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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 08:22 AM   #41
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Re: Safe Withdrawl Rate -- 6%

True

My spending 1993-2005, has been all over the map when viewed SWR wise.

I view things like FireCalc as very useful guides and a valuable informational tool.

My bias - current yield - and change spending/and or what's in my portfolio as reguired.

heh heh heh heh
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 12:05 PM   #42
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Re: Safe Withdrawl Rate -- 6%

Yep, as mentioned over the years, I put together an annual expense budget, then put together all the stuff I'll need to buy in 10 and 20 year periods. New cars, tires, furnace and air conditioners, kitchen appliances, furniture, etc.

Composite the annual "costs" by using the real expenses in conjunction with the amount I need to virtually "put aside" for the capital expenses.

If that is under 4% of my stash or my stash is 25x the annual composite cost, i'm good to go. Every once in a while when i'm bored I revise the budget spreadsheet and look at the net worth and see if i'm still better than 4%. So far after 5 years the number keeps improving.

So when the number is really a lot better and your investments have thrown off so much cash, you buy your wife some diamond earrings and a lexus and really put the pressure on the co-workers and neighbors husbands...
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 12:41 PM   #43
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Re: Safe Withdrawl Rate -- 6%

Quote:
Originally Posted by Cute 'n' Fuzzy Bunny

If that is under 4% of my stash or my stash is 25x the annual composite cost, i'm good to go.* Every once in a while when i'm bored I revise the budget spreadsheet and look at the net worth and see if i'm still better than 4%.* So far after 5 years the number keeps improving.

So when the number is really a lot better and your investments have thrown off so much cash, you buy your wife some diamond earrings and a lexus and really put the pressure on the co-workers and neighbors husbands...
CFB,

Does your "better than 4%" include your DW's salary? If so, what would you say you were taking out of a real basis from your accounts? Just curious.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 01:44 PM   #44
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Re: Safe Withdrawl Rate -- 6%

Nope, I dont figure her salary in. Half of that goes to her 403b, about a third of the remainder funds our Roths, and the rest pretty much pays the monthly utility bills, gas and so forth. Remember she's only working a few days a week.

Now, should the **** hit the fan, we stop the 403b contributions, think about those roth contributions, and start pulling in the belt a little.

Real basis from our accounts? Wow...thats a hard one. I'm not really one of those quicken/adding up my receipts type. Let me do a little back of the envelope figuring in real time here...note that my financial situation has swung a little bit between being a single ER two years ago, married and having my wife on maternity leave for six months last year, to married to a part time working spouse and having a baby in the house this year.

Our funds pay out a weighted average of about 2, maybe 2.25-2.3% in dividends. What my wife brings in after taxes and other above mentioned deductions runs to about 1% of our total portfolio. At the end of the year I always have extra money laying around that I have to reinvest (or buy a car with). About 20-30% of the dividends paid out were left over last year.

So real consumption of the portfolio is dividend only, minus the bit I reinvest. We dont plan to sell any shares ever to fund our living expenses. I'll tweak the wifes deductions to fill any shortfalls or overages until the 'system' runs efficiently.

As my wife reduces her hours and eventually quits, our target retirement funds will have slowly increased their bond holdings, and therefore dividend payouts. Presumably I can tweak the output and she can tweak the hours to keep our funding flows 'efficient'.

Were she to quit tomorrow (I wish she would! HI HONEY! ) I'd put us right back to 50/50 wellington/wellesley and keep living off of the approximately 3.5% dividends thrown off, that'd keep us at about the same lifestyle indefinitely, with inflation protection.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 01:48 PM   #45
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Re: Safe Withdrawl Rate -- 6%

CFB...thanks for the response. It is helpful to see how you guys are doing it compared with all the "noise" here sometimes.

Thanks
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 01:50 PM   #46
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Re: Safe Withdrawl Rate -- 6%

Shoot and I thought I was the big noise maker.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 02:00 PM   #47
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Re: Safe Withdrawl Rate -- 6%

Quote:
Originally Posted by Cute 'n' Fuzzy Bunny


Composite the annual "costs" by using the real expenses in conjunction with the amount I need to virtually "put aside" for the capital expenses.
Would you "dumb this down" a bit? Not sure what this means Example? Thx.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 02:09 PM   #48
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Re: Safe Withdrawl Rate -- 6%

Quote:
Originally Posted by Soon2B
Hey ronin,

What's the verdict?* What would you specifically recommend?
I'm still playing with the spreadsheets and data. *So far I've plugged in the CPI from '70-'05, and the returns of various AA using data from Fundadvice.com for the same period. *Depending on what you want to have happen (I used a 4% initial WD% for both, with a 25% bonus on the "gummy" excess profits), and what you'd be willing to put up with, the Guyton rules strategy is the clear winner. *The ups and downs are, comparatively, eliminated. *The 35 yr avg is larger, SD way smaller, cumulative amt greater and terminal value larger as well. *Of course, who knows what returns will look like for the next 35 yrs. but I think the general principles would still apply and results would likely by analogous.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 02:17 PM   #49
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Re: Safe Withdrawl Rate -- 6%

Quote:
Originally Posted by LL
Would you "dumb this down" a bit? Not sure what this means Example? Thx.
I'm sorry LL...I made that a lot more complicated than it needed to be.

You can do it one of two ways.

Lets say you're going to need a car in 10 years. Looking at the price of cars and how much the price has changed in the last ten years, figure out roughly what you think the car you'll buy will cost in ten years.

Then take 1/10th of that and add it to your annual budget. But dont take it out of your portfolio.

If you're a real neatnik, figure out the amount you'd need to put aside that, with investment growth, net present value, tiered and indexing from year to year to accommodate the differences...whoops...theres that complication crap again and you really dont need it.

By factoring in a fat inflation factor and not figuring in the investment returns and all that other funny business, the results (I think) are pretty conservative).

Or I can save you a whole lotta work and effort. I listed these items for "decade spends", IE, what I'll need to buy in ten years:

2 Cars
Half a water heater
Half a furnace
Half an AC compressor
Housepaint
Half refrigerator
Half Dishwasher
Half range
Half Microwave
Half washer and dryer
Four sets of car tires
Two computers
Printer
Two tivos
Three televisions
Living room set
Bedroom set
Two gas grills
Replacement clothes
Replacement exercise equipment
Personal care appliances
Two Vacuum Cleaners
Two Steam Cleaners
Tools

and came up with ~ $50,000 worth of maintenance and replacement for long term stuff, or about $5000 a year in set-asides.

If you're a homeowner with a couple of cars and about the same needs, add $5000 to your annual expenses, and if thats more than 4% of your investment stash...uh oh...

This may be an eye opener for people thinking about doing $25k-30k bare bones possum living that arent figuring that stuff in.

If you screw up and forget something, or inflation runs wild, or the market takes a huge dump, you can defer some of these or buy a cheaper car or furniture, or go Goodwill shopping for stuff.

But its a decent broad rule of thumb.

We compared notes a couple of years ago and people who did the same analysis all were within walking distance of each other...I think ESRBob was the one who started that and I stole his list of stuff and added to it.

By the way, when I work up my monthly budget and my 'decade spends', I add 30% to the bottom line to account for taxes, unexpected inflation, and other 'funny business' that you cant predict. Again, if this results in your falling from '100% firecalc' to '50%', reconsider that plan. Cuz somethings going to happen thats unpredictable.

Now if you're as conservative with budget planning as I'm demonstrating above, perhaps you can move to a 6% withdrawal rate and come out the same. Since I inflated most peoples base expenses by 50$, why not the withdrawal rate?

Make sense now?
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 02:37 PM   #50
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Re: Safe Withdrawl Rate -- 6%

Thank you. Much better.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 03:16 PM   #51
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Re: Safe Withdrawl Rate -- 6%

Wow, my brain hurts.* *:P* I started out wanting to do all these spreadsheets and analize this six ways to Sunday, now my eyes glaze over just reading it.

I feel like I have absorbed a lot of information from this board and elsewhere, and can feel comfortable with what I intend to spend without all the ongoing calculations.

FIRECalc tells me that I have 100% survival rate with an annual withdrawal amount significantly higher than I ever intend to spend -* so If I work with the basic assumption that I will spending $10 - $20k less than that 100% safe amount* each year, except when I have a major purchase like CFB's list, I should be fine.

Just to be sure I keep an eye on inflation, the market and the portfolio to make sure nothing scary is happening.

I mean, isn't that good enough
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 03:33 PM   #52
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Re: Safe Withdrawl Rate -- 6%

Absofrickinlutely.

I do that spreadsheet thing about once a year just to see what our personal rate of inflation looks like, and if anythings out of whack.

Frankly, aside from just opening it, I dont think i've looked at it in at least 12-18 months.

It was just part of my initial "can I do this"/"is this reasonable" financial data wrangling. Did my budget, ran orp, ran firecalc, ran a couple of others, did financial engines. Magic 8-ball. Everything said "yea".

Some people are still in that stage, and some people revisit it often.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 05:01 PM   #53
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Re: Safe Withdrawl Rate -- 6%

Yeah,* I'm just burned out on it.* *:P

I'm burned out on thinking and working.* *:P

I need to retire.* *

The countdown is going very well.* *

Can't possibly be more than 18 mos now.* *
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 06:52 PM   #54
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Re: Safe Withdrawl Rate -- 6%

As part of the annual budget you need to set aside some money for "savings" each year so that you can buy yourself a really BIG toy now and then......

Audrey
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 06:56 PM   #55
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Re: Safe Withdrawl Rate -- 6%

Why do you think i'm so "conservative" all the time...

"Look honey, due to my excellent planning, we have a bunch of money left over!

You want me to buy you a what...?!?"
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 10:33 PM   #56
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Re: Safe Withdrawl Rate -- 6%

TH/CFB,
you get two new cars AND all that other stuff for 50k every 10 years? Dude, I gotta come shopping with you.
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Re: Safe Withdrawl Rate -- 6%
Old 03-20-2006, 10:45 PM   #57
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Re: Safe Withdrawl Rate -- 6%

Yes you do. I am a LOT of fun to go car shopping with.

I was planning on a couple of used, inexpensive cars. Of course, I've already blown the entire 50k and a bit more in one shot buying the wifes lexus.

I buy most of my appliances from places like the sears dent and scratch place. What I dont get there I get on clearance from Sams Club, mostly stuff people bought and returned the next day.

Here's the stuff and the numbers attached, should have just done that in the first place...

I get every deal, coupon, freebie, rebate, etc I can latch onto. My time is free...

Cars $30,000.00 (pair of $15k 3-4 year old used cars)
Half water heater $300.00
One half furnace $2,000.00
One half AC compressor $1,200.00
Housepaint $300.00 (paint the house myself)
Half refrigerator $600.00
Half Dishwasher $220.00
Half range $350.00
Half Microwave $150.00
Half washer and dryer $400.00
Car tires $1,250.00
Two computers $1,000.00
Printer $450.00 (probably pay half this)
Two tivos $1,000.00 (actually get them free from sat/cable co's now)
Television replacements $2,000.00

Living room set $3,000.00
Bedroom set $2,000.00
Two gas grills $500.00
Replacement clothes $1,000.00
Fitness equipment $500.00
Personal care $200.00
Vacuum Cleaner $200.00
Steam Cleaner $200.00
Tools $500.00


Annual total $5,326.56 (total above / 10)

The cars might be dicey, but then again I have three of them right now...a lexus 430 with 600 miles on it, a 2001 rav4 with 28k miles, and a 2000 expedition with under 50k on it...they're going to last a while. Everything else is pretty reasonable.
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Re: Safe Withdrawl Rate -- 6%
Old 03-21-2006, 07:17 AM   #58
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Re: Safe Withdrawl Rate -- 6%

Quote:
Originally Posted by Cute 'n' Fuzzy Bunny


I was planning on a couple of used, inexpensive cars. Of course, I've already blown the entire 50k and a bit more in one shot buying the wifes lexus.
ah, the best laid plans...

btw I _would_ like to come out there and see you buy a half a water heater, though! is the top half cheaper than the bottom half?

Painting the house yourself makes a lot of sense, and helps explain that part. And it looks like you are a serious barbequer wearing those guys out every 5 years.

off to have bkfst with the kid

ps: after bkfst (and thinking about new dishwashers -- wife says no more repairs, wants a new one with stainless steel front) Wondering in your case how any wife who's managed to get a new Lexus --- how long is she going to be satisfied with slightly dinged appliances?
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Re: Safe Withdrawl Rate -- 6%
Old 03-21-2006, 07:23 AM   #59
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Re: Safe Withdrawl Rate -- 6%

"Now the average American father and mother,
owns one whole car, and half another.
And I'll bet that half-a-car's a trick to drive, don't you..."

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Re: Safe Withdrawl Rate -- 6%
Old 03-21-2006, 10:33 AM   #60
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Re: Safe Withdrawl Rate -- 6%

Quote:
Originally Posted by Cute 'n' Fuzzy Bunny
Why do you think i'm so "conservative" all the time...

"Look honey, due to my excellent planning, we have a bunch of money left over!

You want me to buy you a what...?!?"
Yes, I figured you would have this covered!!*

So is "honey" good at spending any excess?!?* Mine is pretty good at coming up with more toys he thinks he needs.....

Audrey
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