Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 04-25-2015, 04:57 PM   #21
Thinks s/he gets paid by the post
Join Date: Sep 2012
Location: Seattle
Posts: 2,294
Don't forget about SS which can offset some of the sequence of return issues.

Someone retiring with a 4% SWR that encounters a bad market pushing them up to an 6% SWR might consider taking SS early which could drop their SWR back to 4% or even lower with the same spending.

I haven't given a lot of thought to what I would do if faced with an extreme down market and a rapidly dwindling portfolio...would I take SS early to protect my remaining assets or delay SS and continue to spend down?

If the market dropped 50% and I was able to take SS early, I might really consider doing so and hoping the market and my portfolio recovered over the next several years.

Fermion 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 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 04-25-2015, 05:29 PM   #22
Full time employment: Posting here.
Join Date: Jan 2007
Posts: 576
Originally Posted by Lsbcal View Post
Actually the portfolio went to zero at year 35 as per the VPW depletion plan to age 100. Suppose we set the depletion to age 115, that gives a 4.0% withdrawal rate in the first retirement year. Then the sequence looks like the following with less spending in one's 70's but you could really live it up in your 90's ( not my cup of tea):
Well, not only is it not your cup of tea or mine, it's not that realistic, so it is not much of a 'Plan'.

I have a number of acquaintances that are in their 80s and their 'Life' is pretty much over. Most things have been done, and they don't really want to do that much anymore.

Sure, there is always the odd 1 in 100 - 90 year old that is ready for most anything, but these are the anomalies. When you plug in 115 into a retirement calculator and get 'weird' results, don't be surprised. It is much better to plug in age 100 and at age 90 (If by a slim chance you even make it that far) and then reevaluate.

The biggest 'Failures' I see in people's Retirement Planning is that they will probably leave a Huge Pile at the end of plan. Which either means they scrimped in retirement or didn't retire early enough. Either way it is a Failure in my Book.

Cut-Throat is offline   Reply With Quote
Old 04-25-2015, 05:45 PM   #23
Thinks s/he gets paid by the post
Lsbcal's Avatar
Join Date: May 2006
Location: west coast, hi there!
Posts: 4,827
I think we are basically on the same page CT. After I took a serious look at VPW I came around to your point of view. That said, a lot depends on one's portfolio size and spending habits. Some will find a 4.5% withdrawal more then enough -- that could be the couple with maybe $5M. I'm not quite there yet myself but find that 4.5% allows for a fullfilling retirement. Many here will have a smaller portfolio and so 4.5% will be easily spent ... and then some.
Lsbcal is offline   Reply With Quote
Old 04-25-2015, 07:15 PM   #24
Recycles dryer sheets
Join Date: Aug 2009
Posts: 352
Originally Posted by Running_Man View Post
He advocates for a percentage of portfolio withdrawal to avoid sequence of return risk to call the drop in payouts that happen with a decline market risk instead of Sequence of returns and claims by doing this you have eliminated the sequence of return risks.

In an example in the series after the ones you posted, he showed a portfolio using a 2.5% withdrawal, because when he looked at the data a 4.5% withdrawal he was using later had a failure in year 11, would have income drop to $16,000 a year from a starting value of $25,000 with a portfolio starting with 1MM dollars!

His "solution", of having a large annual variable income swings on a 2.5% initial withdrawal rate in order to eliminate sequence of return risk to the terminal value of a all valuable portfolio is a non-starter for the vast majority of retirees.

Of course I think he also advocates a very large position (15 years) in TIPS and offsetting that with an investment portfolio that you withdraw 2.5% from so for a retirement of 40K you would need 15K per year coming off in TIPS (or 225K invested in tips) and be willing to vary income from that, with the idea being after 15 years a normal 4% withdrawal rate from the portfolio will be ok.

He seems focused with making sure there is a large estate for heirs, even tho his subtitle of his blog is retirement planning for the unwealthy. His advice is great for people concerned with leaving an estate, but for me not knowing 4 years down the road if I will be spending 31K per year or 51K per year is not a budgetable process and therefore a non-starter.

He actually doesn't recommend a variable withdrawal rate. He's a floor and upside investor:

He states:

Having read my last few posts on this topic, it would be reasonable to assume that I would advise retirees to spend down stock portfolios based on a percentage of remaining portfolio balance and not one based on constant-dollar withdrawals. But I don't.

I advise retirees to set aside the capital they need to generate enough income to cover non-discretionary spending in a safe TIPs bond ladder or fixed annuities. Then you will have some certainty that you can pay the bills. If you have cash left over, then invest that amount in stocks. None of the three (fixed annuities, TIPs ladders, or buy-and-hold stock portfolios) are exposed to SOR risk.

Sent from my iPad using Early Retirement Forum
bmcgonig is offline   Reply With Quote
Old 04-26-2015, 07:47 AM   #25
Thinks s/he gets paid by the post
nun's Avatar
Join Date: Feb 2006
Posts: 4,331
If you have low expenses going into retirement you will also minimize sequence of returns issues. This is where the old chestnut if paying off the mortgage works in your favour.
"The needs of the many outweigh the needs of the few, or the one." - Spock
Retired Mar 2014 at age 52
Target AA: 70% equity funds / 28% TIAA-Traditional/ 2% cash
Target WR: 0.0%,
Income from pension, rent, and eventually SS
nun is offline   Reply With Quote
Old 04-26-2015, 01:16 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 13,197
Originally Posted by Fermion View Post
....I haven't given a lot of thought to what I would do if faced with an extreme down market and a rapidly dwindling portfolio...would I take SS early to protect my remaining assets or delay SS and continue to spend down?...
+1 but if it happened we could tighten our belt on expenses, invoke my pension, or in a couple years, start SS earlier than we planned. As Teddy Kennedy would have said, I'll drive off that bridge when I get to it.
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is offline   Reply With Quote
Old 04-27-2015, 12:03 AM   #27
Thinks s/he gets paid by the post
Join Date: Feb 2013
Posts: 4,504
Originally Posted by nun View Post
If you have low expenses going into retirement you will also minimize sequence of returns issues. This is where the old chestnut if paying off the mortgage works in your favour.
I agree on the low expenses, especially low fixed expenses. I'm not so sure about paying off the mortgage, since money used to pay down a mortgage lowers asset income. There are always interesting pro and con threads here on the mortgage payoff topic.

I do think the value of low overheard sometimes tends to be underrated as a retirement factor compared to portfolio returns. The strategy at our house is to invest pretty conservatively and live well below our SS, pension and asset income in retirement and not have to worry too much about sequence of returns.

Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
daylatedollarshort is offline   Reply With Quote

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
Kitces: / Managing Sequence Of Return Risk With Bucket Strategies Vs A Total Return macav933 FIRE and Money 21 12-06-2014 09:38 AM
Born lucky? Sequence of returns risk Focus FIRE and Money 40 08-16-2014 11:26 PM
withdraw sequence ripper1 FIRE and Money 28 08-13-2014 10:13 AM
Interesting article on impact of sequence of returns trirod FIRE and Money 6 07-12-2013 08:08 PM


All times are GMT -6. The time now is 01:07 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.