swr

[golfnut]

I realize this is probably been discussed many times. My wife is 52 and I am 55. I have worked with the FIRECALC numerous times.

I'd like to early retirees' opinion on what a swr would be assuming no other income (i.e. social security, pension or wages) coming in. Also, assume the mix is 50% equities, 30% bonds and 20% cash.

Interesting to see what the swr ranges would be from forum members.

Thanks,
Golfnut

 

[REWahoo]

Something slightly less than what FIRECalc says will give you a 95% success rate.

 

[Gotadimple]

I'd like to early retirees' opinion on what a swr would be assuming no other income (i.e. social security, pension or wages) coming in. Also, assume the mix is 50% equities, 30% bonds and 20% cash.

You haven't said how much you hold in retirement funds (a minor issue).
You also haven't said how much you need to live on (another minor issue).

Assuming you are retiring in your mid-50's and expect to live at least 30 years, pick a number between 3% and 6%. Hopefully, it will be enough to meet your basic needs.

-- Rita

 

[RonBoyd]

Ten million dollars should give you a swf of around $350,000/$400,000 a year... if you don't outlive it.

 

[golfnut]

You haven't said how much you hold in retirement funds (a minor issue).
You also haven't said how much you need to live on (another minor issue).

Assuming you are retiring in your mid-50's and expect to live at least 30 years, pick a number between 3% and 6%. Hopefully, it will be enough to meet your basic needs.

-- Rita

Rita, I am just attempting to get peoples's opinions on a swr based on the parameters I set out. I thought some forum members (who are actually ER) could provide some real life thoughts vs. FIRECALC.

 

[caninelover]

Without knowing the specifics of the portfolio size, given your ages, I would guess 3-3.5%. In your mid-50's you have a very long way to go on your portfolio and I'd personally go lower than the standard 4% guideline.

But as others have said, it depends your expenses and portfolio size. Also, I'm w*rking and not in ER yet, so this is just my opinion.

 

[Alan]

Given our ages (both 55) it's not realistic to really think we'll get nothing out of SS so it is difficult for me to think of a swr without that expectation of SS lurking in the background.

However, in those circumstances I would not RE unless I had a 3% SWR or less to cover both my essential and discretionary budgeted expenses.

 

[walkinwood]

What is the point of your question? All our circumstances are different.

But anyways, here's mine if it helps you. Portfolio is 60/40, age 50 DW is 46, no kids, I use Bob Clyatt's 4%/95% methodology. I'm sure I'll get Social Security, but am not counting on it. The 4% of current portfolio allows us a satisfactory lifestyle.

 

[bbbamI]

We are 52 and 56 years of age. If I don't count SS and the pension we receive, our SWR would have to be 3.8% to live a modest life with constant spending power.

However we do have a pension and I figure half of our SS benefits when I run FIRECalc. The SWR I use at this time is 3%.

 

[Bikerdude]

At your age, without other resources I would begin with 3%. If after 5 yrs you have more than you started with I would then take 4% of the original amount.

 

[youbet]

Given our ages (both 55) it's not realistic to really think we'll get nothing out of SS so it is difficult for me to think of a swr without that expectation of SS lurking in the background.

However, in those circumstances I would not RE unless I had a 3% SWR or less to cover both my essential and discretionary budgeted expenses.

Agreed, and I'd add that one's definition and implementation of "discretionary budget" also has a lot to do with what constitutes a Safe Withdrawal Rate for any individual. If your discretionary budget includes everything you ever dreamed about doing in retirement plus a generous allowance to cover things you haven't even thought of yet, then 3% sounds very conservative. If your discretionary budget includes only enough to cover a few small indulgences beyond your basic needs, it's not conservative at all.

So much of what constitutes a Safe Withdrawal Rate for any individual is determined by that individuals flexibility in spending I'm frequently amazed we can compare situations amongst ourselves at all..........

 

[golfnut]

Thanks to all who replied here.

 

[Alan]

Agreed, and I'd add that one's definition and implementation of "discretionary budget" also has a lot to do with what constitutes a Safe Withdrawal Rate for any individual. If your discretionary budget includes everything you ever dreamed about doing in retirement plus a generous allowance to cover things you haven't even thought of yet, then 3% sounds very conservative. If your discretionary budget includes only enough to cover a few small indulgences beyond your basic needs, it's not conservative at all.

So much of what constitutes a Safe Withdrawal Rate for any individual is determined by that individuals flexibility in spending I'm frequently amazed we can compare situations amongst ourselves at all..........

Good points. My discretionary spending is 40% of the total expenditure so I have a lot of fat built in. When times get bad I can cut back significantly.

 

[rayvt]

I don't quite understand the thinking here.

AFAIK, the standard SWR calculations use something like 95% confidence that the portfolio will not be exhausted in 30 (or 40) years. Even if you retire at age 40, 30 years takes you to 70, and 40 years to 80.

IMHO, either of these durations is pretty close to "forever", so it hardly matters what age you start drawing.

 

[chinaco]

I will FIRE at 55.

I use 4% as a max reference point to understand our highest spending threshold.

year 1 of FIRE: 1.9% of our portfolio + my ER pension (no COLA) would provide our current spending level. But this is amount does not include large extraordinary expenses such as car replacement, large house maint items, etc.

I am using 3% as our planning level reference to smooth out extraordinary expenses and some additional travel and entertainment. This does not include SS.

But in any given year, I will have no problem spending more if we choose to do so.

 

[Bikerdude]

I don't quite understand the thinking here.

AFAIK, the standard SWR calculations use something like 95% confidence that the portfolio will not be exhausted in 30 (or 40) years. Even if you retire at age 40, 30 years takes you to 70, and 40 years to 80.

IMHO, either of these durations is pretty close to "forever", so it hardly matters what age you start drawing.

What you say is true. However in some of the 95% SWR periods your portfolio is down by 50% 10 yrs or so into retirement, only to come back in later years. How you would sleep during that dip is important to consider.

 

[rayvt]

Right. That's why I'm using the Guyton-Klinger rules for our withdrawals.

FWIW, both the MWR and the CPR rules kicked in in 2009, for the 2010 draw.

 

[traineeinvestor]

I am in the postion of having no pension or equivalent of SS to fall back on. My (simplified) assumptions are:

1. between 40-60% of assets in real estate, 40-50% in equities and a small balance in bonds, cash or similar

2. a retirement budget which has been put together and frequently revised as we have tracked spending over the last few years

3. 20% arbitrarily added to the budget as a buffer

4. I have concluded that a WR about equal to the net yield on the real estate and equities will work

Expected ages at retirement should be about 47 and 41. We also have two young children.

 

[golfnut]

There has been some great and interesting responses!

Thanks,

 

[W2R]

Assuming that you will never get SS, pension, or wages, and will have to live solely off your portfolio for the rest of your life, I would withdraw 3% of your portfolio annually assuming an AA of 45:55 equities:bonds (similar to mine).

 

[golfnut]

In reality, I will be receiving a non-coled pension (presently worth only $8,100 per year) and we will both qualify for ss. My original post's purpose was just to hear what people would expect from solely their nestegg.

 

[LOL!]

You might enjoy these two web sites with further info on the subject:
Bob's Financial Website
otar retirement calculator

 

[haha]

In reality, I will be receiving a non-coled pension (presently worth only $8,100 per year) and we will both qualify for ss. My original post's purpose was just to hear what people would expect from solely their nestegg.

Why don't we just play where's Waldo?

Ha

 

[fisherman]

But in any given year, I will have no problem spending more if we choose to do so.

I thought this also but DW and I have not been able to mentally.

Dw and I ESR'd three years ago. We both have pensions coming at 55 or later and have an on paper a very good social security amount coming at 62 or later for each of us but who knows on that.

Due to the business doing much better than planned our SWR is way below the amount we planned. We find that even thought our portfolio is way above where it should be after three years at the 3% we were considering taking we cannot bring ourselves to spend more. I think it is a lifetime of LBYM and growing up with parents who grew up in the depression. I find I still set goals to achieve even higher savings amounts than called for. It a sickness I tell you a sickness!

 

[W2R]

We find that even thought our portfolio is way above where it should be after three years at the 3% we were considering taking we cannot bring ourselves to spend more. I think it is a lifetime of LBYM and growing up with parents who grew up in the depression. I find I still set goals to achieve even higher savings amounts than called for. It a sickness I tell you a sickness!

It is hard to do, I agree! One is accustomed to living a certain way, and an upgraded lifestyle means change. I am sure one can gradually slide into spending more as retirement progresses, though.