it in the portfolio.
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Originally Posted by ERD50 View Post
Why not re-run FIRECalc with your current situation? If you were confident enough with the FIRECalc output to retire originally , then you should be confident now with more experience, and a shorter time to cover, and a better handle on expenses (not to be morbid, that is just the way it goes for all of us!).
I think Firecalc is useful for deciding whether to retire. Remember it assumes that you will spend your principal. No one here is actively planning to do that. You need a spreadsheet that has 4 lines:
1. Portfolio value, including capital gains, dividends, ROE
2. Income: Pensions, SS, net rental, annuities
3. Expenses
4. Extra-ordinary costs: New cars, new roof...
Grow line 1 by your average return assumption. Line 2 may grow through COLA or not. Line 3 should have an inflater. Line 4 are specific estimates of non-recurring costs.

The key assumption is life expectancy. Each year you live your expectancy increases by more than one year. My 90 yo Dad had an expectancy of 3.5 years and he died 5 years later so he was above the 50% median.
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Originally Posted by Lsbcal View Post
Some of us are never quite comfortable with spending down the nest egg. Those lines that go down and to the right in FireCalc are one thing to take note of but quite another to live through.
And that is why Firecalc loses its value.
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Old 01-11-2017, 12:08 PM   #76
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Originally Posted by kcowan View Post

Quote:
Quote:
Originally Posted by 2017ish View Post
Thanks for that info! (DS1 and his Canadian bride are considering migration from SanFran to Toronto ....)
They should probably find living expenses comparable once they get over the higher taxes on everything.
Quote:
Quote:
Quote:
Originally Posted by Meadbh View Post
They should check out the Canadian Money Forum.Canadian Money Forum
Also the Canadian Financial Wisdom Forum:
Financial Wisdom Forum - Index page
it is a more mature forum and has a financial wiki:
finiki, the Canadian financial wiki
...

Thanks! She is from Courtice and her folks are still there (and sister is in Toronto proper), so they've had good numbers to insert into their spreadsheets. The higher taxes are present, but impact decreased because of the California income taxes they presently pay.

I had already found, and passed along the Financial Wisdom links--saw both you and Danmar posting there, which gave it quick credence.
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Old 01-11-2017, 12:23 PM   #77
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Originally Posted by kcowan View Post
...
I think Firecalc is useful for deciding whether to retire. Remember it assumes that you will spend your principal. No one here is actively planning to do that. ...
Not really accurate. FIRECalc assumes you will spend your principal only in some cases. Roughly half the historical cases end up with a higher portfolio value than they started with (even after adjusting for inflation).


Quote:
You need a spreadsheet that has 4 lines:
1. Portfolio value, including capital gains, dividends, ROE
2. Income: Pensions, SS, net rental, annuities
3. Expenses
4. Extra-ordinary costs: New cars, new roof...
Grow line 1 by your average return assumption. Line 2 may grow through COLA or not. Line 3 should have an inflater. Line 4 are specific estimates of non-recurring costs.
That's good, but it doesn't take into account "sequence of returns", which can be hard on portfolio survival.

Quote:
The key assumption is life expectancy. Each year you live your expectancy increases by more than one year. My 90 yo Dad had an expectancy of 3.5 years and he died 5 years later so he was above the 50% median.
And that is why Firecalc loses its value.
I don't agree. If you are to rerun FIRECalc into retirement, you adjust for your current life expectancy. Since I'm conservative with this, I plan for (not the same as expecting) a very long joint LE (likely DW outliving me), like living to 100. Again, not they expect this, but on the outside chance it happens, I'd like to be prepared (same reason I wear a seat belt - to be prepared in case a crash happens, not that I expect a crash each time I drive). Unless medicine really advances, I doubt I'll be extending that age 100 planning, so my number of years entry in FIRECalc will only go down. And conservative planning for 100 pretty much gets you to a 'forever' portfolio anyhow, so it probably works for 105 or 110 as well.

If you only plan for your median LE, you can expect to be wrong ~ 50% of the time (personal results won't be the same as a group - otherwise it would be exactly 50%). That's not very good planning in my book.


-ERD50
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