Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Pulling from investments 4% rule
Old 04-05-2015, 09:32 PM   #1
Recycles dryer sheets
 
Join Date: Nov 2014
Location: Texas
Posts: 164
Pulling from investments 4% rule

Hi there
My question is 4% to much for 30 years.
In this forum what percentage are most people trying to hold to.
To figure my bottom line I am trying to calculate my number.
I am trying to hold it to no more than 3% for a few years.

I have a budget I have monitored for 4 years in detail.

I am so nerdy I will have a account I am putting together to supplement travel so we don't have to pull more than 3%
All this will most likely put me in omy
of work. I am 53 and plan 56 to 57

Thanks o by the way thank you all for your financial wisdom.


Sent from my iPhone using Early Retirement Forum
__________________

__________________
Terryjm51 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-05-2015, 10:52 PM   #2
Recycles dryer sheets
cooch96's Avatar
 
Join Date: May 2014
Location: Lakewood
Posts: 442
My plan is to retire when I get at least 80% success rate on firecalc using an 80/20 (equities/other) asset allocation. I expect that will put my SWR at around 4.5%, maybe higher. I fully intend to retire young and with enough health to really live.

Saving and toiling away until I have a 100%+ success rate will do me little good if real calamity strikes (world war, mega-tsunami, avian flu, car accident, falling off a ladder, cancer, EMP, complete hacking data reboot, etc.). There's likely a 1:5 chance of something like that happening in my productive lifespan, so I'll just plan for the 80%.

This is more aggressive than perhaps most members here would be willing to tolerate. But I pride myself on being flexible. I figure I can always cut back on spending and get a part time gig toiling for the man if I must.

In short, I think you're 3% SWR sounds great and your assets are likely to grow as long as you keep a well balanced AA. Sleep easy and go forth and enjoy life!
__________________

__________________
Why be normal when you can be yourself?
cooch96 is offline   Reply With Quote
Old 04-06-2015, 07:44 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,645
4% WR is the rule of thumb for a 30 year retirement with I think about a 50/50 or so AA. But if you have a 80% chance of "success"... you still have a pretty good chance of having quite a bit left over.
Look at it another way... what do you need to live... both bare minimum and where you'd like to be. I took one of my recent year's spending with a 2.5 week Europe vacation, 7 day cruise, bunch of furniture purchased and added $20k for health insurance + max out of pocket... and that was my "desired" spending. For me that is 1.5% WR... but I hope for more than 30 years.

So figure out what you need or want to spend... then see if that works. Remember FIREcalc is not predictions of the future, but back testing. It gives what is likely a good indication. Flexibility in spending is beneficial in RE as you can cut back during down years that keeps you from drawing down too much during the down years. The counter... you can increase somewhat during up years.

good luck.... remember you could live more than 30 years
__________________
bingybear is offline   Reply With Quote
Old 04-06-2015, 08:38 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 2,056
Quote:
Originally Posted by cooch96 View Post
My plan is to retire when I get at least 80% success rate on firecalc using an 80/20 (equities/other) asset allocation. I expect that will put my SWR at around 4.5%, maybe higher. I fully intend to retire young and with enough health to really live.
In most of the FireCalc scenarios I've run, there's usually only a 3-4 year difference between 80% and 100%. If I retired right now, and wanted to live off of $50K per year, for example, I'd have a 78.7% chance of success. Waiting one year bumps it to 85.4%. Two years is 92.1%, 3 years, is 98.9%, and 4 years is 100%.

Of course, your age makes a big difference. I'm 45 now, so waiting for that 100% success puts me at 49...still pretty young. But if I was, say, 65, I'd probably have a different perspective, since each year becomes more valuable, the older you get.

I don't shoot for 100%, but rather, 95%, so the above scenario would have me leaving at age 48. And, depending on my mood at the time, I might be willing to go at 47, which is still a >90% chance of success.
__________________
Andre1969 is offline   Reply With Quote
Old 04-06-2015, 09:19 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Sep 2012
Location: Seattle
Posts: 2,904
Also you might be forgetting about SS. It is important for those of us who are not at a 1.5% SWR.

If you retire at 45 with a 4% SWR, it might drop to 3.5% or lower depending on your spending and tax bracket when SS kicks in.

Imagine someone spending 40k a year on a million dollar portfolio, with some of that in Roths. SS is going to significantly lower their SWR well before they hit age 75 (30 years from 45).
__________________
Fermion is offline   Reply With Quote
Old 04-06-2015, 10:04 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,811
Quote:
Originally Posted by Terryjm51 View Post
Hi there
My question is 4% to much for 30 years.
In this forum what percentage are most people trying to hold to.
To figure my bottom line I am trying to calculate my number.
I am trying to hold it to no more than 3% for a few years.

I have a budget I have monitored for 4 years in detail.

I am so nerdy I will have a account I am putting together to supplement travel so we don't have to pull more than 3%
All this will most likely put me in omy
of work. I am 53 and plan 56 to 57

Thanks o by the way thank you all for your financial wisdom.


Sent from my iPhone using Early Retirement Forum
I think you are saying that if you want to spend $36k in retirement, you'd feel more comfortable with $1.2 million in assets (with a 3% initial withdrawal) than with "only" $900k (with a 4% initial withdrawal).

Furthermore, you don't have any pension and you want to ignore Social Security. This is a "living off my savings alone" plan.

Back testing says that 4% worked 95% of the time over 30 year horizons. But, it's hard to find past scenarios that started with 0% real returns on bonds and P/E10 ratios of 25. We seem to be in an unusually difficult starting position today.

I'd guess that "most people" here are not comfortable with 4%.

Before I retired, I mentally carved out $X for large, one-time expenses. The remaining money was my base for "sustainable" spending. I think that's a common approach. Unusual travel would be in the "large, one-time" category.
__________________
Independent is offline   Reply With Quote
Old 04-06-2015, 10:53 AM   #7
Recycles dryer sheets
 
Join Date: Apr 2011
Location: Castro Valley
Posts: 400
I look at SWR after SS and any pensions or rental income. Your retirement budget should have some flexibility so the can reduce spending if needed. After all of that my comfort levels are:


3.5% maximum, not overly confident
3.0% feeling confident, still a little concerned
2.5% very confident, not worried at all
2.0% golden
__________________
jkern is offline   Reply With Quote
Old 04-06-2015, 11:22 AM   #8
Recycles dryer sheets
 
Join Date: Nov 2014
Location: Texas
Posts: 164
Quote:
Originally Posted by jkern View Post
I look at SWR after SS and any pensions or rental income. Your retirement budget should have some flexibility so the can reduce spending if needed. After all of that my comfort levels are:


3.5% maximum, not overly confident
3.0% feeling confident, still a little concerned
2.5% very confident, not worried at all
2.0% golden

I am with you!!!! That's why I was asking the question to get a feel if I was being to nerdy or over cautious.
2.5 % should get me to my goal so omy is my thought.
Thanks !!!!


Sent from my iPhone using Early Retirement Forum
__________________
Terryjm51 is offline   Reply With Quote
Old 04-06-2015, 11:33 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 5,672
Quote:
Originally Posted by Terryjm51 View Post
I am with you!!!! That's why I was asking the question to get a feel if I was being to nerdy or over cautious.
2.5 % should get me to my goal so omy is my thought.
Thanks !!!!

...
The nerdy way to do this should include VPW. See the thread on this and over at Bogleheads. You may find you are being too conservative. It changed my approach.
__________________
Lsbcal is offline   Reply With Quote
Old 04-06-2015, 11:37 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,446
4% seems fine for someone who retires at 65, but most folks here retire earlier than that. If you are hoping for 40+ years of retirement rather than 30, you might want to be more conservative.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 04-06-2015, 11:39 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Don't be satisfied until your WR is 0%... Your spawn will thank you!
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 04-06-2015, 11:48 AM   #12
Recycles dryer sheets
 
Join Date: Apr 2010
Posts: 412
Quote:
Originally Posted by cooch96 View Post
when I get at least 80% success rate on firecalc using an 80/20 (equities/other) asset allocation
That's interesting, I was trying to get 100% success rate, but you brought up an interesting prospective, could you elaborate on your thinking behind 80% idea?
__________________
“The problem with the world is that the intelligent people are full of doubt, while the stupid people are full of confidence.”

(—Charles Bukowski)
wanaberetiree is offline   Reply With Quote
Old 04-06-2015, 11:50 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,495
Quote:
Originally Posted by jkern View Post
I look at SWR after SS and any pensions or rental income. Your retirement budget should have some flexibility so the can reduce spending if needed. After all of that my comfort levels are:


3.5% maximum, not overly confident
3.0% feeling confident, still a little concerned
2.5% very confident, not worried at all
2.0% golden
This is in line with much of the latest thinking. See this for a good overview of the latest predicted SWR's:

The Retirement Café: The Sustainable Withdrawal Range
__________________
Options is offline   Reply With Quote
Old 04-06-2015, 11:54 AM   #14
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Posts: 1,842
Quote:
Originally Posted by wanaberetiree View Post
Quote:
Originally Posted by cooch96 View Post
when I get at least 80% success rate on firecalc using an 80/20 (equities/other) asset allocation


That's interesting, I was trying to get 100% success rate, but you brought up an interesting prospective, could you elaborate on your thinking behind 80% idea?
Here is one reason to not fixate on attaining rates vastly higher than 80%, from Bill Bernstein:
Quote:
Now, let’s return to the above table. The historically naïve 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 (FWIW, I'm shooting for greater than 80 myself, but ....)
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Old 04-06-2015, 12:28 PM   #15
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 387
Quote:
Originally Posted by Terryjm51 View Post
I am with you!!!! That's why I was asking the question to get a feel if I was being to nerdy or over cautious.
2.5 % should get me to my goal so omy is my thought.
Thanks !!!!
Just be careful of the OMY affliction. Are you the kind of person that when you get your WR to 2.5% you'll say "to be really sure, I should get that down to 2.2 or 2.3...".
__________________
mrfeh is offline   Reply With Quote
Old 04-06-2015, 12:53 PM   #16
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,822
Quote:
Originally Posted by jkern View Post
I look at SWR after SS and any pensions or rental income. Your retirement budget should have some flexibility so the can reduce spending if needed. After all of that my comfort levels are:


3.5% maximum, not overly confident
3.0% feeling confident, still a little concerned
2.5% very confident, not worried at all
2.0% golden
I love this and these are my personal feelings about my own withdrawal rates.

I think that 4.0% is acceptable for those who are less risk averse than I am, especially when bridging the gap before Social Security kicks in. I would not recommend 5.0%, though.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 04-06-2015, 02:28 PM   #17
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,118
My plan is to use no "rules of thumb". Whatever the market returns is what I get. I'll continually adjust my income with the goal of spending all my money by about age 95.

We have pensions and social security in the lifetime plan so portfolio withdrawals will probably be higher (more than 4%) during the first 12-15 years. But nothing is set--our spending will be very customized and flexible both up and down.
__________________
RetireAge50 is online now   Reply With Quote
Old 04-06-2015, 02:33 PM   #18
Recycles dryer sheets
 
Join Date: Nov 2014
Location: Texas
Posts: 164
I am looking at 5 to 6 years to bridge the gap for ss. So if I can hang at 2.5 that would be great the problem I am seeing is the further away the higher the withdraw rate..... If I could get Dw to work 2 more years would be helpful. I will be lucky if she can make that. Lol she is pretty burned out .


Sent from my iPhone using Early Retirement Forum
__________________
Terryjm51 is offline   Reply With Quote
Old 04-06-2015, 02:57 PM   #19
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
It certainly seems possible that we will be skirting the danger zone for 4% withdrawals over 30 years. Other countries have had even worse results than the U.S.. I like 3%, or 4% with SS/pension/deferred annuity helping out later.
You could also go with a 4% of portfolio each year approach, which might allow for higher spending now but result in less income if your portfolio decreases.
__________________
Animorph is offline   Reply With Quote
Old 04-06-2015, 03:37 PM   #20
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by W2R View Post
I think that 4.0% is acceptable for those who are less risk averse than I am, especially when bridging the gap before Social Security kicks in. I would not recommend 5.0%, though.
I have a few small pensions and SS for myself and DW. These are enough to live what I consider a basic lifestyle. I have allocated a sinking fund to bridge us until I am 70 (DW's SS kicks in when I'm 66). For the remaining portfolio, I have initially started with a 5% WR. A sudden drop in the market would reduce our spending on traveling and what I would call luxuries. It would have to be a horrific market drop for many years to wipe out most of the portfolio.

I look at retirement spending as peeling an onion. I can live with more or with less. I'm pretty sure it won't go to below a reasonable standard of living.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Pulling the trigger - This should be easy Lagniappe FIRE and Money 13 10-20-2006 10:24 AM
Pulling the trigger MRGALT2U FIRE and Money 9 12-18-2005 08:08 AM
Regrets on Pulling the Plug? Mountain_Mike Other topics 14 06-11-2005 01:47 PM
Pulling the trigger on Monday nearly50 Young Dreamers 20 12-21-2004 08:35 AM
Thinking of of Pulling the ER Trigger...... Bill Gates FIRE and Money 10 09-02-2004 09:00 AM

 

 
All times are GMT -6. The time now is 12:00 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.