Semi-Fixed Minimum Withdrawal Starting at 3%

[sdfire]

Fast forward 8years and now these days how do you feel about the WR?

Funny you should ask right now. In the last 8 years, I’ve been working less and less instead of outright retiring. Loving it by the way! But, I’ve still covered all of my expenses with my work income. So, I’m not in the decumulation phase just yet.

However, I was recently asked by a charitable organization to come work full-time (for free with only some expense reimbursements). I am going to do it. So, now I will be working harder and starting to use what I’ve planned so long to use. Fortunately, the last 8 years have allowed me to drop the required withdrawal rate to well below 3%. So, I should be just fine.

Funny how things work out . . .

 

[pb4uski]

For fun, how a 50/50 portfolio would have fared with 3% withdrawals from May 2010 to Nov 2018... basically 150% of what it began after 8+ years of withdrawals.

https://www.portfoliovisualizer.com...location1_1=50&symbol2=VBMFX&allocation2_1=50

 

[2177V]

Here is my Withdrawal strategy: I have a diversified portfolio with many different asset classes. Stock portion includes large cap, mid caps, small cap, health sector, energy sector, real estate, asia, europe, south america, etc. Bond portion should include government, corporate, junk, asian bonds, etc I then pick the asset class that is relatively high. This is consistent with the Buy low, Sell High strategy.

I also believe in the bucket strategy. One bucket for cash reserve, another bucket for age 65 to 70, another bucket for 70 to 75, another bucket for medical expenses, etc. This is because of the time horizon of the different buckets. Cash reserve is conservative while the bucket for age 85 to 90 can be more aggressive because that is 20 years from now.

The big question is how much? That will depend on your standard of living. I always lived below my means and I will continue to do so in retirement. If I am age 70 and there is money left over in my 65 to 70 bucket, I usually party like hell because I can't take it with me. My 70 to 75 bucket then takes over.

 

[sdfire]

For fun, how a 50/50 portfolio would have fared with 3% withdrawals from May 2010 to Nov 2018... basically 150% of what it began after 8+ years of withdrawals.

https://www.portfoliovisualizer.com...location1_1=50&symbol2=VBMFX&allocation2_1=50

Thanks for putting this together. It provides an interesting reality check on my future plans.

 

[2177V]

2010 to 2018 was generally a bull market. It is not reasonable to expect the same results. However a 3% withdrawal is conservative which is OK. I prefer to be flexible and pay attention on my retirement expenses rather than my income. I divide my expenses into mandatory and discretionary. During a bear market, I cease discretionary spending so I can minimize my withdrawals. You should always try to buy low and sell high. In retirement, you are in the selling phase. Withdrawing during a bear market means you may be selling low. You should try to minimize your withdrawals. During a bull market it is OK to sell high but put some money away for a rainy day. This means increase your cash asset portion of your portfolio. I am always fearful of a big and unexpected mandatory medical expense during a bear market. This is why I have a bucket strategy with a portion of my portfolio in cash or treasury bonds dedicated for this purpose. Make sense?

 

[pb4uski]

2010 to 2018 was generally a bull market. It is not reasonable to expect the same results. ...

Thanks for the perceptive glimpse of the obvious. We never would have thought of that.

 

[TwoByFour]

The 4% rule assumes a lifetime of 30 years and an AA of 60/40. You can run it through Firecalc with your parameters but that will be iffy because the statistics are poor for 50 year retirements - there just aren't enough 50-year sequences in the historical record to give much confidence in assessing a retirement of that length.

 

[ERD50]

The 4% rule assumes a lifetime of 30 years and an AA of 60/40. You can run it through Firecalc with your parameters but that will be iffy because the statistics are poor for 50 year retirements - there just aren't enough 50-year sequences in the historical record to give much confidence in assessing a retirement of that length.

Actually, not so bad. 1966 was the most recent 'fail year', and a 50 year run (just) includes 1966. So the years that are skipped in a 50 year run won't add to failures.

You can re-verify that by doing 50,49,48,47.... year runs, with "Investigate" spending for 100% success. The spending should increase each time you shorten the years. If it doesn't, it shows you dropped off some bad years. I think you will see spending decrease when you cover 1966. 1966-2017 (last full data) is 51 years, maybe 52 (start-end inclusive?)

-ERD50