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swr
Old 08-21-2010, 11:06 AM   #1
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swr

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,
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Old 08-21-2010, 11:10 AM   #2
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Something slightly less than what FIRECalc says will give you a 95% success rate.
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Old 08-21-2010, 11:20 AM   #3
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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.

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Old 08-21-2010, 11:43 AM   #4
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Ten million dollars should give you a swf of around $350,000/$400,000 a year... if you don't outlive it.
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Old 08-21-2010, 12:41 PM   #5
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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.

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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.
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Old 08-21-2010, 12:53 PM   #6
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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.
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Old 08-21-2010, 01:00 PM   #7
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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.
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Old 08-21-2010, 01:24 PM   #8
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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.
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Old 08-21-2010, 01:41 PM   #9
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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%.
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Old 08-21-2010, 01:57 PM   #10
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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.
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Old 08-21-2010, 01:58 PM   #11
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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..........
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Old 08-21-2010, 02:05 PM   #12
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Thanks to all who replied here.
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Old 08-21-2010, 02:06 PM   #13
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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.
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Old 08-21-2010, 02:47 PM   #14
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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.
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Old 08-21-2010, 03:21 PM   #15
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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.
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Old 08-21-2010, 04:48 PM   #16
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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.
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Old 08-21-2010, 06:32 PM   #17
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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.
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Old 08-21-2010, 08:31 PM   #18
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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.
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Old 08-21-2010, 09:14 PM   #19
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There has been some great and interesting responses!

Thanks,
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Old 08-21-2010, 10:34 PM   #20
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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).
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